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Thursday, September 26, 2013

Coal-fired electricity price puzzles

There is something seriously amiss with the economic analysis of the coal-fired electricity generation market in Australia.
  1. Australian coal mining companies are in diabolical financial difficulties with the thermal coal price for exports plunging to around $80 a tonne.
  2. The wholesale price of electricity from Australian coal-fired power stations has for nearly a decade hovered around $20 to $50 per megawatt-hour (or 2 to 5 cents per kilowatt-hour.)
There is a puzzle in the above situation:
  • The cost of fuel for a modern efficient coal-fired power station buying thermal coal for $60 per tonne is about $14 per megawatt-hour (or 1.4 cents per kilowatt-hour).
  •  Notwithstanding this stable and low cost for fuel to generate electricity, retail prices in Australia have increased to an average of 24.8 cents per kilowatt for households in the year ending 30 June 2012.
Calculations for the fuel costs of coal-based electricity are at "Coal and Natural Gas power plants".

This report shows problems began with retail electricity pricing in 2007: "Electricity Prices in Australia: An International Comparison".
Household electricity price index
Electricity Market Reform An International Perspective
Electricity Market Reform
An International Perspective

2 comments:

Ariel Liebman said...

Your table in the pages after the link say that for $60/tonne coal the electricity cost is $14/MWh Not $140/MWh. So no puzzle!

Askgerbil said...

Ariel,

Just checking that someone was paying attention.

Thanks for spotting that. :)