Issue 245, September 2025
We are now in to the last third of 2025 and what’s changed in the energy arena this year? Basically, not much despite a lot of colour and movement from the actors. For example, a key factor in pursuing progress over the next 5-10 years is, to quote petroleum producers, a strong, stable and competitive east coast gas market that delivers more gas when and where it’s needed, while providing certainty for existing and future investment. Identify real progress in this regard……. And then there is the issue of transmission costs. The past month has seen more hand-wringing, not least from the energy markets operator, over a 100 percent increase in less than two years in the modelled costs of the high voltage grid expansion in the NEM to meet the “transition” blueprint. Plus there is news that investment in new renewable energy projects is now at less than half the pace required to meet Labor’s clean energy targets, casting fresh doubt over whether enough power generation can be brought online before the closure of coal plants. As the Victoria Energy Policy Centre declared in August, “the metaphorical rubber of the transition is starting to hit the road,” especially in its home State. Above all, as the centre asserts, “there is also a desperate need for an honest reckoning of the costs of the policies as they are now evident, not as discredited planning bodies have claimed them to be.” In sum, this not a good look — and consumers at the pointy end are increasingly concerned, with good reason.
“Considering the large volume of generation requirements over the next decade, the timely delivery of new generation, storage and transmission, along with the operation of consumer energy resources to support reliability, remain critical” — Daniel Westerman, chief executive, Australian Energy Market Operator.
"This is a period that needs to be navigated by plotting the right course and by having two very steady hands on the steering wheel” — Westerman. "Right now, our control rooms are becoming mission control for one of the most complex and critical challenges of our time: how we manage this evolution of our energy systems. It’s fast and it’s high stakes."
"AEMO’s report is further evidence that Labor’s energy plan is working” — Chris Bowen, federal Climate & Energy Minister. “We are making the system cleaner, fairer and more reliable while ensuring we replace retiring coal with the firmed renewables of the future.”
"AEMO and successive governments have always downplayed the real costs implied by the integrated system plan” — energy economist Bruce Mountain, Victoria Energy Policy Centre. “The many deep-rooted problems bedevilling the ISP and the large-scale projects that depend on it are unlikely to ease."
"Faced with long delays, huge cost blowouts and staunch opposition from some quarters, the push to build large-scale projects from wind farms to transmission lines is becoming increasingly fraught” — Daniel Mercer, ABC energy reporter.
“There is a staggering amount of investment going into transmission – alongside that there is also a large amount going into renewables, storage and firming technologies” — Origin Energy CEO Frank Calabria. “That is ultimately going to be recovered on consumer bills, so our attention has to be how do we bring consumers along on that transition.”
"Australia is flooding its eastern grid with high-cost, low-value parasite power, driven not by engineering or economics but by politics” — media commentator Chris Uhlmann in The Australian newspaper.
"What we're seeing is a kind of zombie energy transition that's being forcibly intubated and resuscitated by government subsidies” — Aidan Morrison, energy research director, Centre for Independent Studies.
"The reality is many people are telling porkies about the cost of renewable energy which is why governments need to intervene in the market to subsidise it – and big time” — economist Judith Sloan.
" We need to prioritise the cheapest technologies first - we want to see strong policy signals,” Energy Australia managing director Mark Collette.
"We need to get back to energy being a competitive advantage and we need a high quality, high energy system” — Energy Users Association of Australia CEO Andrew Richards.
The next big energy-related test for the Albanese government looms in September — setting the 2035 carbon emissions reduction target under the UN Framework Convention when it is struggling to pursue its current goal of a 43 reduction by 2030 from a 2005 level.
Climate & Energy Minister Chris Bowen reacted brusquely in August to the head of the UNFCC, who, on a visit to Australia, urged the government to set a “truly ambitious” 2035 level.
“Targets are easier set than met,” Bowen told journalists. “We will be informed by expert advice.”
That advice will come from Australia’s Climate Change Authority.
Context for Bowen includes his competition with Turkey for hosting next year’s UN climate change summit (CoP 31).
August also saw Bowen announce a substantial increase in the government's main climate and energy program, pushing up its capacity investment scheme for renewable energy by 25 per cent.
The scheme is designed to deliver the government’s goal of 82 per cent of grid electricity coming from renewables by 2030. Over the past year renewables have been at 42 per cent of grid power supply.
Professor Ross Garnaut, an adviser to the Gillard ALP government and now director the Superpower Institute think tank, declared in recent weeks that Australia is “on a trajectory to miss the (current) target not by a little but by big margin.” He told a conference that an addition of 5,000 megawatts of dispatchable capacity, which typically means large-scale batteries and 3GW of large-scale wind and solar generation to its underwriting program, is in train. (In total, the government has promised to underwrite 26,000 MW of generation and 14,000 MW of storage or clean dispatchable capacity that can be called on when needed.)
