I was reading were the introduction of fuel efficient cars would deprive the feds of revenue so they are now looking at way to tax the hybrid's etc wonder if the same will happen to solar were the power stations are not making money and each price rise make more people go solar.
Bottom line is that the actual cost of your household electricity supply is several hundred $ per annum just to keep the system available. In addition, there's the cost of actually generating electricity (which is relatively low by the way).
The present and historic pricing model recovers most of the fixed costs via what amounts to a (hidden) surcharge on the unit rate for consumption. This model works perfectly well only where consumers have no alternative other than to consume electricity from the utility. Since fixed charges are recovered in proportion to consumption, the utility has a strong interest in maximising the volume of consumption - hence the industry's historic fairly aggressive marketing of electricity for applications where it faced competition (cooking, hot water and especially space heating in the cooler states).
As I said before, there was an attempt to separate all this out in Tasmania during the mid-1990's but it ended in an outright disaster politically. Some parts of it remain, albeit in a rather hidden form. The majority of Tasmanian homes pay $350 a year in fixed supply charges (still only around half of what it really ought to be) and the offset via higher unit rates is directed away from uses that face competition (heating and hot water) and into the largely captive "everything else" market.
The situation in the other states is generally even more extreme, with the fixed charges even lower and most of the actual fixed costs recovered by a charge on each unit consumed. Trouble is, this model falls in a hole big time if consumption declines.
In short, the cheapest way is large scale centralised generation using coal, gas or hydro. But the industry is no longer focused on cost as it was pre-1990's, and such arguments about cost minimisation are now largely irrelevant in practice. Indeed it would be true to say that the industry is now largely focused on how to justify higher costs, rather than how to reduce them since that's the way it works these days.
Put solar on your roof yes. You can get a 1.5kW system fully installed for somewhere in the order of $2000 if you're in a capital city. But don't fool yourself into thinking that we can run the whole country this way...
Solar market penetration here in Tas is around 2% of all homes now, virtually all of those installed within the past 2 years. Those 2% of homes with solar, manage to generate 0.05% of the state's electricity. 0.05% of power from a $35 - $40 million total investment - you do the math but suffice to say that hydro, wind or gas are far cheaper options for generation here in Tas and that coal or gas are cheaper options in the other Australian states. But as I said, the industry hasn't really been focused on costs since the 90's since that's not how it works these days.