Issue 256, August 2026
The debate about energy costs, and especially those for electricity supply, is not restricted to Australia. International media are filled with fears, complaints and a lack of consensus about the collision between consumer concerns and the pursuit of expensive new power developments across many parts of the world – and increasingly about government efforts overseas, as well as here, to remedy the situation. As one international commentator put it in recent days, electricity systems can’t remain frozen in the form they took many years ago – but they don’t respond to political ambition or financial models either. Meanwhile, public debate in Australia and overseas about how to manage huge data centre energy needs has reached an important point.
"Australia has blazed a trail as one of the fastest-growing export markets for Chinese batteries amid a rapid shift to domestic renewable energy by one of the world’s largest fossil fuel producers” — London Financial Times. "A total of 600,000 home batteries are now installed in Australia — more than three times the number in California — with some signs that the strain on the country’s power network has eased during times of peak demand. The government estimates that, by 2030, at least two million new residential batteries will be installed.”
"The 36 per cent of suitable Australian dwellings that have installed rooftop solar did so largely because governments showered households with billions of dollars of taxpayer-funded subsidies across the past two decades. The same applies to the nation’s roughly 600,000 household batteries” — Adam Creighton in The Australian newspaper.
“Battery storage is going gangbusters, solar-battery hybrids are new and exciting, but not nearly enough new wind and solar capacity is being built to meet the 2030 renewable targets, or to ensure that coal generators can be closed as scheduled” — RenewEconomy’s Giles Parkinson.
“We are making good progress on the renewables roll-out” — Federal Climate & Energy Minister Chris Bowen. "Of course there are always headwinds and challenges... but, against all that, we’re making really good progress, particularly around solar.”
“Affordability needed to be put back at the centre of discussion in Australia” — Zoe Hilton, Affordable Energy Australia think tank. “One in five Australian households are in energy hardship or on the brink of energy hardship.”
“The CSIRO’s annual GenCost report reaches a stark conclusion: existing coal-fired power stations are helping to keep electricity prices lower because much of their capital cost was paid off decades ago. As those ageing generators retire, replacing them with a new electricity system will inevitably cost more” – Nick Cater, Menzies Research Centre.
“Chris Bowen is building a more expensive energy system” — Aidan Morrison, energy research director, Centre for Independent Studies. “Rooftop solar is not an efficient was to scale up more electricity in the grid."
"Battery storage is playing an increasingly important role in Australia's electricity market, with lower costs and significant new capacity beginning to compete with traditional gas peaking generation, contributing to lower peak evening electricity prices” — CSIRO, releasing its GenCost 2025-26 report.
“It is time for an open and honest conversation with Australians about the costs and challenges of the transition and what it means for their energy bills over the long term” — Louisa Kinnear, Australian Energy Council chief executive.
Prominent UK energy consultant Kathryn Porter, speaking remotely to a Sydney energy conference in mid-July, has warned about “an extra-ordinary asymmetry” in the international debate over the power sector’s transition.
Porter, who heads the advisory firm Watt-Logic in London, told the NSW Energy Forum that the transition, as presently conceived, “is not sensible.”
She declared: “Replacing reliable, energy-dense generation with large volumes of intermittent wind and solar is a poor use of both capital and natural resources. It requires us to build far more generating capacity than we need, duplicate it with dispatchable capacity for periods when the weather does not co-operate, expand the network to connect increasingly remote and dispersed assets, and then procure additional equipment and services to replace the essential electrical characteristics lost when synchronous power stations close.
“This isn’t an elegant transition from an old system to a better one. It’s the construction of several overlapping systems, at enormous cost, in an attempt to reproduce the reliability we already had.”
She added: “The environmental impacts of fossil fuels and nuclear power are being examined in minute detail, as they should be. But the land take, mineral intensity, habitat disruption and waste associated with wind, solar, batteries and thousands of kilometres of new transmission are too often treated as incidental.
“We’ve confused low carbon at the point of generation with low environmental impact overall.”
Porter said the Australian Energy Market Operator and Australian network businesses deserve credit for being more candid than many policymakers about the engineering challenge. “Their work on system strength, minimum synchronous generation, fault levels and protection acknowledges that adding megawatts of renewable capacity doesn’t automatically add the capabilities required to operate a secure network.
“We’re deliberately building generation that breaks the engineering logic of our electricity grids and this is forcing us to spend $billions on correcting the problems introduced by that generation. When we pay $billions in subsidies to build it in the first place, that adds insult to economic injury.”
And she opined: “Governments count installed renewable capacity because it’s visible and politically convenient, but consumers don’t care how many gigawatts have been connected. They care whether the lights come on, whether their bills are affordable and whether industry can invest with confidence in a reliable supply.”
The Clean Energy Council, which represents leading renewable energy developers, is calling for data centre operators “cashing in on the AI boom to bring their own clean energy to the table”.
CEC chief executive Amanda McKenzie says in a media statement that “with energy demand from Australian data centres set to triple by 2030, we can’t afford to let this industry drain our grid, push up electricity bills and create more climate pollution”.
