Article by Colin Packham and Perry Williams, courtesy of The Australian
26.05.2025
Households in NSW will endure electricity price hikes of up to 9.1 per cent from July 1, as big users say bills will remain elevated until the end of the decade amid fresh concerns over a cost blowout to build major renewable energy and transmission projects.
Prices for the default market offer will rise between 6.1 and 9.1 per cent across NSW, the Australian Energy Regulator said, with Queensland lifting 4 per cent, South Australia up 3 per cent and Victoria rising 1 per cent.
The regulator attributed the higher charges to a rise in wholesale electricity prices, which have surged in part due to tighter supply conditions and a patchy rollout of new renewables.
Fears are growing that a failure to hit 82 per cent renewables by 2030 combined with a cost blowout on transmission could threaten a smooth energy transition as annual bill hikes continue to mount.
The Andrew Forrest-owned renewables developer Windlab hit out at the huge spike in costs for building green energy projects in Australia.
“I just returned from an overseas trip, and one message that came out loud and clear there was the cost of developing renewables in Australia is up amongst the highest in the world,” Windlab chief executive John Martin told an industry forum on Monday.
“The issue that creates for developers is ‘am I going to get returns?’ If the costs of developing are so high, what electricity prices are going to support that?”
Anthony Albanese has faced criticism over his failure to deliver on a pledge to lower electricity prices by $275 by this year amid a national cost-of-living crisis. The one-year, $300 rebate announced in last year’s budget was set to expire on June 30 but has been extended to the end of this year, adding $150 in support for every home in the country in a $6.8bn taxpayer subsidy.
Experts said power prices would remain high for the rest of the decade. “I can’t see in the next five years that there is going to be downward pressure on prices,” Energy Users Association of Australia chief executive Andrew Richards said.
Broker RBC expects electricity tariffs in 2027 were likely to increase in line with inflation.
Tony Wood, energy director at the Grattan Institute, said the full extent of a $20bn-plus transmission build is yet to be seen on bills, which will offset any lower wholesale power prices.
“For the next few years, we expect that the lower cost of wind and solar generation will be largely offset by higher costs of transmission, both interstate and intrastate,” Mr Wood said.
Revelations on Monday of a 55 per cent spike in transmission had underscored long-held fears of “a network cost tsunami”, according to the EUAA, whose members include BlueScope and Brickworks.
The Albanese government must launch an independent assessment of the net benefits of the huge transmission build-out so households could understand the true costs rather than “the wildly optimistic assumptions of the past”, Mr Richards said.
The EUAA chief said there needed to be a dose of reality about the construction period required to deliver green energy to the grid, which was clashing with the availability of workers and gaining social licence among affected communities.
“Just physically this is like D Day-Normandy invasion co-ordination required and it just isn’t happening,” he said. “Can the roads and bridges handle it? Well, probably not.
“Do we have the port infrastructure to bring it all in the same time? No. Do we have the workforce? No. Do we have enough steel and cement? Well, it’s going to be difficult as well. So this isn’t an issue of policy or even capital, this is just an issue of materials and labour.”
Clare Savage, chair of the AER, conceded the default market offer ruling would pile pressure on many households. “We know this is not welcome news for consumers in the current cost-of-living environment. Sustained pressures across almost all components of the DMO have driven these price rises, with wholesale and network costs rising in most jurisdictions between 1 per cent and 11 per cent, and retail costs between 8 per cent and 35 per cent compared with last year,” she said.
“Since the draft determination, we have used compulsory information gathering powers to further scrutinise retail costs and refined part of this component of the DMO as a result.”
The annual DMO sets a reference price for electricity retailers across eastern Australia and acts as a benchmark against which retail discounts are measured. While only a small proportion of consumers pay the default offer, it has a broad influence over market pricing and bill expectations.
In contrast to NSW, electricity prices in Queensland will rise by less than initially forecast. The AER said bills in the Sunshine State would climb just under 4 per cent, down from the 5.8 per cent increase outlined in the March draft. Victoria, which is governed outside of the AER, will see bills little changed.
The steeper increases in NSW will intensify pressure on the state and federal governments as they try to maintain political support for the transition to clean energy while balancing affordability.
Federal Energy Minister Chris Bowen urged consumers to compare retail offers and seek better deals, saying the bill increases underlined why the government extended household rebates and reinforced the need to accelerate the transition.
“It’s clear energy bills for Australians remain too high, and we’re providing help for people doing it tough as we deliver longer term reform,” Mr Bowen said.
Labor has committed to achieving 82 per cent renewable energy in the grid by 2030 – a goal that will require massive investment in wind, solar, and storage, along with more than 10,000km of new transmission lines.
While these upgrades are expected ultimately to reduce wholesale costs by enabling more cheap renewables into the market, they will drive higher upfront network charges, most of which will be passed on to consumers via electricity bills.
Despite growing concern over rising power bills, energy authorities say there are limited alternatives as Australia confronts the inevitable retirement of its ageing coal-fired power stations, many of which are nearing the end of their operational lives and suffering from declining reliability.
While the shift away from coal is considered essential to meeting Australia’s net zero emissions commitments, experts argue the transition will not be without cost.