Cheap Energy. It is often stated as one of Australia’s great economic advantages, and something that will be ruined by the pursuit of climate change policies and clean energy.

But who in Australia actually does enjoy cheap energy? Households and most business consumers don’t: they face the some of the highest electricity costs in the world, thanks to the imposts put upon them by network operators and the oligopoly of fossil fuel generators.

The irony is that even brown coal generators such as Northern power station and Hazelwood say that wholesale electricity prices in Australia are not high enough to justify their continued operation.

As energy Hugh Saddler, writes in his latest monthly report from Pitt & Sherry and The Australia Institute, Australia’s wholesale electricity prices – in real terms – have hardly budged in the last few decades.

And one of the principal reasons is the impact of renewable energy, which have helped to bring down wholesale prices from where they would otherwise be.

This graph (above) illustrates his argument. On the left are the average wholesale prices for all states since the creation of the National Electricity Market nearly 20 years ago. Note the historically high South Australian wholesale prices, when the state relied only on brown coal and gas.

On the right are the average prices for Victoria and NSW only, compared to the average retail price in those states. As is clear, retail prices have doubled – thanks mostly to the more than doubling on network charges and higher margins for the retailers, while wholesale prices have remained subdued.

Saddler uses NSW and Victoria as examples because these are two states with the most ageing coal infrastructure, and where coal generators are likely to retire over the next decade.

The first to go will be Hazelwood in Victoria, which will close by next April, with others expected to follow in both states.

In trying to estimate what will happen when those power stations close, Saddler uses a real example of the Eraring power plant, which has as significant role in the NSW market, as Hazelwood does in Victoria, and which was closed for repairs in October.