Issue 249, January 2026
January 2026 marks the 21st anniversary of the beginnings of this newsletter — looking back, the monthly editions to date provide another illustration of the truth of an aphorism that the more things change, the more they stay the same. Or, to put it another way, that the more things seem to be changing, the fundamental nature of the situation — in this case, Australian energy supply — remains the same. For Australia today — as it was two decades ago — the big energy issues remain cost of use, security of supply and an efficient way to reduce carbon emissions. And management of these issues remains enmeshed in, and dominated by, politicking rather than engineering. Depressingly, the likelihood that this will change significantly any time soon is on the low side.
"Australia is heading into a perilous electricity position which threatens our ability to fully participate in the artificial intelligence revolution and force industry and consumers to take measures outside the grid to ensure security of supply” — media commentator Robert Gottliebsen. "Dangerously, the nation is setting up a system where climate-linked renewables are our base power source. Our power costs will be substantially higher than our rivals.”
"The question is no longer whether Labor’s version of net zero is being executed well. The question is whether the concept itself still holds merit as a guiding framework for a modern, resource-heavy economy” — commentator Nicholas Sheppard. "If the transition is built on unrealistic assumptions, inflated promises and mechanisms that do more accounting than abatement, then no amount of bureaucratic refinement will fix it. A policy born in an era of high rhetoric is faltering in an era of hard realities."
"It matters not whether you power the nation with solar panels, hamster wheels or thermo-dynamic combustion. The first requirement is that electricity is produced cheaply, restoring the competitive advantage Australia once enjoyed” — Nick Cater, Menzie Research Centre senior fellow.
"Matt Kean talked a big game as NSW Energy Minister, promising that the shift from coal to renewable energy would save households $130 every year. Five years later, the average household energy bill in NSW has risen by between $380 and $530, depending on the provider. Even if we allow for inflation, that's an increase up to $190 a year” — Cater.
“Australia’s energy transition is no longer just about replacing tried and tested source of energy with a novel alternative; it is about doing so fast enough to meet rising and increasingly inflexible demand. Failure will mean higher prices, greater reliability risks and constraints on precisely the digital and industrial sectors policymakers are counting on to drive future prosperity” — Cater.
"Electricity is only as cheap as the most expensive generator needed to keep the system standing. Coal still delivers the most consistent, on-demand, low-cost electricity on the grid. As it exits, the price will rise as higher-cost generators set the wholesale price more often” — media commentator Chris Uhlmann.
“Under any scenario, there is a cost associated with the build of Australia’s future electricity system” — CSIRO energy director Dietmar Tourbier.
"Our price outlook highlights a critical five-year window” — Anna Collyer, chair, Australian Energy Market Commission. "Residential electricity prices are projected to fall through 2030 as renewable generation and batteries ramp up, but then rise through 2035 if the pace of new investment doesn’t keep ahead of growing electricity demand and planned coal retirement.”
“This is a timing challenge, not a technology cost issue. With the right pace of investment, we can manage the energy transition while keeping prices stable” — Collyer.
“Being practical about the electricity grid necessarily involves having a Plan B, a set of contingencies that can be called on should the features of the preferred strategy not fall into place in a timely fashion. In other words, what happens when the shit hits the fan” — economics commentator Judith Sloan.
“A tripling in the domestic wholesale gas price from $4 a gigajoule to more than $12 over the past decade is proof the east-coast gas market is broken and needs an urgent fix” — Ben Eade, CEO, Manufacturing Australia. “The longer we delay fixing this, the more damage it does to employment, investment and Australia’s ability to transition to lower emissions energy.”
The federal government has announced in its annual “climate change statement” that national carbon emissions for the 12 months to mid-2025 were 437.5 million tonnes.
This, Energy Minister Chris Bowen told Parliament in Canberra, was a reduction of 9.9 million tonnes on the previous year to June – a fall of 2.2 per cent. “Emissions fell in electricity, chemicals and metals sectors, fugitives, agriculture and stationary energy– reflecting record renewable generation, abatement technology improvements and reduced venting,” he said. “However, transport emissions rose.”
