Issue 243, July 2025
As the new financial year and a new quarter century roll in, the actual outlook for energy policy for Australia, as opposed to declarations by politicians and activists, remains quite a bit less than clear. In the recent tradition of high-flying net zero rhetoric, the re-elected ALP government is due to set new targets for economy-wide Australian carbon emissions, moving the bar from 2030 to 2035 as it pursues holding a global UN climate jamboree (CoP) here later this decade. This ambition is underpinned by the current aim to achieve 82 per cent national electricity supply via renewable generation. Whether the renewables goal is achievable is still subject to much doubt – led most recently by global analysts Woodmac declaring the present trajectory is heading to only 58 per cent green power supply by 2030 – and to growing demands for a full and frank disclosure of the cumulative cost of the policy, not least to taxpayers. Meanwhile the Liberal/Nationals coalition, mired in post-election depression, is wrestling with how best to pursue its desire for Australia to include commercial use of nuclear power in the supply mix.
“The 2025 election was an energy win” – federal Climate & Energy Minister Chris Bowen. “We won the argument when we turned the debate around and didn’t accept the premise that action on climate change can come at an economic cost, but in fact is an economic opportunity for Australia.”
"We have been clear that we want to ensure Australian industry is best placed to compete in a decarbonising world" – Bowen.
“Since the pandemic, Australian manufacturing input prices have risen sharply, with gas inputs showing the most significant increase” – the Australian Industry Group in a June report. “The sharp rise in gas and manufacturing input costs has significantly outpaced the more moderate increases in consumer and industrial goods prices, highlighting growing cost pressures on producers.”
“While Australia continues basing its economy so heavily on commodity exports, each successive government continues to impose renewables targets requiring hundreds of billions of dollars of investment to not only transition to using solar and wind turbines, but also for the expansive grid transition needed to utilise green energy” – freelance journalist Robert Weir in a Sky News commentary.
“If you thought energy markets were chaotic before, buckle up. Australia’s biggest power guzzler – the Tomago aluminium smelter – is knocking on the doors of both Macquarie Street and Canberra, and it’s not asking for pocket change” – the Australian Financial Review’s Current Climate newsletter. “Tomago is seeking billions in support to stay in business. The stakes? About 1,000 direct jobs and another 5,000 downstream. Not to mention 37 per cent of the country’s aluminium output.”
“Tomago’s current predicament is a direct result of State and Federal government plans to shift our grid to mostly intermittent energy sources” – Zoe Hilton, Centre for Independent Studies analyst. “With power prices in Australia rising higher and higher, it simply doesn’t make financial sense to run a smelter here.”
“Federal government spending on climate change and net-zero policies has reached $9 billion a year, up from $600 million just a decade earlier and up more than 400 per cent in the last term of parliament, new analysis shows, despite concerns progress on emissions cuts is too slow and the costs of electricity keeps rising” – Matthew Cranston, economics correspondent, The Australian newspaper. “Economists are now calling out whether the ramp-up in government net-zero spending is delivering proper value for money for taxpayers and that building bottlenecks could have further inflationary pressures.”
“The federal Energy Minister declares that victory is imminent in a system lurching towards collapse. He insists the great energy transition is on track, and we’re at the cusp of an era of clean, cheap and abundant power. What could possibly go wrong?” – Nick Cater, Menzies Research Centre.
"If Chris Bowen was an executive in any sensible company around Australia he would have been fired years ago and yet he still stays in his job, completely destroying the very thing that underpins our economy and that's affordable and reliable energy" – Liberal senator Anne Ruston.
Australians, says the Lowy Institute, are split on the national net zero target for 2050.
Reporting on its 2025 annual poll of public opinion, the institute says 38 per cent of respondents believe the economy will be better off when the target is achieved – but 36 per cent believe it will be worse off and almost a quarter think the transition “will make no difference.”
The poll also shows that three-quarters of the adult population support renewable energy having a major role in the power mix while a fifth think it should have a minor role.
There is more of a split on the role of gas in meeting future national energy needs: the poll finds that 51 per cent believe the fuel should have a minor place by 2050 while 38 per cent see a major role.
Meanwhile a quarter of respondents believe coal should have still have a major role in electricity supply by mid-century versus 44 per cent envisaging it will have a minor share of the market then. Almost a third of those polled, Lowy adds, believe coal should have no role in 2050.
