Issue 244, August 2025
A feature of Australian energy debate for the weeks since the May federal election has been the public exchanges about net zero policy and measures to drive it in the market — an issue the federal government had believed was laid to rest by its large victory in that poll. Where this all now goes is likely to loom large, at least in the media arena, for the rest of 2025 and possibly well beyond. A key driver in this situation is the decision the government has to make soon about how it extends its carbon emissions goals from 2030 to 2035. How that feeds in to public opinion, given concerns about energy costs and their impact on households and businesses, large and small, also remains to be seen, not least if the warnings by the Australian Competition & Consumer Commissions are borne out of a “deteriorating outlook for east coast gas supply.”
“The path to net zero must not compromise price and reliability” — federal Liberal MP Tim Wilson. "If you actually have prices rise, if you don't have stability in our electricity grid and security in our electricity grid, unsurprisingly, support for emissions reduction declines with it.”
“Energy is one of our most stressful expenses” — Finder website. “The average household spends $1,498 on electricity bills each year and $827 on gas bills. Energy prices have steeply outpaced inflation since the mid-2000s and further increases will only add to household financial pressure."
“An urgent response is needed from energy retailers and the government to address the financial strain faced by households” — Liz Stephens, Energy Consumers Australia. “One in five households are struggling to pay their energy bills.”
“Higher energy prices are brutally punishing Australian households and businesses. Australians on low and fixed incomes are especially hardest hit. Our manufacturing sector, disproportionately located in regional Australia, is being eaten alive” — former senator Ron Boswell in a newspaper op-ed.
"Western Australia's biggest electricity system could be sliding towards a crisis as customers not shielded by taxpayer subsidies are hit by eye-watering price rises” — ABC National’s energy reporter Daniel Mercer.
"Businesses have reported electricity price hikes of up to 50 per cent or more, prompting warnings some are scaling back their operations or could even go under in the face of power bills costing thousands of dollars more a month.”
"Australia is flooding its eastern grid with high-cost, low-value parasite power, driven not by engineering or economics but by politics — commentator Chris Uhlmann in The Australian newspaper.
"People support net zero. They support renewables. But they are increasingly worried about cost, complexity and whether they are being heard” — Peter Purcell, Australian Pipelines & Gas Association.
“Rising construction and finance costs will push up prices for energy projects of all kinds in the coming years” — CSIRO.
“It’s right that the sunniest and windiest continent remains at the forefront of solar and wind innovation – and this government intends for it to stay that way” — federal Climate & Energy Minister Chris Bowen.
“Bowen’s idea is that, if you are prepared to throw enough taxpayers’ dollars at anything, then a project can go ahead” – economist Judith Sloan.
“The system costs of renewables are what matters” — Oxford University professor Sir Dieter Helm. “As more and more are added to the electricity system, they require not just a very large and costly rebuilding of the grid, but also more and more back-up generation for when the wind doesn’t blow and the sun doesn’t shine. This is not controversial: it is well-known but widely simply ignored.”
“What is needed going forward is a realistic conversation about the costs involved in making the shift to a lower emissions grid and an acceptance that, since it still has a long way to go, it will take time for us to realise the full benefits” — Carl Kitchen, Australian Energy Council.
The federal Climate & Energy Minister is in upbeat mode about the Australian energy transition.
Interviewed in July for The Conversation newsletter by leading journalist Michelle Grattan, Chris Bowen declared himself “pleased but not yet satisfied” with progress of the federal government’s policy. "We are, by and large, on track for our 43 per cent emissions reduction goal,” he added.
Grattan asked: "You are confident that Australia can reach the 2030 targets of 43 per cent emissions reduction and 82 per cent renewable energy?” Bowen responded: “I am.”
His view contrasts with a recent Wood Mackenzie commentary in which the global analysts claimed Australia is likely to achieve only 58 per cent of renewable energy generation by the end of the decade.
It also contrasts with the current view of Ross Garnaut, an economics professor and former key adviser to Labor governments on climate change policy. Garnaut, a director of the Superpower Institute think tank, told the Clean Energy Summit conference in Sydney that he believes Australia “is on a trajectory to miss the renewable energy target – not by a little but by a big margin.” He is calling for the re-introduction of a carbon price scheme, a political disaster for the ALP earlier this century.
In the last days of July Bowen announced that the Albanese government will expand its renewable energy investment scheme by 25 per cent.
