Issue 255, July 2026
Welcome to another financial year where the debates about climate policy, energy transition investment and consumer concerns about costs in particular will roll on as will the politicking. Conservative commentators are harping on ever more loudly about their estimate that Australia is now saddled with $17 billion in annual subsidies to renewable industries and that the energy transition is “impossible” without such support. The over-arching political phenomenon domestically remains the rise in opinion polls of support for One Nation — whose policy approach includes highlighting promises to “ditch net zero, exit the Paris Agreement and axe the climate change department” while “saving coal and gas and bringing in nuclear power to bring down prices, restore reliability and guarantee national energy security.” How this plays out in the run-up to the next federal election as well as looming State polls will be crucial to forward energy investment. To quote one fretful media commentator from the green side, “political change is never far away, particularly given the volatile and uncertain world we live in now.”
“Power prices are expected to fall from 1 July – but the savings, touted by Chris Bowen, won’t be passed on to many households and businesses” — the Guardian newspaper.
“I would expect that households and small businesses should be experiencing a decline in costs overall” — Climate & Energy Minister Chris Bowen in a letter to the ACCC.
"We’ve seen some companies, not all, far from it, choose to increase their fixed supply costs while reducing their per-kilowatt-hour costs” — Bowen.
"We’ve been clear to the industry and regulators: any reforms must deliver cheaper bills” — Bowen.
“We need a target for lower electricity prices, not more renewable energy targets. We are losing our industry and the government remains obsessed with overseas conferences, not domestic jobs” — National Party leader Matt Canavan.
“The proposed reform is an attempt to address a growing problem: that households with the means to afford solar and batteries are no longer paying an equitable share of the cost of a network built for everyone" — Tony Wood, Grattan Institute.
“If you run a busy, high-energy household, the deep cuts to usage rates are likely to eclipse the higher fixed fees. However, for low-energy users these new daily supply charges could mean your bills may actually rise” — Canstar director Sally Tindall.
“The electricity market spanning Australia's eastern seaboard is almost incomprehensible to the layperson” — Richard Foxworthy, manager Bill Hero price comparison service.
“Part of the issue is that many people grew up with electricity as a government monopoly and don’t expect to have to shop around” — Bruce Mountain, director, Victorian Energy Policy Centre. "The creation of the energy market made buying electricity more like other things (cars, insurance, banking) but not everyone is interested in that."
“Electricity pricing has become too complex, too hard to compare, and too often unfair. You shouldn’t need to be an energy expert to get a fair deal” — Australian Energy Market Commission chair Anna Collyer.
“The over-complexity of power pricing is a problem facing the energy industry and one it needs to tackle” — Louisa Kinnear, Australian Energy Council.
The latest issue of the Australian Energy Market Operator’s rolling 10-year roadmap for the energy transition — tasked with focussing on the lowest-cost path forward — has called for “concerted action” to better deal with change in an environment where overall electricity demand in the NEM almost doubles out to the middle of the century.
In its report presented at the end of June the operator warns that the current rate of the buildout of renewable generation is not sufficient to meet the federal government's 2030 carbon emissions targets even if all solar and wind farms presently in the development pipeline are delivered as planned.
AEMO assumes that household demand for electricity in the eastern States’ grid will fall by 44 per cent by 2050 due to many more homes generating and store their own power — but it foresees business demand doubling on the back of more electrification of industry and large-scale growth in developingdata centres.
AEMO’s model requires 18 gigawatts of new wind projects by 2030 — and only nine gigawatts are currently in the grid connections pipeline.
Under its main scenario, the operator envisages around $106 billion in capital cost outlays (in today’s dollar values) on generation, storage, transmission, distribution and system security projects.
Daniel Westerman, the operator’s CEO, has told media that "Australia’s energy transition requires a whole-of-system approach, one that maximises value from generation, storage and transmission with the growing contribution of homes and businesses through rooftop solar, batteries and more flexible energy use.”
Westerman adds: "The direction for Australia’s energy future remains clear — it is renewable energy, supported by storage, connected by upgraded transmission and distribution, and backed up by gas."
AEMO tested almost 1,000 different combinations of generation, storage, network and consumer investments across three future scenarios, supported by detailed cost-benefit analysis, in preparing its latest report.
The Australian Energy Producers industry association says the latest AEMO integrated system plan has “re-affirmed the critical role of gas in supporting reliable and affordable electricity to 2050.”
This, it adds, means that the NEM will need more gas power generation to keep the lights on and power prices down.
Chief executive Samantha McCulloch says the ISP demonstrates the eastern States power market will require 17 gigawatts of flexible gas-powered generation by 2050, up from 8GW today.
She adds: "That is why governments must provide stable and predictable policy settings that encourage investment in the gas resources and infrastructure needed to support the transition. Unfortunately, the current draft design framework released by the government risks destroying investment signals, crowding out domestic-focussed gas producers and ultimately risking higher energy prices and future shortfalls.”