The government’s statement shows that national emissions have been cut 28.5 percent from their 2005 level.
On electricity supply, Bowen said: “The first time our national grid got over 70 percent renewables in any 30-minute period was in September 2023. Since the start of September this year, renewables have been 70 per cent or more for at least 30 minutes on 65 days.
“In the past 12 months, Australia has produced over 100 terawatt hours of renewable electricity, enough to power every household more than one and a half times. We’ve seen over six gigawatt hours of new large-scale battery capacity entering the NEM. The development pipeline for the main grid has ballooned out to 275 projects, representing a total of 56.6 gigawatts in generation and storage capacity.”
On the outlook provided by his department, emissions are well off track to meet the government target, announced in September, of a 62 to 70 per cent reduction by 2035. The department’s current projection is 48 per cent.
FutureCoal, the global lobby group for the coal production industry, has called on the federal government to pragmatically and realistically re-shape its pathway to net zero following what it calls a warning by the Australian Energy Market Operator that the current strategy may not deliver energy security or climate objectives given the current state of alternative technologies.
“The government can only ignore AEMO’s assessment to Australia’s detriment”, says Michelle Manook, CEO of FutureCoal. “The (latest) report challenges the ideology of a ‘renewables-only’ transition and it confirms that Australia’s current pathway is misaligned with engineering and cost realities, or the original intent of the Paris Agreement.”
“Australia has been left behind, while other nations modernise their coal value chains to balance economic and energy security with emissions reductions and sustainability goals”, she adds. “AEMO’s report is an opportunity for Australia to initiate a pragmatic course correction, recognising coal’s domestic and international role, which underpins nearly every aspect of modern life and continues to support the prosperity of the nation.”
The Australian Energy Market Operator -- after “extensive stakeholder consultation and modelling of thousands of potential investment combinations” -- published its latest 115-page draft of the “integrated systems plan” for the east coast’s NEM in mid-December, declaring that “renewable energy, firmed with storage, backed up by gas and connected with upgraded networks remains the least-cost roadmap to meet energy needs.”
Chief executive Daniel Westerman says NEM electricity consumption is expected to nearly double by 2050, driven by electrification of transport, expansion of data centres and industry shifting from gas to electricity. At the same time, two-thirds of the remaining coal fleet will close by 2035, in many cases earlier than publicly-announced closure dates, with all due to retire by 2049.
He says this outlook means the NEM will need a total of 120 gigawatts of grid-scale wind and solar, 32 GW of grid-scale batteries, 14 GW of flexible gas and 12 GW of pumped hydro — and 6,000 kilometres of new transmission lines to add to the existing 44,000 km network.
As well, Westerman adds, “consumers will continue to play a major part in Australia’s energy transition, with expected investment in 87 GW of small-scale solar, 27 GW of behind-the-meter batteries and 9 GW of storage from electric vehicles by 2050.”
He told media that the capital cost of the energy grid infrastructure under the "optimal path” of NEM expansion would be $128 billion in today’s dollars, pointing out that the transition will be more expensive if it is delayed and the current official 2030 renewable energy target – for 82 per cent of generation – is not met.
“While momentum in investment and delivery continues to build, challenges remain in delivering essential infrastructure at the pace required,” Westerman told the Australian Financial Review.
“Slower progress will erode benefits to consumers and present risks to reliability.”
The final version of the new ISP will be published in mid-2026.
Commenting on the AEMO draft report, David Dixon, an analyst for Australia at consultants Rystad Energy, told the ABC that the biggest factor affecting new technology development is cost, pointing to high voltage transmission lines now being two to three times more expensive to develop than earlier this decade.
A new opinion poll undertaken for the Sydney Morning Herald by Resolve Political Monitor has found that 59 per cent of 1,800 people interviewed agreed that the priority for national energy policy should be on lowering prices.
“Even among Labor voters,” say Resolve, “55 per cent back reducing prices over cuts to emissions. Only Greens voters, at 48 per cent, favoured emissions reduction over lower power bills.
“By contrast, just eight per cent of One Nation voters supported lower emissions compared to 79 per cent who back cheaper electricity.”
