Issue 242, June 2025
With the media and analysts all still caught up in analysing the outcome of the federal election on 3 May — a thumping win for the ALP rather than a hung parliament as was so widely predicted — and with Liberals and the Nationals agonising over how address their difficult futures, the issue of how the energy sector will be overseen in the rest of the decade has not gone away but is momentarily a sideshow. However, a chuffed Chris Bowen has been quick to claim the poll victory as endorsement of Labor's energy policies and to promise to press on with pursuit of 82 per cent renewable energy in the power market by 2030 as well as with setting a new goal for 2035. Unlike 2022, there has been no claim that electricity prices will fall in this term of government.
"Our forecasts show the country will only reach 58 per cent renewable electricity by 2030. Stronger policy backing and improved coordination across government levels will be needed to overcome grid connection and planning hurdles” — Natalie Thompson, senior analyst at Wood Mackenzie’s Asia Pacific Power unit in Australia.
"We are in the middle of an era-defining energy transformation that requires policy stability, continuity and long-term reform that can endure beyond election cycles” — Louisa Kinnear, CEO, Australian Energy Council. “There is more work to be done to develop the market settings that will deliver this outcome, whilst managing the energy trilemma of affordability, reliability and sustainability.”
“We are in the messy middle of the energy transition so governments need to consider what role they need to play to manage consumer impacts” – Energy Users Association. “Decarbonisation of the economy must be achieved through new technology, realistic timelines and appropriate policy, not through demand destruction.”
“For Labor to hit its targets, practically every project in the investment pipeline needs to hit every milestone, including approvals, financial commitments, breaking ground, construction and grid connections” – Alison Reeve, Grattan Institute energy policy analyst. “A huge amount of things need to go right to hit the target – and a lot of those things are outside the federal government’s control.”
“We now have the time to bed down a path to decarbonisation that gets investment flowing, lets businesses grow, and secures the jobs we need now and into the future” – Chris Bowen, federal Climate & Energy Minister.
“Labor has no credible plan for reversing the renewables-driven increase in energy costs any time soon” – Michael Stutchbury, editor-at-large, Australian Financial Review.
“Beyond Climate Change and Energy Minister Chris Bowen’s political bravado regarding the renewable energy transition is an admission that policymakers have yet to detail exactly how it is all going to work once the last coal-fired plant has been shut. This is the conclusion that must be drawn from the Australian Energy Market Commission’s latest dispatch to the Australian Energy Market Operator” – The Australian newspaper in an editorial. “The rule maker has warned that electricity system security risks are emerging faster than expected and a detailed plan urgently is needed for how the national grid will operate without baseload power from coal.”
Reacting to the federal election outcome, the Australian Energy Council CEO, Louisa Kinnear, has called on the Albanese government to put a focus on supply affordability at the top of its approach to the sector.
Kinnear says: “The energy transition is a huge undertaking, requiring unparalleled levels of investment in networks, storage and replacement generation. It is crucial that the transition proceeds at least cost to consumers, requiring both industry and government to have affordability front of mind as they make decisions.
“It is also important to recognise that bills are unlikely to significantly reduce in the near term and be upfront with consumers about this, with targeted financial support available to vulnerable customers to ensure nobody is left behind.”
Kinnear has also called for the government to give priority attention to electricity system security, saying: “Currently the market does not value the full range of system security services needed for a net-zero emissions system. As the system prepares for thermal plant exits, essential system services must be better valued through the establishment of spot markets for services like inertia, which is needed to keep the system stable.”
The Energy Users Association says: “We need more domestic gas supply, but it must be priced at a fair and reasonable level.”
Professor Frank Jotzo, director of the Australian National University’s Centre for Climate & Energy Policy, says in an ABC interview that “with Labor having won this election in a landslide, there is every opportunity — and arguably also a mandate — for comprehensive and ambitious climate change policy in the new period of government.”