Origin Energy CEO Frank Calabria, speaking at the Australian Energy Council conference in Sydney in June, has warned that recent reductions in electricity prices should not be viewed as a guarantee of lower bills in future, "as the cost of building the infrastructure needed to support the transition continues to climb.”
Calabria, who is also chairman of the AEC, added: "While most customers will see a modest reduction in their bills this year, the outlook for the years ahead is more uncertain.” He said the economics of large-scale renewable developments had deteriorated sharply over the past four years, with the cost of building wind farms rising about 50 per cent since 2020 as developers grappled with higher financing, labour, steel and construction costs.
"Our problem is not ambition,” Calabria said. “The projects exist. The intent is there. The problem is economics – and it is getting worse, not better.” He added that planning delays, workforce shortages and rising compliance costs are increasing the expense and complexity of major infrastructure projects.
Also at the AEC conference, Mark Collette, managing director of electricity and gas supplier Energy Australia, highlighted the jump in the cost of building wind farms, which he said now requires wholesale power prices of about $120 a megawatt-hour to go ahead, well above forward prices of around $9.
Collette also said that he was particularly concerned about the affordability of energy for heavy industry, which must compete on a global stage. “Bottom line, if two-thirds of energy is going to be for industry and industry is competing on a world scale, the price of electricity matters, so having enough of it and adding it to a grid that is cheap enough to compete internationally is the main game.”
As readers of this newsletter know, I am a fan of Oxford University’s Sir Dieter Helm. In this I am far from alone — his social media site on X, formerly Twitter, lists almost 14,000 followers and his LinkedIn site just under 10,000.
And then there are his books and podcasts. One of the latter recently implanted a phrase in my mind that has stuck — “sticky plaster energy policy.”
That was the kicker in one of his many critiques of British energy policy and management and in particular of the UK’s version of our Chris Bowen — one Ed Miliband.
Helm's website — it is dieterhelm.co.uk — is a must visit for me and one of the most recent commentaries on it (headlined “The high cost of energy and what to do about it”) is as apposite for us here, with Bowen now prancing on the CoP world stage, as it is in the UK.
One paragraph in this piece really resonates.
Helm writes: “It is worth also debunking the idea that the energy world is divided simplistically into ‘clean’ and ‘dirty' energy, and that renewables in particular are ‘clean'. They are not. The supply chains are full of emissions and pollution – from mining to transport to refining to manufacture of the generation equipment and the transmission and distribution systems, and the batteries that can be very dirty. Take a look at the lithium, cobalt, nickel and copper and rare earth mines around the world. Renewables may be ‘cleaner’ (although not always), but they are not clean and they are not zero emissions. Decarbonising the world’s energy systems is a much harder task than advocates of the simplistic notion of 'clean energy’ apparently believe.”
He also writes: "There is a temptation from advocates and lobbyists for particular technologies to choose a measure of costs that gives them the answer they want. This is especially true for renewables and the wrong measure is embedded in the contracts for renewables generation. The advocates and lobbyists like to point out that wind and sunshine are free. If they are free, it must be obvious that they are cheaper. Reflect for a moment: so is rain from the sky ‘free' and so is the air that we breathe. In the case of water, perhaps you should have free water supplied to you? We treat the atmosphere as a free pollution dump, and this is one of the reasons we have climate change. We dump our carbon into the atmosphere for free – or at least until we introduce carbon taxes.”
He adds: "It is true that the marginal cost of wind and solar is effectively zero. So, too, for almost everything that comes through the digital technologies. There are lots and lots of zero-marginal-cost products and services. Nothing follows to suggest they are necessarily cheap to provide. Why? Because they need a system to get the free sunshine and free wind to the customer, and, in the case of electricity, so that supply and demand are instantaneously matched.
"Whatever the right basis for comparing renewables with other electricity-generating technologies, the answer is not the marginal costs of the solar panel or the wind turbine. The right basis is to compare the system costs of the technological options. It is here that renewables hit a buffer: they are intermittent, whereas most of the demand is for firm power, 24/7, and for supply to match demand instantaneously. The implication of this is profound. Something else needs to be available to bridge the gaps in supply, and this comes in various guises – including gas, interconnectors, batteries, pumped hydro, and perhaps one day hydrogen.
"Perhaps one day in a couple of decades’ time there will be batteries that fix this. But in the meantime, it is gas that is needed to be available at very short notice, and lots of it.”
Helm opines: "The central question for any electricity system is how good is it at delivering firm power and at what cost. It is not optional. A modern economy is utterly dependent on firm power.”
As I have said here before, I wish many in our energy debate, and especially many of our politicians, would read and listen to Helm.
Keith Orchison
30 June