Meanwhile the Melbourne Institute says "Australia needs fast and practical action based on facts to address our electricity affordability problem.”
The University of Melbourne-based institute comments: "High electricity prices disproportionally affect lower-income households and affect the cost structure of businesses.”
Millions of words are written about energy issues every year. I certainly can’t claim to read most of them but, over the past 25 years, I have built a list of writers I want to read whenever they publish something new because experience has left me valuing their analyses and opinions.
As I have referenced a number of times in this newsletter, the top of my list features Oxford University’s Sir Dieter Helm, who is a giant among thinkers in the energy sphere.
Another of fairly recent attention is Cristina Talacko, an Australian business leader and energy policy commentator. She is the co-founder and CEO of GLOW Strategies, a global advisory firm on energy and critical minerals, and the founder of the Coalition for Conservation, an organisation promoting pragmatic climate and energy policy. She writes frequently on geopolitics, decarbonisation and industrial strategy.
The latest offering from her I have seen appeared as an op-ed in the Australian Financial Review at the beginning of December under the headline "Australia toys with its own ‘Why Nations Fail’ moment on energy,” sub-titled "It’s dangerous when institutions are captured by their own storyline. Faith in renewables has become an identity, and that’s a lot harder to tweak than policy."
The headline references a 2024 Nobel prize-winning book that Talacko suggests has “uncomfortable relevance” for Australia today “as our energy debate drifts further from engineering and economic fact.”
As Talacko writes, the book describes a pattern the authors call a “vicious circle”: leaders becoming so invested in a narrative that they defend it long after evidence has turned against them.
Germany’s Energiewende, she opines, is a textbook example – a prosperous nation clinging to a renewables-only vision even as prices rose, dependence on Russian gas deepened and its energy-intensive industries fell in to increasing strife. And Australia, she asserts, is now showing similar traits, ignoring energy-related problems because acknowledging them requires "challenging a political identity rather than adjusting a policy,” adding that Australia’s insistence that an advanced industrial economy can be powered primarily by intermittent renewables has shifted over the past decade "from policy position to political identity."
She goes on: "Today, warning signs flash across Australia’s energy system. Electricity prices have risen more than 30 per cent year-on-year once temporary rebates are removed, according to the Australian Bureau of Statistics. Investment in large-scale renewables has collapsed: the Clean Energy Council reports that only 1.1 gigawatts reached final investment decision in 2024, far short of the roughly 6 gigawatts required annually to meet the government’s 2030 target. Meanwhile, the Australian Energy Market Operator shows solar curtailment exceeds 20 per cent to 25 per cent in parts of NSW and Victoria – vast amounts of clean energy the system cannot absorb. In any functioning system, this would trigger immediate correction. Instead, the government insists the transition is on track.”
Part of the problem, Talacko argues, is group think: "Australia’s energy debate is dominated by a tight ecosystem of advisers, NGOs, consultants and sympathetic experts sharing the same assumptions. This creates an echo chamber in which dissenting voices – even those grounded in engineering or economics – are dismissed as obstacles.”
And she winds up: "Energy policy is destiny. It determines which nations manufacture, innovate and attract investment -- and which lose industries, competitiveness and geopolitical autonomy. It shapes household living standards, regional cohesion, national budgets and strategic security.”
Also, in a column in Spectator Australia, Talacko comments of national energy policy and the pursuit of 100 per cent renewables by 2050 that “what should be technically rigorous has become a test of political loyalty, engineering constraints are dismissed as pessimism and economic trade-offs are reframed as moral failure.”
Elsewhere recently Talacko declared: “It’s time for Australia to design a transition that is real. That means putting people, nature, and national security back at the heart of climate policy.
“It means embracing every technology that works, instead of clinging to a single narrative.
“It means measuring success by outcomes: lower emissions, lower bills, stronger ecosystems; not by construction targets or political slogans.”
“Above all, it means restoring integrity to a debate that has drifted dangerously far from evidence. Net zero is still the right destination. But the road we’re on is broken.”
There’s more than a little food for thought in all this as we travel in to a new year and a new decade.
Keith Orchison
26 December 2025