By not locking in a 2035 emissions target before the election, Jotzo adds, the government “has given itself wriggle room to embrace stronger policy settings”.
The Australian Energy Market Operator says it will need to re-examine proposed transmission developments deemed critical in the 2026 edition of its integrated systems plan because of large increases in costs.
AEMO says some new transmission developments under consideration have seen cost increases of up to 55 per cent.
In its latest “electricity network options” report published in late May, the operator records 25 to 55 per cent rises for overhead lines and 10 to 35 per cent increases for transmission substations.
It points to “sustained supply chain pressures on materials, equipment and workforce.”
In its last ISP report, published in 2024, the operator estimated that NEM outlays on transmission to facilitate the electricity transition towards increasing use of renewables would reach $16 billion – up from $12 billion in the 2022 report.
Speaking at a Committee for the Economic Development of Australia forum in Melbourne in May, Daniel Westerman, CEO of the energy market operator, has declared that “gas must be part of the energy mix.”
Westerman said: “While the role of gas can sometimes be controversial, it is an important ingredient in supporting renewable energy and its role in future power plans. Let me be clear, flexible gas-powered generation will remain the ultimate backstop in a high-renewable power system.”
He drew attention to the warning about gas supply AEMO was giving before the federal election was called. “This year’s gas adequacy report again highlights the structural changes in the east coast market, particularly that production is falling faster than demand in the southern States, reinforcing the need for investment in new gas supply.”
Meanwhile, the Energy Users Association in another forum presentation in Melbourne during May has called for understanding in the energy debate that “gas will have significant role to play in a net zero energy system and will be needed in many industrial processes for many decades.”
EUAA also urged understanding that the east coast power market, the NEM, “is not a series of tranches – but a single eco-system relying on all parts working in harmony.”
The Australian Energy Market Commission and the Energy Market Operator are interacting to consider upgrading NEM rules to accommodate the influx of power-hungry data centres.
AEMO is warning that the NEM’s stability may be threatened if data centre demand is not managed.
AEMC chair Anna Collyer says that the rule review is focussed on data centre demand that can equate to the needs of small cities. “This consultation is about future-proofing our electricity system. The new connection rules will help smooth the rollout of new renewables projects.”
Saul Kavonic, energy analyst at MST Marquee, has told the Australian Financial Review that the growth in the number of data centres and their demand for power needed to be matched by new sources of secure, round-the-clock electricity generation.
“Australia has had an energy advantage for many decades. If we want to maintain that advantage to set us up for a bright future in data centres, quantum computing and AI, we need to make sure we are addressing the supply side of this issue,” he says.
The Energy Market Operator has released its NEM outlook for winter 2025 and is sanguine about the weather and the availability of gas and electricity.
In a late-May statement, the operator says it expect warmer weather, more new generation capacity than a year ago and no gas supply shortfalls on the east coast.
AEMO adds: “Coal stockpile inventory in the NEM is at normal levels, and gas demand is forecast to be lower than average across a range of weather conditions.”
The operator reports that, since the end of winter 2024, an additional 2,000 megawatts of battery, wind and grid-scale solar projects have come online in the NEM, including approximately 855MW of battery storage.
It says another 7,000MW of projects are in final commissioning. “These are expected to become fully operational in the coming months.”
Wood Mackenzie, one of the world’s leading energy research businesses, says Australia is “currently on track to achieve only 58 per cent renewable electricity generation by 2030.”
The re-elected Labor government’s target is 82 per cent.
Woodmac Australian senior analyst of energy storage and solar Natalie Thompson says “while over 65 gigawatts of utility-scale storage projects are in various stages of development, only five to 10 per cent of announced projects are likely to reach financial close.”
She adds: “Efforts may be further complicated by moves from some governments, such as Queensland and the Northern Territory, to repeal or scale back their renewable energy targets.”
According to Wood Mackenzie, Australia's utility-scale storage capacity is expected to increase from the current 2.5 GW to more than 16 GW by 2030.