A review of the eastern Australian power grid commissioned by the federal government has warned in a draft report that the NEM is “facing real challenges and becoming more volatile.”
The review, under the chairmanship of associate professor Tim Nelson, makes nine major recommendations "aimed at re-establishing the NEM’s core strengths: efficient markets to guide investment decisions, efficient dispatch, manage financial risk, and deliver the affordable and reliable energy consumers deserve and expect.”
Nelson says: "If we get the right market settings in place, we can deliver a secure, affordable, low-emissions electricity system that works better for everyone. We are confident that the pathway we’ve set out – one that strengthens markets, supports investment, and puts consumers first – is the right one.”
The report says: "Due to changes to the way we generate and consume electricity, the NEM is becoming a system that is more weather dependent, more energy constrained, less scheduled and less dispatchable.”
It warns that the main driver of power prices is shifting from being dependent on demand and supply-side fuel costs, to being increasingly influenced by “supply-side variability, driven by the weather-dependent nature” of renewable energy.
It says: “Prices are increasingly characterized by longer periods of very low prices when solar and wind output is strong, punctuated by sharp, often very high, price spikes during periods of low renewable generation or unexpected outages. Prices are likely to become predictably more variable and unpredictably more volatile.”
The report says variability, including the daily changes in solar or wind output, can be forecast and managed – but volatility, like unexpected network outages or long-term changes in wind and solar output, “poses more significant challenges”.
Responses to the report are required by 17 September.
The federal government’s Powering Skills Organisation is warning that the transition to net zero faces a major problem: a shortfall of 42,000 energy, gas and renewables workers by 2030.
In a new report at the end of August, the organisation says that the current workforce in the sector numbers 300,000 and further investment in training is needed.
In the electricity industry, it says, there is a current shortage of 22,000 apprentices – and the training system is at capacity.
The federal opposition, via its energy spokesman, Dan Tehan, has challenged the Albanese government to “come clean” on the cost of pursuing its net zero implementation plans.
Following up an 83-page report by the Productivity Commission, published in August, on “Investing in Cheaper, Cleaner Energy and the Net Zero Transformation” and calling on the government to take stronger action across the electricity, heavy industry, transport and housing sectors to cut emissions, Tehan called out its “silence” on costs.
He added that “there is no end in sight to the skyrocketing cost of Labor’s energy transition — and that’s the clear takeaway from the report.”
Tehan asserts: "After three years in office, Labor’s climate change and energy policies are delivering worse outcomes across every key metric:
• electricity prices up more than 30 per cent;
• transmission project costs have doubled and are delayed;
• emissions have increased;
• gas prices up more than 30 per cent and shortages are expected by the end of year;
• the threat of blackouts is growing, with businesses being forced to power down to keep the grid stable; and
• Labor has walked away from their promise to cut power bills for households by $275 a year by 2025.”
Meanwhile, the issue of costs is also being taken up by a prominent figure in the Labor movement, former MP and Australian Council of Trade Unions president, Jennie George, who said in a newspaper op-ed at the end of August that the government "refuses to disclose its whole-of-system costs for a transition held together by billions in taxpayer subsidies and relief packages — the secrecy is indefensible”.
Also joining the chorus of criticism, Australian Financial Review columnist Jennifer Hewett writes that "For an agency that usually likes to talk a lot about dollars spent, saved or wasted, the Productivity Commission’s new report is curiously lacking in any cost estimates."
A new annual report from the Australian Energy Regulator has highlighted the greatest capacity change in the eastern States’ NEM since it was launched in 1998.
AER chair Clare Savage, releasing the regulator’s “state of the energy market” for the 12 months to March this year, declared that the profile of energy generation has changed significantly over the past decade, with 2024 being a notable year.
“In 2024, more than 5GW of new solar, wind, battery and gas capacity entered the National Electricity Market (NEM) – the largest annual new entry of capacity since the NEM began in 1998,” she said. “By the end of the year, renewable technologies including rooftop solar, solar farms, wind, hydro and batteries made up 60 per cent of the National Electricity Market’s generation capacity and contributed 39 per cent of generation output, representing a significant increase over the past decade.”
Savage added that the report shows "this evolving system, the complex relationships between weather conditions, shifting energy demand, coal generator and network outages and the diverse mix of generation types are increasingly driving the wholesale market, resulting in increased price volatility.”
She said that, "while the wholesale market has been changing, energy customers have also changed their behaviour – consuming less electricity from the grid across the middle of the day, being more energy efficient, and generating their own power through rooftop solar systems and installing batteries for storage."
Savage noted that technological developments and consumer preferences continue to lead the NEM away from a supply-side orientated system to one that needs to support two-way flows of electricity and away from centralised generation to distributed generation.
“As the system continues to evolve consumer energy resources must be effectively integrated and coordinated to help achieve a least-cost transition, with networks evolving to support these new energy services and ensuring they are utilising their full capacity,” she said.