He said the government now plans to underwrite the construction of 40 gigawatts of large-scale solar and wind generation plus storage by the end of the decade.
He added: “The transition to clean electricity generation is urgent as ageing coal-fired power stations are becoming more expensive and unreliable.”
Under the expanded program, the government is promising to underwrite a total of 26 gigawatts of large-scale solar and wind generation and 14GW of storage or clean dispatchable capacity that can be called on when needed. It had previously promised 23GW of generation and 9GW of dispatchable capacity.
The scheme effectively provides a floor price for power, reducing the risk of company investments.
Reporting Bowen’s announcement, the Australian Financial Review commented that it came "as supply chain and planning approval issues, worker shortages and social licence concerns continue to stifle the roll-out of new projects.”
Meanwhile, The Australian newspaper has published an editorial claiming that the energy transition “is becoming an end unto itself.”
The paper’s editors assert that the renewables transition has costed taxpayers an estimated $29 billion over 10 years “while cutting emissions only six per cent.”
They add: “There is a danger that by cherry picking desired outcomes, including more renewable energy, without considering alternatives such as nuclear – and subsidizing favoured industries – scarce taxpayer funds will be misdirected.”
A new Energy Consumers Australia survey on bills shows that households with incomes of less than $50,000 per year are the most likely to face energy hardship, with 54 per cent of renters and 46 per cent of mortgage holders experiencing financial strain.
More than one in 10 households answering the survey reported spending more than six per cent of their income on energy bills, which, according to ECA, is a key indicator of energy hardship. Of the highest-earning households with incomes of at least $150,000 or more per year, only 11 per cent of renters and six per cent of mortgage holders faced energy hardship. People who own their own homes are far less likely to deal with these financial pressures.
A spokeswoman for the lobby group told media that “many rental homes in Australia have the energy efficiency of a tent.” She said: "Not only does this lead to higher energy costs, adding to cost of living pressures for renters, it also affects them financially, because energy inefficient homes cost more to heat and cool, thus further entrenching energy hardship."
The Australian Industry Group says there is “a desperate need” for the current national productivity debate to include better energy planning.
Innes Willox, chief executive of AIG, says: “The bottom line is that, if we fail to deliver affordable, reliable and scalable energy solutions for industry, we will continue to lose capacity, capability and competitiveness.
"Investment will inevitably slip away, employment opportunities will diminish, and we will be perpetually managing energy uncertainty. Getting our energy settings right and delivering on them is fundamental to lifting our flagging national productivity performance.
"Cheap, scalable clean energy is central to managing our biggest vulnerabilities — social and economic exposure to climate change — and our biggest opportunities: world-scale industries producing green energy intensive commodities.”
Willox was reacting to a two-year delay of the VNI West transmission project, which he declares is vital to energy security for Victoria and New South Wales.
Willox says there are clear ways to substantially improve productivity in energy supply. These include streamlining environmental approvals, improving community engagement, delivering clean energy faster and cheaper, reassessing and reducing cumulative burdens on developers and designing efficient gas security policies.
The Australian Energy Market Operator says the east coast NEM saw a surge in generation and storage capacity investment in the 12 months to June.
In its new “connections scorecard,” AEMO reports the pipeline of new projects in the market reaching full output attained a record level in 2024-25 financial year.
Merryn York, the operator’s executive general manager system design, says 29 projects, totalling 4,400 megawatts capacity, achieved the output mark.
In the June quarter, she adds, this involved 1,520 MW of grid-scale solar generation, 1,420 MW of wind supply, 130 MW of solar plus battery, 1,300 MW of stand-alone batteries and 43 MW of gas-fired plant.
As well, York says, at the start of the new financial year 260 NEM projects were in the grid connections process, 39 per cent more than in the previous year.
She claims this shows investors are adjusting to the economics of negative wholesale electricity prices and to using grid forming technology to support power system security.
Meanwhile, the Clean Energy Finance Corporation says it committed $3.5 billion in clean energy investment in the 12 months to 30 June. It says this takes the investment through it by the federal government since the corporation was launched to $18.3 billion, supporting $85.3 billion worth of projects.
In this context, recent BloombergNEF analysis shows Australia needs to invest some $US59 billion annually over the rest of this decade to achieve the federal government’s 2030 net zero target.