“This sixfold increase is bolstered by the federal government's capacity investment scheme, which has already awarded more than 8 GW in funding, including 2.8 GW for storage solutions with an average duration of 3.5 hours,” Thompson says.
“Current projections suggest the remaining coal capacity will gradually phase out by the end of 2045, based on existing policy settings,” she adds. “To achieve the government’s renewable energy ambitions, more support is needed to overcome roadblocks in grid connection and planning processes, ensure a smooth transition and meet planned coal plant closure timeframes.”
Wood Mackenzie also projects Australia's solar capacity for residential, commercial and industrial use will expand from 29 GW in 2025 to 46 GW by 2030.
“This growth presents challenges in managing midday solar peaks, prompting network operators to focus on grid stability strategies,” Thompson says.
Just as I was gearing up to write this issue of the newsletter my friends at Quest Events, whom I helped more than a decade ago to launch the highly successful Australian Domestic Gas Outlook and Australian Energy Week, came on the phone to ask if I could write a short promotion piece for a trade magazine ahead of the latest AEW in Melbourne in June.
Energy Week 2025, at my point of publication, has attracted some 1,200 delegates and they will have a very timely opportunity to hear views on the path ahead for the sector, given major political developments nationally and headline-making energy events internationally.
As I wrote for the trade magazine, debate in the federal election headlined the challenges facing policymakers as well as market planners and managers and business leaders across the spectrum of energy supply — and there is no reason to expect that the tumult will die down in the rest of this decade because of the challenges of cost and supply security inherent in the ongoing transition away from a heavily coal-based power system as well as the need to meld gas more strongly in to the new marketplace.
Given my background in public relations and issues management (over 45 years in this country), it won’t come as a surprise that my key point for this promo piece was that the critical factor in pursuing all of the above is the capacity of professional stakeholders to communicate meaningfully in a fast-moving environment while keeping the confidence of energy customers from householders to manufacturers.
Readers of this newsletter also won’t be surprised that I opined that a dispassionate assessment of the past five years suggests that success in this regard has been patchy at best.
I went on to say: How successful the Australian energy transition is in terms of cost of electricity for business and households, and reliability of supply, will play a big part in how voters will be feeling about things when next they go to the polls at State, Territory and federal levels, with major state elections to be held next year and early in 2027 (and the next national poll no later than mid-2028).
The debate over “clean energy” is playing out against a backdrop internationally of the power industry grappling with how to add projects to meet electricity demand that is rising for the first time in a generation. Data centres for artificial intelligence are popping up all around and can require as much power as some cities. New forms of manufacturing are driving demand higher, too.
Here and overseas the body politic has spent a decade reaching for subsidies to sooth consumer angst, but, in a difficult global economic environment, there is a limit to how far this approach can continue to be pursued — and to how long politicians and promoters of the gamut of new energy options can obfuscate about the real cost of change in the sector.
This latter point is one about which I feel strongly, as do others whose views I value.
One such is the journalist Chris Uhlmann who said – in a Sky News interview the week after the election ended in shattering defeat for the Coalition – that he intends to continue pushing for the government to be honest about the true cost of net zero, arguing neither Labor nor the Coalition were willing to acknowledge in the recent campaign how expensive their respective energy policies would be.
The Menzies Research Centre’s Nick Cater describes the current situation as the era of post-truth politics and, in a commentary on the Sky News website, declares the government should fast-track gas projects right now and incentivise them by including gas in the NEM capacity market.
Instead, he asserts, the incoming Labor government seems set to amplify its first-term mistakes by increasing its emissions reduction target for 2035, even though there is little hope it can meet its 2030 ambitions.
He adds: “Consumers and businesses should prepare for a rough ride. However unfit for purpose our energy system is now, we know it will be much worse by 2028.”
Something to chew on as the weeks and months ahead unfold.
Keith Orchison
27 May 2025