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Energy revolution on track: electricity bills to fall, transition to renewables accelerates

by Michael West and Tim Buckley | Dec 21, 2023 | Energy & Environment, Latest Posts

The good news is electricity prices are falling, decarbonisation is accelerating, and there should be little need for public subsidies for fossil fuel companies, despite their demands. Michael West speaks with energy finance analyst and renewable energy expert Tim Buckley.

It was always going to be a complex and costly transition, the revolution in new energy, that is. And like the change from the horse and buggy to the car, the upheaval from burning coal to harnessing the sun and the wind has presented enormous challenges.

Since the price of new solar energy fell beneath the cost of setting up a new coal plant some eight years ago, the transition has been bumpy, challenged daily by the vested interests of the fossil fuel lobby, but the decarbonisation of Australia is happening. 

The Australian Energy Market Operator (AEMO) stunned the markets late last week when it handed down its Integrated Systems Plan, predicting coal would be almost gone from the electricity grid in ten years. The last coal plant in Australia is now expected to close by 2038, five years ahead of AEMO’s expectations of just 18 months ago.

We spoke with Director of Climate Energy Finance, Tim Buckley. “The energy transition is accelerating, and investors won’t keep propping up end-of-life, expensive and unreliable old coal clunkers.”

AEMO also models a quadrupling of distributed energy resources. Rooftop solar by 2050 is now forecast to reach 85GW across Australia to play a pivotal and growing role in the energy transition, electrification of everything and decarbonisation of Australia’s energy system.

Batteries-on-wheels (EVs), behind-the-metre storage, ground heat pumps and the removal of methane gas connections will all drive the energy transformation over coming decades.

Electricity wholesale prices halved

Climate Energy Finance forecasts that energy customers on the east coast of Australia can look to a double-digit reduction in retail electricity prices come July 1, 2024, in terms of the Default Market Offer, which is set by the regulator each year, with a major lag.

It’s good news for beleaguered consumers, smashed by the cost of living crisis.

While grid connection costs represent ~50% of the retail bill, and grid transmission and distribution costs are flat, wholesale electricity prices have dropped 50% in 2023 to date year-on-year, and that augurs well for energy cost relief for consumers in FY2025. That also means the slowdown in general inflation growth will continue, and that, in turn, is likely to bring cost of living and mortgage cost relief.

The decarbonisation of the National Electricity Market (NEM( is happening. In 2020 (calendar year), we saw renewable energy contribute 26.6% of the total electricity supply. This grew to 31.4% in 2021, then 34.9% in 2022 and a record high this year 2023 of 38.3%.

Bowen steps up to the plate

“This is rising at an average of 4% increased share annually,” says Buckley. “To reach the Albanese government’s 82% by 2030 pledge in the next seven years requires a step up to 6% increased share annually, a big task. But Energy Minister Chris Bowen has just announced an impressive new Capacity Investment Scheme to work in partnership with the states to roll out 32GW of new batteries and renewable energy infrastructure over the next 3-5 years, which will lift the annual effort in line with what we need.”

“The climate science requires decarbonisation of the entire Australian economy, not just electricity, but the electricity progress is a big start, particularly when combined with the electrification of everything that Dr Saul Griffith’s ReWiring Australia team is modelling.”

The ACT and Victorian leadership have pledged accelerated action to progressively phase out reliance on high emissions and poisonous methane gas use in homes and buildings via a ban on new gas connections in all new buildings with immediate effect, and the Gas Substitution Roadmap

“This should permanently and materially reduce the cost of energy for Australians,” says Buckley – in direct response to the gouging by the multinational fossil fuel cartel operating unhindered in east Australia, making war profits over the last two years on the back of Vladimir Putin’s invasion of Ukraine.

The states are finally moving to protect voters from the predatory tax haven based antics of the foreign-controlled fossil fuel fraternity. It is long overdue.

The Safeguard Mechanism is also starting to take effect to drive progressive decarbonisation of Australian heavy industry, while the advent of EVs is undermining our reliance on expensive, inflation-fuelling, high-emission petrol and diesel imports.

China leading the world in decarbonisation

“The trends are good,” says Buckley. “We just now need to accelerate investment and policy support to deliver for Australians on the Paris Agreement and do our fair share of the global effort. Make no mistake, China is leading the world, seizing this once-in-a-century opportunity to dominate industries, jobs and exports in zero emissions industries of the future, doubling their manufacturing capacities of solar, batteries and EVs every two years.

“The global race to the top is well underway, time Australia pivoted to seize the massive investment, employment and export opportunities ahead for our country.”

NSW does its bit

The NSW Government this week awarded 1.3GW of new wind, solar and battery storage in Round 3 of the NSW Government Long Term Energy Service Agreements (LTESA).

This builds on the Round 2 LTESA awards last month of 1.1GW of storage/VPP DRM (Demand Response Management), which were tripled from the original 380MW ask with the introduction of Chris Bowen’s Capacity Investment Scheme (CIS).

Do we need to subsidise coal companies crying poor?

In the wake of the dramatic AEMO announcement late last week, the fossil fuel lobby quickly emerged with demands for public funding to deal with the energy transition. Led by EnergyAustralia, they warned of blackouts unless the states stumped up “government-backed strategic reserves of coal power”. 

Buckley believes that if governments manage the transition efficiently, there will be little need for taxpayers’ support for what are mostly foreign-controlled and highly profitable mining companies.

“A condition of Round 2 is that these projects need to all be operational by December 2025, thereby largely mitigating any risk of capacity firming shortfalls around the closure of Origin Energy’s Eraring plant. As such, if the NSW Government can expedite the approval of a few new wind and solar projects, including distributed rooftop solar for the commercial and industrial property sectors, in the new year there will be little need for any new coal subsidies to replace the exit of the end of life 2.88GW Eraring coal-fired power plant.

“This assumes (assuming a phased closure of the 4 units progressively around the August 2025 agreed date), and the risk to consumers of sustained price hikes on the loss of Eraring’s generation exit will likewise be mitigated and minimised.”

“As such, there should be little need for any material additional coal keeper subsidies post the expiry of Minister Bowen’s temporary coal cap subsidy to Eraring from July 2024, brought in during December 2022 after the whole NEM market failure due to the combined impact of the unreliability of coal plants and the gouging of domestic energy consumers by the multinational gas cartel.”

Fossil Cry. Give us hand-outs or you might get black-outs, says EnergyAustralia


Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

Director of Energy Finance Studies, Australasia, Tim Buckley has 25 years of financial markets experience, specializing in equity valuation, including as a top-rated analyst and as co-founder and managing director of Arkx Investment Management.

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