AEMO chief executive Daniel Westerman has told media the latest data demonstrate that the national energy transition is doing more than accelerating – “it is,” he says,”gaining real, measurable momentum,” adding that “record levels of investment over four years represents tangible progress towards replacing retiring coal-fired generation.”
The oil and gas industry says it expects to pay a record $21.9 billion in taxes and royalties to Australian governments for the 2024-25 financial year, up from $21.5 billion in 2023-24.
This will take the sector’s tax and royalties contribution to almost $60 billion in three financial years.
Australian Energy Producers says the money includes company income tax, petroleum resource rent tax, State royalties and excise.
AEP chief executive Samantha McCulloch declares that the payments “dispel the myth this sector does not pay its fair share.” She also points out that the industry remains the second highest corporate sector taxpayer in Australia, accounting for 10 per cent of company-related tax.
“This revenue helps fund essential services for all Australians and is equivalent to the annual cost of the national pharmaceutical benefits scheme.”
McCulloch adds that, as well, natural gas supply provides $105 billion overall to the national economy and supports 215,000 jobs.
Nonetheless, the contribution doesn’t impress independent senator David Pocock, who says a recent roundtable discussion on taxation involving economists and tax experts took the view the PRRT should be “strengthened.” He declares “excessively generous” deductions and “flawed” transfer pricing rules enable the petroleum industry to “pay next to nothing in taxes from offshore projects in Commonwealth waters.”
Zoe Daniel, a former ABC foreign correspondent and an independent federal MP who lost the seat of Goldstein in the May general election, has put forward an interesting point in the current net zero debate that is making waves politically and in the media: in an op-ed in The Guardian newspaper, she points out that millennials and Gen Z members are now the largest group of Australian voters and that there will be several hundred thousand more of them by 2028 (when the next federal election is due).
Effectively, she is waving a climate change dagger at the main political parties and especially at MPs concerned about and often antagonistic to net zero policies because opinions polls show that members of the younger voting block are convinced the issue needs strong and urgent attention.
There’s no question, Daniel adds, that the issue is complicated, practically and politically, but, she says, Labor arguably has a six-year runway to handle it because of the size of its poll victory this year.
While the climate change action horizon is 2050, Daniel’s arguments are of high current meaning because both major political groups are wrestling with key moves – the Coalition in reviewing the energy policies it took to the recent election and the ALP, via Climate & Energy Minister Chris Bowen, in preparing to submit a 2035 national greenhouse gas emissions target under the Paris agreement by September.
Bowen is fending off questions from all sides by pointing out he has asked the (government-appointed) Climate Change Authority to give him advice.
He is not the only dodger and weaver on this issue.
As I write Last Word, the Australian Financial Review is having a go at the Business Council for apparently opting “to withhold its view on a 2035 emissions reduction target until after the Albanese government makes its own decision, despite commissioning detailed research on the topic”. The AFR says the BCA is sitting on two analytical reports it commissioned from McKinsey in 2024.
Meanwhile, another major business lobby group, the Australian Chamber of Commerce & Industry, has sent the Productivity Commission a submission in which it has has warned against aiming too high on the 2035 target at a time, it says, when the current 2030 goal is “becoming increasingly challenging” and “slipping out of reach.”
ACCI argues that the 2035 target should be set at a level that is “realistic, reasonable and achievable without imposing overly tight constraints and excessively high costs on Australian business or the taxpayer.”
There’s going to be a lot more commentary on this issue before 2025 is over and it will continue on in to the new year.
Those opposed to the policy generally are not going to go away.
An example of their sharpening claws appeared in the AFR in recent days in the form of a trenchant op-ed by former Nationals senator Ron Boswell.
He summed up his views like this: “If we stick with net zero, our economy will weaken. Our living standards will suffer. The electricity price advantage we once enjoyed will become an even more distant memory. And because electricity costs feed into the price of everything, the price of almost everything will go up. Perversely, on current trends, many other countries, including energy-poor nations that have no hesitation in using our resources, will grow more competitive.
“And our efforts will be in vain. Emissions cuts here are pointless if they are cancelled out many times elsewhere. Self-delusion is not a strategy. The same applies to subsidies for every latest green boondoggle. We can’t continue to treat the net zero as a bottomless pit, a cause worthy of limitless sacrifice from Australian working families and one beyond scrutiny or question.”
Watch this space.
Keith Orchison
30 July 2025