More inexpensive renewable energy is being used to power our grids than ever before, but our power bills have continued to rise. Why? It’s the product of a complex energy system and global energy prices, but not a sign to change course on the transition to renewable power. 

There’s plenty of evidence to help understand why the transition to renewable energy is not only gathering steam, but also working towards bringing down our power bills (and reducing emissions to curb climate change).

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Renewables are cheaper 

For the seventh year in a row, renewables have had the lowest cost range of any new electricity generation to the Australian grid, despite varied inflationary impacts across technologies¹. And recent evidence shows that wind and solar produce energy at half the cost of coal and gas². 

Globally, more than 95% of new utility scale solar photovoltaic (PV) installations and new onshore wind capacity had lower generation costs than new coal and natural gas plants³. 

Closer to home, the Australian Energy Market Operator (AEMO) measures the downward pressure renewable energy generation is having on wholesale energy prices⁴, much more than existing coal power generation⁵. 

More renewables than ever

There’s more renewable energy powering our grid than ever before, AMEO’s dashboards and quarterly reports show⁶. 

These days, about half of the energy powering our grids in Australia on average each quarter is from renewable sources, like the sun, wind or water. On any given day, the mix of renewables powering the grid can get above 75%⁷. 

The change in the energy mix has been accelerating steadily. The percentage of renewables powering our grid has grown from less than 10% 20 years ago to where it is today⁸. 

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You’re not imagining it, energy prices are high

Average electricity prices across Australia remain elevated compared to historical levels – even though wholesale energy prices are down considerably from the price spikes during the energy crisis in 2022⁹. 

Energy prices have remained high for households on average in Australia and have been rising well above the rate of inflation for some years¹⁰. 

Energy and geopolitics have always been closely linked, and geopolitical events have been one of the primary causes of sudden energy market disruption and price shocks in recent years¹¹. 

You’d think Australia’s energy prices would be much lower because we produce so much gas, but the reality is that more than 80% of the gas we produce in Australia goes offshore, closely observed by policy think tank The Australian institute¹². As a result, Australian consumers are exposed to international gas prices, which contributes to our higher power bills¹³. 

Retailer margins and profits have also added to household energy bill rises¹⁴. The cost of outages due to aging infrastructure is another reason for price spikes¹⁵. 

And because close to 60 per cent of power distributed through our grids still relies on coal-fired power, outages and disruptions with the aging infrastructure are common and put continual pressure on the supply of electricity and the cost of energy¹⁶. 

Weather and power system events have also been impacting the spot market for electricity prices, which has resulted in increases in both wholesale power prices and ultimately our power bills¹⁷.

Then there are the costs of transport, refining, marketing and distribution, customs duties, excise taxes and government fossil fuels subsidies which also contribute significantly to retail prices¹⁸. 

A lot goes into what we pay for our energy at the end of the day! 

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The energy transition: needed now more than ever

It’s more important than ever to continue to push for the transition to renewable energy – we need it to meet science-based emissions targets, but our power bills will come down as a result, too. 

Projections highlight that rapid clean energy transitions result in lower consumer bills compared with a trajectory based on today’s policy settings¹⁹. 

Meanwhile, governments are currently spending hundreds of millions of dollars every year subsidising the use of fossil fuels. This is money they could be putting towards consumer-facing clean energy investments, such as grants or rebates for electric vehicles, efficiency improvements or heat pumps – which could help with energy usage improvements²⁰. 

In Australia, the rebates on power bills offer some short-term relief to households from high energy bills, but it’s not really addressing the root causes behind stubbornly high energy prices²¹.  

Meanwhile, investor capital is flowing to renewable energy investments, with $US150 trillion expected to be invested by 2050 for the world to meet its science-based emissions targets²². 

For our part, Australian Ethical is proud to invest in companies and projects supporting the transition to renewable energy.  

We do this through our investment portfolios. We also provide debt to large scale renewable energy projects through our infrastructure debt fund, and in our private market portfolios. We do this because it makes good investment sense – it’s where capital is flowing as the world reduces emissions in line with science-based targets – and it’s good for the planet too.