“A slim majority (54 per cent) continue to support banning new coal mines – down from 63 per cent in 2022.”
On the use of nuclear power, a major bone of contention between the ALP and the Coalition, which wants the current ban lifted, the institute’s polling found 66 per cent of respondents voted for some role for the generation source by mid-century – almost, it says, the same as those who believe coal should still have some part in power supply then. Thirty-seven per cent of those polled said they believe nuclear should have a major role by 2050 versus 32 per cent opting for no role at all.
Total electricity generation in Australia rose three per cent last year over supply in 2023.
The federal government’s Australian Energy Statistics report released in late June says that 2024 power production was 283,920 gigawatt hours with renewable energy contributing 102,403 GWh or 36 per cent.
The report says the largest source of renewable generation was solar (18 per cent of the total) followed by wind (12 per cent) and hydro (5 per cent).
Coal accounted for the largest share of total electricity generation, 45 per cent, down from 46 per cent in 2023.
Overall, fossil fuel sources contributed 181,518 GWh (64 per cent), down one percentage point on 2023.
These statistics cover all electricity generation in Australia, including by power plants and by businesses and households for their own use.
Power generation in Queensland from all sources continues to creep up on New South Wales — the State’s 2024 total was 74,790 GWh compared with 76,846 GWh in NSW. The next largest outputs were in Victoria (56,272 GWh) and Western Australia (45,580 GWh).
Households in New South Wales go in to the new financial year facing extra power bill costs of between $159 and $249 after the latest review of the NEM’s “default market offer” by the Australian Energy Regulator.
The regulator has also ruled that DMO levels — which serve as a price cap for retailers in NSW, South Australia and south-east Queensland — will go up by between 2.5 per cent and 5.8 per cent in other areas under review (between $61 and $120). The NSW rises are between 7.8 and 8.9 per cent.
Small business customers on standing offer plans will experience increases of 0.8 per cent to 8.5 per cent, depending on the region.
Elsewhere maximum retailer price increases are set by State and Territory governments.
In releasing the AER decisions, chair Claire Savage said wholesale and network costs had increased by between 1 percent and 11 percent, and retail costs by 8 percent to 35 percent, over the past year.
Savage said there had been cost pressures on almost all components of the electricity supply chain,
She acknowledged that the bill decisions are “not welcome news."
The Australian Council of Social Service, a national advocacy group for those affected by poverty, declared increases in power prices a “blow for people on the lowest incomes who are already making major sacrifices to pay their energy bills". ACOSS chief executive Cassandra Goldie said: “One-off energy rebates to everyone are poorly targeted, expensive and do not provide the permanent bill relief other solutions offer.”
Energy Consumers Australia chief executive Brendan French said disparities of up to 27 per cent between the default market offer and other retail deals showed the system was not working effectively.
“The DMO exists to protect people, particularly those in vulnerable circumstances, from paying disproportionately high electricity prices,” he said.
“We’re very concerned to see a growth in wholesale costs again alongside growth in network prices. The sector should be focused on reducing costs at all stages of the supply chain, and making networks as efficient as possible, otherwise consumers risk losing the benefits of the energy transition.”
Gavin Dufty, executive manager of policy and research at St Vincent de Paul Society, who tracks energy bills, told the Australian Financial Review that the latest power price decision is "a glimpse into where the electricity market is headed as Australia forges ahead with its energy transition."
At Australian Energy Week in Melbourne in late June, federal Climate & Energy Minister Chris Bowen announced there will be a review of the default market offer “which has not worked as well as intended.”
He said: "The DMO was intended to act as a benchmark price to stop the worst forms of price gouging, while leaving the job of putting downward pressure on prices to competition between energy companies but I don’t think it’s working that way and reform is needed.”
Bowen added: "The vast majority of bill payers, some 80 per cent, could be getting a better deal. It’s difficult to defend the DMO, when the customer is required to do the deal hunting,”
Ted O’Brien, deputy leader of the federal Liberal Party, responded: “The increases are not sustainable for families, businesses and industry — prices remain too high and the pressure is mounting.”
In the wake of the regulator’s price rise announcement, commentators have been warning that the costs of new transmission systems to underpin the federal government’s energy transition and the related policies of State government will lay an ongoing burden on consumers.
