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Single parents hit hard by energy costs, a quarter in energy poverty

Media release

Families who earn the least are spending more of their household expenditure on energy than the average household, a new Bankwest Curtin Economics Centre report on the Western Australian energy sector released today shows.

The Bankwest Curtin Economics Centre’s (BCEC’s) latest report, Power to the People: WA’s Energy Future, examines the state of play of WA’s energy industry, and the key challenges, risks and policy issues facing the industry.

BCEC Director and report author Professor Alan Duncan said the report reveals the extent of energy poverty within the State.

“West Australian households are now spending an average of $1,791 on energy each year, which can account for more than 10 per cent of household spending for low income families,” Professor Duncan said.

“While roof-top solar power is a solution for many households seeking to deal with rising electricity costs, low-income households are only one quarter as likely to have roof-top solar as those with median wealth.

“There is some evidence to support the claim that high energy costs lead to compromises in other life aspects. While average household energy costs have increased since 2010-11, spending on health and groceries have both reduced in this same period.”

The report also found that WA has been slow in adopting large-scale renewable energy technologies, with the majority of renewable energy generated by roof-top solar installed on homes.

“While renewables only account for 7.1 per cent of WA’s total electricity consumption, total current capacity from roof-top solar as a combined power source is around 730MW. That capacity is expected to reach a potential of 2,000MW by 2022, making it the second largest combined power source in the State, after Muja Power Station,” Professor Duncan said.

“However, there is a need to revisit incentives for new solar installations, with landlords having little financial motivation to install solar on rental accommodation, and homeowners deterred by the initial upfront costs involved.”

Report co-author and BCEC Research Fellow Dr Yashar Tarverdi said the report also reaffirmed seasonal variances in the use of energy.

“Energy use is vastly different between the seasons, with West Australians consuming energy more consistently across the day in summer, with large peaks occurring at the beginning and end of each day in winter,” Dr Tarverdi said.

“In summer, early morning energy use increases at a much slower speed than in winter. West Australians tend to decrease their energy use around midday during winter, and increase their energy consumption very quickly once the sun begins to set.

“An increase in the uptake of solar storage in households will not only drive down household spending on energy, it will also ease the pressure on the public electricity grid during hot summer days and cold winter nights.”

Professor Duncan said WA’s regulatory framework needs to be future-proofed, flexible and adaptable to different energy futures.

“Regulatory change is inevitable in order to keep pace with the rising popularity of household solar photovoltaic (PV), and new ‘disruptive’ options for distributing and trading electricity through micro-grids,” Professor Duncan said.

“But whatever direction is taken, consumer protection must remain critical as energy markets evolve, no matter how large distributed energy generation grows in the future.”

Professor Duncan concluded that a collaborative approach was needed to develop an energy future that integrated existing and emerging energy technologies.

“The journey to Western Australia’s energy future requires leadership, collaboration and the optimisation and integration of all forms of energy technology. This discussion must also be non-adversarial in nature; no one energy source or technology is going to be the answer for our diverse State,” Professor Duncan said.

Key findings from the report include:

    • Total energy consumption in WA has almost doubled in the last 25 years.
    • Gas is the main source of energy in WA, accounting for more than 50 per cent of WA’s net energy consumption in 2014-15.
    • WA’s utility sector has grown to $6.2 billion in Gross Value Added, up from $2.5 billion in 1990, and currently employs around 20,000 people.
    • 2.1 per cent of WA’s total energy consumption is sourced from renewables, with electricity generation from renewables increasing from 2.9 to 7.1 per cent in the six years to 2014-15.
    • Two-thirds of WA’s renewable electricity generation is sourced from wind compared to one-third nationally.
    • 1 in 4 suitable WA dwellings have roof-top solar, however only 7.4 per cent of suitable dwellings in the lowest socio-economic areas have solar PV installations.
    • Mandurah is the top solar postcode in WA with over 10,000 installations.
    • Total current capacity from roof-top solar PV in WA is around 730MW. Capacity is expected to reach a potential of 2,000MW by 2022, making it the second largest combined power source in the State, after Muja Power Station.
    • Electricity prices in Perth almost doubled between 2008 and 2014.
    • Household expenditure on energy rises beyond 10 per cent of total spending for those families with the lowest 10 per cent of income distribution. This compares with 3 per cent of expenditure for typical families on middle incomes and below 2 per cent for those families with incomes in the top quarter of income distribution.
    • Western Australian households rank fifth nationally in energy spending at an overall weekly average of $40.64.
    • Around a quarter of single parents commit at least 10.2 per cent of their income towards energy costs, and one in ten spend at least 15.1 per cent.

Additional report findings include:

The energy sector in WA

  • Oil and gas extraction remains the major employer in the energy sector, employing around 10,200 people.
  • More than 77 per cent of WA’s energy sector employees are located in the greater Perth region and technicians and trade workers make up the majority of full-time employees in the utility sector.
  • Around 20 per cent of businesses in the utilities sector reported the reduction of environmental impacts as one of their drivers of innovation. This compares to less than 5 per cent from all other Australian businesses.

Electricity use in WA

  • Since 2008-09, WA has generated more electricity every year, growing to annual generation of 38,000 Gigawatt hours.
  • In summer, early morning energy load increases at a much slower speed than in winter. Winter energy use is characterised by a load decrease around midday, before a sharp increase toward the end of the day.

100 per cent renewables: not if…when

  • Investment in solar and wind is predicted to constitute three-quarters of the $10.2 trillion of expected global investment in new power generation technology out to 2040.
  • Levelised cost of new-build solar PV and wind is now cheaper than new-build coal and on-par, or in some instances cheaper, than new-build combined-cycle gas.

Consumption and costs

  • On a per capita basis, WA’s energy consumption is 1.8 times the national average.
  • Perth utility prices have remained consistently below those in all other states and territories since the start of the millennium. The utility price gap between Perth and other capital cities has widened since the start of 2017.
  • WA’s fixed supply charge tariff nearly doubled in July 2017, from 48.60c to 94.91c per day, up 95 per cent on 2016’s supply tariff.
  • Australian households consuming an average of 15kWh of electricity per day would receive an electricity bill of $34.44 per week, or $1,791 per year

Power to all people

  • Increases in energy expenditure for single parent households in WA have been substantial – up 39 per cent in real terms over ten years, and 10 per cent over the last two years alone.
  • The median WA energy cost shares are around 4.7 per cent overall for all household types, 4.6 per cent for single parent households and 4.8 per cent for couples with children.
  • For many families on low incomes, the cost of energy is significant and forces them to compromise on other expenditure items.

The full report can be viewed here: http://bcec.edu.au/assets/bcec_focus_on_industry_report_power_to_the_people_was_energy_future.pdf