The AER report also illustrates the impact of change on consumers.
Savage said that, in the 12 months to 31 March 2025, the total number of residential customers and the proportion of customers with energy debt increased. The average debt was also higher. Disconnection rates remained low, however, with only around 0.06 per cent of small electricity and/or gas customers being disconnected for non-payment.
Two years ago Climate & Energy Minister Chris Bowen hailed the setting aside of $3 billion of the “Rewiring the Nation” fund for projects in Western Australia as a “good deal on Australia’s decarbonisation journey” — but the ABC has revealed that, on information from the Clean Energy Finance Corporation, not a cent has been spent to date.
The WA Coalition opposition has attacked the situation for “setting back work on the north-west interconnected system by years,” accusing the State government of “messing around with money that’s sitting on the table.”
The WA government has responded through Energy Minister Amber-Jade Sanderson that it is supporting negotiations with Pilbara region traditional landowners on tenure issues.
Meanwhile, in the eastern States, the ABC points out, $3.54 billion of “Rewiring the Nation” funds have been committed to projects in Victoria and New South Wales.
The ABC quotes the Climate Energy Finance think tank as fretting that inaction in WA could result in significant network project delays.
CEF director Tim Buckley says: "There is not enough skilled workforce, we don't have the domestic supply chains, and so grid transmission projects could take five or 10 years.
He adds: "If government doesn't approve things in 2025, they're not going to be operating this decade.”
The contrast between the viewpoints of the federal Climate & Energy minister, Chris Bowen, and his critics could hardly be more stark.
For Bowen, at least in the public arena, it’s vital to remain upbeat about the green revolution in energy supply.
In a recent speech, he said: "We've made good progress in the last three years, sometimes against headwinds. But that progress is just the beginning. The headwinds remain but the opportunities remain bigger.”
And he put out a media statement claiming that: "Australia is tracking well to meet its 2030 climate pollution target, driven largely by the Albanese government’s policies."
By contrast, Aidan Morrison, energy research director of the Centre for Independent Studies, speaking at one of the most influential national conferences, the Diggers & Dealers Mining Forum, held annually in Kalgoorlie-Boulder, characterizes the energy transition as a "zombie" artificially sustained through government subsidies rather than economic viability.
Morrison declared to 2,300 attendees at the conference that policymakers have failed to acknowledge fundamental engineering and economic constraints affecting the transition. “There is no serious intellectual defence for meeting 2050 net-zero targets,” he said.
Morrison asserted that the ALP's 2030 renewables targets are no longer credible and that the transition has stalled except where attempts are being made to revive it through subsidies — claiming that large-scale renewables deployment in Australia has "already flatlined.”
Added weight to Morrison negativity came from his fellow panellist at the forum, Chris Keefer, president of Canadians for Nuclear Energy, who commented that, looking internationally, there was much evidence the technical challenges of integrating renewable energy at a national scale have been consistently underestimated by policymakers.
Keefer stressed the need for realism about costs and geopolitics. “I experience a certain amount of cognitive dissonance. I am climate concerned, but I’m an energy realist,” he said.
Keefer said much of the climate conversation remained divorced from real life. “We spend a lot of hot air talking about the issue, but we are not numerate about it."
He’s certainly not alone in taking that position — and even some green energy boosters feel that way. One, writing for a notably green Web newsletter earlier in August, observed: “Despite various State and federal government targets supporting emissions reduction and renewables, policy settings are tough and we’re critically short of transmission and network capacity.”
Interestingly, the ABC, which for years resembled a house journal for boosters of renewables, is increasingly focussed on reporting the problems rather than the hype.
And the Australia Financial Review featured an op-ed in recent days by Alison Reeve of the Grattan Institute that included this notable observation: "Setting Australia up for a flourishing and productive net-zero future is going to require the technology, the capital and the market signals to change most of the energy-consuming assets in the economy in the next 25 years. We absolutely need comprehensive and consistent incentives, as the Productivity Commission says. However, these incentives have to fit with the realities of physical assets – because that’s where productivity happens.”
And then, frequently, there is economist Alan Moran giving the net zero process a towelling — most recently writing "Without a rethink of market design. Australia risks a grid that’s neither cheap nor stable. Wind and solar are far more expensive than coal and every dollar spent on them is not only subsidized but requires another dollar in backup and transmission."
Developments just ahead, including the federal government’s September decision on adjusting national carbon emissions targets to send to the United Nations, will throw a sharp light on the viability, and acceptability (by voters, households, small business and large industry) and will see an even louder debate on these policies and programs.
As AFR columnist Jennifer Hewett points out: "the Albanese government knows there’s nothing easy about its target of a 43 per cent reduction in 2005 emissions levels by 2030 – let alone proposing a much higher figure (for) five years later."
Keith Orchison
29 August 2025