Australia has the potential to halve its energy bills over the next 25 years, according to a report released by the Grattan Institute. The independent think tank’s analysis indicates that the average household, currently spending $5,800 annually on gas, electricity, and petrol, could see that figure drop to less than $2,900 by 2050. This significant reduction is contingent upon the nation achieving net zero emissions and implementing measures to curb pollution from coal-fired power plants.
The report, titled “Bills down, emissions down,” highlights that a transition to electric vehicles, increased adoption of solar panels, and a shift from gas appliances to electric ones will drive down energy costs. According to the modelling, the decline in petrol prices as electric vehicles become more commonplace will significantly contribute to these savings.
Challenging Misconceptions about Renewable Energy Costs
Grattan’s findings directly challenge arguments from critics of renewable energy who claim that overhauling the electricity grid will lead to unaffordable bills for consumers. The report asserts that expanding the Australian government’s emissions-reduction controls to include coal-fired power stations is crucial for meeting climate targets, yet it would have minimal impact on overall household energy costs.
While such a policy could result in an increase of approximately $100 per year in electricity expenses from 2030 to 2035, the long-term savings from reduced energy bills would outweigh this short-term rise. “For too long, federal governments of both political colours have avoided pricing carbon because they fear higher electricity prices,” said Alison Reeve, the Grattan Institute’s head of climate and energy. “The source of that fear is becoming outdated.”
The Australian government aims to reduce greenhouse gas emissions by at least 62 percent by 2035, primarily through the replacement of coal-fired power with cleaner energy sources. Despite ongoing investments in wind, solar, and battery projects, officials warn that the current pace of rollout is insufficient to keep up with the anticipated closure of coal generators.
Proposed Emissions Limits and Industry Reactions
Grattan recommends that emissions limits be imposed on coal-fired power plants as part of the federal government’s safeguard mechanism, which currently requires the nation’s largest polluters to cut emissions by 4.9 percent annually. This proposal, however, faces significant opposition, as energy has been exempted from the safeguard regulations to prevent raising power bills. Climate Change and Energy Minister Chris Bowen has already dismissed the idea, stating that the government is focusing on enhancing wind and solar farm development as well as improving household energy efficiency.
Grattan’s analysis anticipates that wholesale electricity prices will rise from under $50 per megawatt hour to more than $100 by 2035. However, power prices are not expected to double, as wholesale prices account for less than 30 percent of a typical electricity bill, which also includes retail margins, taxes, and other network costs.
The Australian Energy Market Operator has indicated that ageing coal-fired plants are becoming increasingly expensive to operate, and competition from renewable sources is likely to lead to their rapid closure in the next decade. Senior fellow Tony Wood from the Grattan Institute noted that as coal plants are decommissioned, the oversupply of electricity from renewables may diminish, potentially causing a short-term rise in wholesale prices.
The report assumes that the government will take the necessary steps to reach its climate goals, such as constructing transmission lines to connect regional renewable sources with urban demand centers and implementing the federal government’s Capacity Investment Scheme, which aims to support private renewable projects valued at $70 billion.
“This might get done, it might not get done,” Reeve remarked. “They’ll probably get all the money out the door, but whether the projects actually get electrified is a different matter.”
In summary, the Grattan Institute’s report presents a roadmap for significant reductions in energy bills in Australia, contingent upon decisive action to transition away from coal and expand renewable energy infrastructure. The findings emphasize the importance of strategic planning to ensure that energy costs remain manageable while achieving ambitious climate targets.
