One of the hardest things about planning for, or living in, retirement is estimating how much your expenses will grow.
When preparing a retirement budget or plan, factoring in inflation increases and getting them somewhat close is very important.
What you don’t usually plan for is prices going down. However, the Australian Energy Market Commission (AEMC) has released its residential electricity price trends report and it contains some very good news for retirees.
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According to the report, households can expect to pay around $77 (or around 6 per cent) less for electricity in 2024 than they do today, as cheaper renewable energy flows to consumers, reducing prices to their lowest levels since 2017.
The report examines the direction household electricity prices will take over the next three years.
It found that lower wholesale costs, and reduced environmental costs in most regions, were continuing to drive overall prices down.
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AEMC chair Anna Collyer said the report shows that, based on current trends, prices per kilowatt hour are likely to be under 26c p/kWh by June 2024, the first time that has happened since 2016/17.
“This illustrates how integrating renewables in a smart way makes it possible to have both lower emissions and lower costs for consumers,” Ms Collyer said.
“We can now see far enough into the future to be confident that power prices paid by consumers will continue to trend downwards over the next three years, despite the staged exit of Liddell power station in 2022 and 2023, one of the biggest coal-fired generators in the national electricity market.
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“But while wholesale costs and environmental costs are trending lower, we are starting to see increases in the cost of network investments, and this is likely to accelerate over the next decade as more network investment is required to connect dispersed new generation to the grid,” she said.
“There are also regional differences across states and territories in the national electricity market that will affect price outcomes.
“And what energy offer you have, how much you use and whether you also have solar or gas will also affect your bill.”
While most jurisdictions covered by the AEMC predictions could expect a drop in electricity prices by 2024, the news was not as good for the ACT where prices were predicted to rise by 4 per cent.
Some of the predictions for different states in Australia by June 2024, covered by the AEMC predictions, were:
- South East Queensland electricity prices are estimated to fall by 10 per cent or $126
- South Australian electricity prices are estimated to fall by 2 per cent or just over $35
- Victorian electricity prices are estimated to fall by 8 per cent or about $99
- NSW electricity prices are estimated to fall by 4 per cent or about $50
- ACT electricity prices are estimated to rise by 4 per cent or $77
- Tasmanian electricity prices are estimated to fall by 6 per cent or $125.
Ms Collyer said the report shows that prices are expected to fall slightly in FY21/22, increase by around $20 a year in FY22/23 as Liddell exits the system, and then fall again as lost capacity is replaced by a combination of solar, wind, gas and batteries.
What will reduced electricity costs mean for your retirement plan? Why not share your thoughts in the comments section below?
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