Energy authority warns of soaring power bills as renewables rollout slows

Australian households face a shocking reversal in electricity price predictions, with costs now expected to surge rather than fall as renewable energy rollout stalls.

Forecasts of future electricity prices have blown out by a third compared to official estimates made just 12 months ago because fewer wind and solar farms are now tipped to be built.

Forecasts of future electricity prices have blown out by a third compared to official estimates made just 12 months ago because fewer wind and solar farms are now tipped to be built.

The 2024 edition of the Australian Energy Market Commission’s residential electricity price trends report predicted a fall to less than 30 cents per kilowatt hour early next decade from about 37c/kWh.

“I think Chris Bowen took great comfort from that,” the Grattan Institute’s Tony Wood said. “This (new) report doesn’t show that.”

Instead, it shows a rise to more than 40c/kWh at the same point.

The AEMC said its projected prices were now higher due to a “slower renewable build-out and slower electrification than was expected in our 2024 outlook”’

By slower electrification, the AEMC means not as many households are expected to ditch gas appliances and petrol cars.

Grattan’s energy and climate change program senior fellow Tony Wood. Picture: Supplied

AEMC chair Anna Collyer. Picture: John Feder/The Australian

AEMC chair Anna Collyer told this masthead: “If we have slower electrification, that means our electricity demand is not increasing by as much ... (so) we build less new renewables. Therefore our wholesale prices are set more often by gas which is a lot more expensive.”

In its price trends report, the AEMC said that “ensuring all households have options to electrify requires addressing the varied barriers that face individual consumers.

“These include, but may not be limited to, being able to afford new appliances or vehicles,” it said.

“Policymakers should prioritise addressing these barriers.”

The AEMC said a household that “fully electrifies” can cut their energy expenses, including petrol, by 70 per cent.

Its price forecasts are for a fall over the next five years, because of growth in renewable energy and batteries.

Mr Wood – who is Grattan’s energy and climate change program senior fellow and a former executive at Origin – said that seemed “realistic and plausible”.

However, the savings are now expected to be completely gobbled up after the end of the decade. That was not what last year’s report said.

“We see a significant change,” Ms Collyer said.

Across the National Energy Market, average costs are tipped to go up by a total of 13 per cent between 2030 and 2035, the AEMC said, “unless new renewable generation, battery and transmission projects are delivered faster” to cover reduced supply due to coal-fired power station closures and increased demand.

Eraring is among the coal-fired power stations expected to shut by 2030. Picture: Supplied

Coal plants, including Eraring and Vales Point in NSW, Yallourn in Victoria and Gladstone in Queensland, are all expected to shut by 2030.

On top of those, Mr Wood said the “closure of the next tranche of coal” could be triggered by the federal government through new policies aimed at delivering its 2035 emissions reduction target.

The AEMC report warns prices may rise by a further 20 per cent if there are further delays to new wind and transmission assets, leading to greater reliance on gas in evening peaks.

However, if wind and transmission rolls out faster than forecasts it could take about 12 per cent off projected costs; increased battery uptake can lower prices by an extra three per cent, the AEMC said, noting subsidised storage was “markedly” in front of that pace in its early phase.

Climate Change and Energy Minister Chris Bowe. Picture: NewsWire/Martin Ollman

The Climate Change and Energy Minister, Mr Bowen, said the AEMC had made it clear that “slowing the renewables rollout and sweating ageing, unreliable coal will drive up energy bills and pollution.

“Yet this is exactly what the Coalition’s anti-renewables plan is designed to do.

“It’s simple: when coal breaks down, your bills go up – that’s why we’ve got to keep rolling out reliable renewables, and help more households embrace solar and batteries,” Mr Bowen said.

Originally published as Energy authority warns of soaring power bills as renewables rollout slows