Transmission cost blowout threat to power bills, AEMO warns

Up to 10,000km of transmission projects are needed to deliver Australia’s switch to green energy. New analysis shows major cost blowouts could be passed on to household power bills.

Minister for Climate Change and Energy Chris Bowen. Picture: Brett Hartwig

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A massive surge in costs to build $20bn worth of electricity transmission would trigger a hit in household power bills, the ­Australian Energy Market Operator says, amid skill shortages and a battle to win over communities and farmers to the green ­energy switch.

The cost of overhead transmission line projects has ballooned by up to 55 per cent, with substations rising as much as 35 per cent compared with equivalent estimates provided for AEMO’s 2024 electricity plan.

The steep hike “would impact bills for electricity consumers”, prompting the market operator to review uncommitted transmission projects as part of its planning to ensure a lid is kept on overall system costs. The new estimates are contained within scenarios from a draft electricity options report for consultation which will help form the basis of the 2026 ­integrated system plan, regarded as the definitive blueprint for Australia’s power grid.

The threat of a jump in electricity bills adds to ongoing pressure over the cost of Labor’s plan to double the share of renewable energy in the grid to 82 per cent by 2030. Electricity bills are already set to rise by as much as 9 per cent from July 1, while Anthony Albanese has faced criticism over his failure to deliver on a pledge to lower electricity prices by $275 amid a national cost-of-living crisis. The Australian Energy Regulator will sign off on a final price hike for 2025-26 on Monday.

While one of the industry’s top forecasters has warned Labor will vastly undershoot its 2030 renewable target due to delays delivering big solar and wind projects, ALP national secretary Paul ­Erickson claimed the party’s “embrace” of renewable energy was one of its election-winning tenets.

High voltage electricity transmission towers in Lake Macquarie. Picture: Getty Images

Energy Minister Chris Bowen said Labor’s Rewiring the Nation program was providing over $20bn in concessional finance, equity and underwriting to necessary network upgrades.

“This support will reduce the costs of these projects for consumers,” a spokeswoman for Mr Bowen said on Sunday. “The Australian government also has critical work under way to address supply chain pressures on materials, equipment and workforce.”

Australia must develop about 10,000km of high voltage transmission lines by 2050 to deliver a smooth transition from coal to ­renewables, with half of the project pipeline to be delivered in the next decade.

However, pockets of rural ­opposition and project pressures spanning supply chain constraints, competition, contracting issues and social licence considerations have slowed momentum and added to costs along with ­delays in delivering a new wave of green energy to households.

AEMO has detailed a 25 per cent to 55 per cent increase after accounting for inflation for overhead transmission line projects compared to estimates for its 2024 integrated system plan and a 10 per cent to 35 per cent leap for transmission substation works, saying the figures are in line with increases announced for recent projects.

“AEMO recognises that ­increases in costs for electricity transmission network development would impact bills for electricity consumers,” the operator said. “The 2026 ISP will revisit transmission network projects previously identified as needing to proceed … seeking to ensure that overall costs for consumers are optimised.”

Options outlined in the AEMO report are used in its modelling to determine the best development path for its integrated system plan.

Changing the path of transmission lines to avoid “particularly complex areas” has been added as a potential new cost as officials grapple with winning over mostly rural communities for a massive rollout of transmission infrastructure. Big projects like VNI West in Victoria and the $4.8bn HumeLink in NSW have faced robust community opposition from landowners.

“Additional costs have been included in network options to represent the potential need to change proposed transmission line routes to avoid traversing particularly complex areas for delivering transmission infrastructure, signalling potential realignment of transmission lines to less complex areas,” AEMO said ahead of kickstarting a consultation process with industry.

Victoria alone plans to build renewable energy zones covering 7 per cent of the state’s land area, with 5.2 million solar panels, nearly 1000 onshore wind turbines and four new transmission projects, as it chases a target for clean energy to provide 95 per cent of its electricity by 2035.

Farmers have criticised the Allan government for forcing ­regions to carry the burden of its renewable targets and ignoring concerns its transition plan will compromise food security.

One area where AEMO may be able to cut back on costs is by leaning more heavily on household sources such as rooftop solar, electric vehicle to grid supplies and batteries which received a recent subsidy boost. Taxpayers will contribute $4000 for an average household battery installation under a $2.3bn election commitment by the Prime Minister, with Labor promising the policy will push electricity prices down for “everyone”.

Transmission line projects are running years behind their initial timetable despite pledges by the federal government to kickstart works, with the slow pace of development sharpening the risk of blackouts and price rises.

The average slippage on transmission projects across the power grid has ballooned to three years.

The next AEMO blueprint will also incorporate a greater focus on gas amid a recognition from energy ministers the fossil fuel will prove an essential back-up through the transition.

“While several supply, storage and transport solutions are presently proposed, which solution is developed, and the timing, is currently uncertain,” AEMO said.

AEMO in March said gas producers had responded to calls by increasing supplies and as a result a structural deficit with a projected shortfall in 2026 was delayed for a further year. Australia is the world’s largest producer of LNG and a major ­exporter, but a steep drop-off in offshore gas from Victoria has sparked new fears over energy security.