Labor’s renewables-only grid will cost at least $642 billion, not $122bn as claimed, new report says

Aussies have criticised Labor’s plan to convert Australia to mainly wind and solar power, which will cost half a trillion dollars more than what Anthony Albanese has been saying. Have your say.

The real cost of building a renewables-only power grid is more than half a trillion dollars higher than the Albanese government has claimed, bombshell new research reveals.

According to the modelling, replacing a predominantly coal-fired system with mainly solar and wind will set Australia back at least $642 billion, not $122bn as Labor has stated.

The more than $500bn hole is due to the exclusion of fixed and variable operating expenses, fuel and more than $60bn of transmission projects, as well as the use of an accounting treatment called “net present value”, rather than actual prices.

The cost of emissions is also cut out, even though a little-known quasi “carbon price” has been introduced at $70 a tonne, which is about twice the scale of that imposed by Julia Gillard.

The new paper, “Developing a base case to assess the relative costs of nuclear power in the NEM”, was done by energy experts Frontier Economics — a group of advisers the ALP has previously used.

Then PM Julia Gillard in 2010 when she famously stated that there ‘will be no carbon tax’

It was prepared at the request of the Coalition, which also asked Frontier to crunch the numbers for its plan that includes seven reactors. That report has yet to be made public.

The Opposition – which did not pay for Frontier for either piece of work – said the initial findings on renewables were so damning that the Prime Minister and his team now had to “own up” to the full scale of the financial burden being imposed on households via taxes and electricity bills.

“There has been a deliberate attempt to hide the real cost from the Australian people,” Shadow Climate Change and Energy Minister Ted O’Brien told this masthead.

“All that’s been said is that it will cost $122bn, but now we know the truth is it’s going to be five times that.”

News Corp readers have reacted to the news of the report, with many critcising the approach to energy policy.

“Labor deliberately out to send the country broke and destroy Australia. The more wind and solar the higher the power prices which forces up prices and hurts the workers, families and pensioners and union leaders are supporting this attack by Labor on our living standards,” one reader Paul wrote.

Another reader, Troy, posted: “To be honest I this is still well under estimated the actual cost of renewables. While this figure is gobsmaking by the time it is completed I believe the true figure will run into the trillions.”

“Labor has failed in math calculations, oh we will look to the taxpayer, but guess what the taxpayer has nothing to give,” reader Faye also wrote.

Shadow Energy Minister Ted O'Brien. Picture: Lyndon Mechielsen / The Australian

Climate Change and Energy Minister Chris Bowen has repeatedly said the total cost to 2050 of the new generation, storage and transmission required to reach net zero emissions is $122bn, citing the Australian Energy Market Operator’s 2024 Integrated System Plan [ISP].

In federal parliament in June, Anthony Albanese taunted the Opposition with AEMO’s ISP, waving around the document at the dispatch box and characterising it as his government’s plan.

At the time, the Prime Minister also said an earlier version of the ISP was “the basis” of the plan Labor took to the 2022 election.

The new research by Frontier uses AEMO’s current ISP as its starting point.

In its work, Frontier noted the cost cited by AEMO and Labor was the “net present value” for only some of what was required by mid-century.

“Consumers do not pay the net present value,” Frontier said. Instead, they paid the “real cost” in full, including at least a further $62bn for transmission, the advisers added.

Mr O’Brien highlighted Frontier’s comments on the impact of the new “Value of Emissions Reduction” carbon price, or VER.

He said a $70 a tonne VER, which took effect in May, was being applied to project assessments to make renewables appear better and make coal look worse.

“Suddenly, the case for projects that would otherwise in some instances not stack up and never be approved let alone receive federal funding are suddenly treated as really important and even accelerated to get them into the system,” Mr O’Brien said.

“Labor did not take a carbon price to the last election, which is why this has been done by stealth.”

The VER is set to rise to nearly $420/t by 2050.

Frontier’s report said “the VER is not a price that has to be paid directly by consumers, but the investments the VER make appear to be economically cost efficient do have to be paid by consumers and/or taxpayers.

“In this sense, the VER is, in effect, a carbon price that all consumers pay for through the economic costs caused by the use of the VER in planning the energy system even though no government has agreed to or legislated an explicit carbon price,” Frontier said.

Prime Minister Anthony Albanese with the AEMO ISP. Picture: NewsWire’s Martin Ollman

“The 2024 value of the VER of just under $70/tonne is about twice what the 2024 dollar value would be of the Gillard carbon tax at the time it was abolished” in 2014.

Frontier Economics managing director Danny Price said the price of building a renewables-only power grid could hit a trillion dollars if all states and territories were included.

Frontier Economics released modelling on Friday that put the cost of building a renewables-only power grid at $642bn instead of Labor’s $122bn.

Mr Price said that figure omitted the inclusion of Western Australia and the Northern Territory in the national energy market.

He said all cost estimates had so far proven to be “gross underestimates” and said the price of consumer energy costs, including household solar and batteries, would also increase the cost of a renewables-only power grid.

“If it was a trillion dollars, I’d be surprised if it was only that,” he said.

“The reason I did this work was to really highlight the truth of the matter and to make sure that everyone understands the numbers that different politicians were using.

“So it was completely transparent. The whole point of it was to be as transparent as possible on those costs.”

Mr O’Brien is delivering the 2024 Bradfield Oration in Sydney on Friday, in which he will say Australia is at a “genuine fork in the road”, where a choice must be made about the pathway for the nation’s energy future.

“We choose the right path, and our children and theirs will inherit an Australia that is rich, strong and fiercely independent,” Mr O’Brien will say in his speech.

“But [if] we choose the wrong path, they will inherit an Australia that is poor, weak and dependent on foreign powers whose interests do not align to our own.”

It is not known when Frontier’s costing of the Coalition’s nuclear path will be released.

Mr Bowen has accused opposition leader Peter Dutton of inventing costings amid reports the true cost of building a renewables-only power grid will cost $642 billion.

Mr Bowen defended the government’s costings as fully costed, backed by the experts and could be read on the energy regulator’s website.

“Peter Dutton and Ted O’Brien have made up costings for every single policy except their own nuclear scheme,” he said.

“It’s time for Peter Dutton to be upfront with Australians about what his plan to keep the lights on and bring down emission is going to cost Australian households in higher energy bills and high taxes.

“Experts say Peter Dutton’s taxpayer-funded nuclear plan will cost $600 billion, take twenty years to build, only deliver 4 per cent of our energy needs and push up emissions by extending coal.

“The Government’s energy plan is fully costed and backed by the experts and available on AEMO’s website.”

Originally published as Labor’s renewables-only grid will cost at least $642 billion, not $122bn as claimed, new report says