Tony Wood, energy director at the Grattan Institute, told media that the full extent of a $20 billion-plus transmission build is yet to be seen on retail power bills and this will offset any lower wholesale power prices.
“For the next few years, we expect that the lower cost of wind and solar generation will be largely offset by higher costs of transmission, both interstate and intrastate”, he commented.
Andrew Richards, CEO of the Energy Users Association of Australia predicts that electricity prices will stay high for the rest of this decade. “I can’t see in the next five years that there is going to be downward pressure on prices”, he said.
He told journalists in June: "We are in a phase of completely rebuilding the national electricity market, and that’s very, very expensive, and we’re needing to do it in a very short period of time, which makes it even more expensive.
“The theory has always been we build lots of transmission to connect all this cheap renewable energy, and, eventually, the lower cost energy part will outweigh the higher cost network part. But at the moment, the electricity is still quite expensive, and we can’t see the cost of electricity coming down materially any time soon.”
The situation has also been acknowledged by the Australian Energy Market Operator, which says the cost of overhead transmission line projects has risen by up to 55 per cent, with substation outlays rising as much as 35 per cent, since its 2024 NEM “strategic plan” was published. It adds that the higher infrastructure costs will need to be factored in to its 2026 planning report.
The federal government aims to add 10,000 kilometres of high voltage networks to the NEM system by 2030 to meet its green energy policies.
The Australian wing of the worldwide electricity power systems professional organisation, CIGRE, has declared that "for Australia to meet its carbon emission targets much more needs to happen and to happen quickly.”
CIGRE Australia chairman Sean McGoldrick says: "This is particularly so as the decarbonisation of other sectors of the economy, such as transport and agriculture, require electrification to remove carbon from their operations.”
In a statement, McGoldrick adds: “We have made great progress in decarbonising the existing generation in the power system in Australia, with renewables now a sizeable component of the generation mix. What we have not yet addressed is the incredible challenge of adding around a further six times today’s utility-scale wind and solar and five times today’s consumer energy resources over the next 25 years, and designing and operating the power system to manage that with the level of reliability that consumers have come to expect.”
Sanjeev Gandi, managing director of Orica, one of the world’s largest manufacturers of explosives and chemicals for mining and of fertilisers for farming, has told the ABC that the company’s power bills have gone up three-fold in the past 10 years and its natural gas costs have risen four-fold.
Gandhi says the company is pondering an increase of investment in America if energy prices do not fall in Australia.
At (almost) 83, the demands of travelling to Melbourne to attend a conference are something of a bridge too far for me, but I was able to follow the opening day of Australian Energy Week 2025 there through the organisers, Quest Events, providing a live Web stream.
It is not, of course, a substitute for the networking that’s available if one is right there in the action with this year’s 1,250 attendees and 150 speakers but it provided some interesting insights at a time when I was preparing to write this issue of Coolibah newsletter.
These insights included:
Anna Collyer of the Australian Energy Market Commission summing up a key thread of the event’s discussions for participants thus: "The future is creeping up on us and we have no choice but to deal with the known unknowns of the energy transition if we are going achieve better customer outcomes.”
And Damian Nicks, chief executive of AGL, driving home the point that “The opportunity to get regulation right is enormous. There are too many layers, and if we don’t get regulation right today the transition is going to get harder to deliver and at a cost to the customer.”
Plus Transgrid CEO Brett Redman (a former AGL head), declaring: “We’ve really stripped the supply system very, very thin. We are in a world now where you cannot predict exactly what will happen.”
To which he added: “Because we’ve stripped out all our buffers, it’s left us fairly exposed. And the risk to the transition is that people lose confidence in the system. Because on those days where things go wrong, no one’s going to want to hear explained to them how statistically that seemed very unlikely... even as people are taking cold showers.”
Energy Australia managing director Mark Collette posed a key question for the conference attendees: “What will make energy cheaper?”
His view is that the supply sector needs to focus on designing smarter systems that reward customers, reducing infrastructure needs and "making better use of what we already have” — adding that “cheaper energy is not just about lower bills; it is about creating an energy system that underpins future industry, supports Australian productivity and improves lives".
These are only slivers of the wide-ranging contributions to the Energy Week agenda over three days, but they go to the heart, I think, of the current situation and underscore that we have a supply system teetering ever closer to a brink.
When will the talk about the issues translate in to a genuine move to pursue critical remedies?
Keith Orchison
26 June 2025