She points to a YouGov opinion poll finding that 82 per cent of Australians surveyed “agree governments should insist new data centres pay for additional renewable energy and storage infrastructure to match their electricity consumption”.
Unless this happens, McKenzie declares, “without immediate action, Australian households will pay the price through spiked energy bills and soaring pollution within the next few years”.
The CEC proposal is directed to State and federal energy ministers ahead of their consideration of Energy Market Commission advice on how to implement a plan to require data centres to “fully offset” their power demand with new non-emitting electricity.
Key points from the YouGuv polling commissioned by the lobbyists include:
• 67 per cent of respondents agree data centres risk driving up power bills and putting the grid under strain.
• 82 per cent think data centres should be required to pay for the new renewable energy and storage needed to power them.
• 69 per cent support strict mandatory energy and water standards for new data centres.
• Fewer than half of those surveyed (49 per cent) are convinced the data centre industry will boost Australia’s economy.
The Australian Energy Market Operator, in its latest review of the impact of date centre developments, says their current grid consumption is about two per cent, but it projects that this will grow by 25 per cent per year, reaching 12 terawatt hours or six per cent of NEM power production by 2030.
Almost one in three Australian households are now experiencing difficulty in paying electricity bills, according to Energy Consumers Australia.
A statement published by ECA in mid-July says consumers are being “forced to navigate a complex and confusing market”.
To fix the broken system, the organisation has called for the introduction of a “consumer duty” to require energy companies to demonstrate they are acting in the interests of customers and promoting good outcomes for them.
ECA’s latest national survey of about 4,500 households also shows that 62 per cent of them have avoided heating or cooling their homes to save money – and around one in five have been unable to pay an energy bill on time due to financial difficulties.
"Many people across the nation are struggling to pay their power bills and dealing with a complex and confusing market is making a bad situation worse,” says chief executive officer Brendan French.
ECA’s research has also found one in ten Australians households never review their power plan and a quarter say they review their power plan less than once a year, leaving them, it declares, exposed to a "loyalty tax".
Of those consumers who review their plans less than annually, 30 per cent say it is too hard to compare plans, 26 per cent believe switching is not worth the effort and 20 per cent say it takes too much time.
"This is a huge market design failing," French argues. "The system relies on consumer engagement, yet it actively discourages millions of households from engaging through its needless complexity.”
He adds that ECA research has found that almost six in 10 Australians want a basic, passive relationship with their energy provider. “They just want a fair price and reliable service but our broken market structure forces people to act like highly literate market day-traders just to find a good deal.”
Analysts Wood Mackenzie say that artificially oversupplying the gas market under the Federal government's proposed reservation scheme will do little to improve the competitiveness of Australia's largest manufacturers while risking investment in future gas supply.
In a report commissioned by Australian Energy Producers, WoodMac have analysed the gas costs of 13 of the largest industrial users on the east coast – who together generated almost $24 billion revenue and $3.8 billion in profit last year – and assessed the impact of a manufacturers' proposal for a “must sell” obligation requiring gas to be supplied below $10 a gigajoule even where prices fall below the cost of production.
The report found many of Australia's largest manufacturers have long-term gas supply contracts to 2035 and beyond, meaning any changes to wholesale gas prices would have little or no impact on their operations.
AEP chief executive Samantha McCulloch says the Wood Mackenzie findings reinforce gas sector concerns that the proposed reservation framework will undermine investment in new supply while delivering only marginal benefits for manufacturers. "Artificially oversupplying the market may deliver a temporary sugar hit, but it will undermine investment in new supply, push domestic-focussed producers out of the market and ultimately expose Australian manufacturers and households to higher prices.”
The Wood Mackenzie analysis also found other input costs, including raw materials and labour, have a much greater influence on manufacturers' operating costs and competitiveness than wholesale gas prices.
Commentary writers in any field are always at risk of sounding like a cracked record and especially so, it seems to me, in writing about electricity matters because the current debate has now been going round and round literally for years – at least in terms of the general themes of cost, reliability and the role of governments (and more generally of politicians across the spectrum).
The current high profile debate about data centres may seem to be coming from a relatively new angle but the basics are much the same.
In the run-up to writing this issue of the newsletter I have been reading a commentary (on Sky News) by Nick Cater, a senior fellow at the Menzies Research Centre, dwelling on the latest CSIRO GenCost report and his long-running criticisms of the federal Climate & Energy Minister, Chris Bowen. The report effectively highlights that existing coal-based power stations are today helping to keep grid generation costs lower than the full burden of their replacement but Australian consumers should expect their bills to rise beyond 2030 as the whole-of-system costs kick in.
This is not least because of the already high, and still rising, costs of networks.
Cater writes: “Five years ago, planners commonly assumed new high-voltage transmission lines could be delivered for only a few million dollars per kilometre. Today, major Australian 500-kilovolt projects typically cost between $8 million and $12 million per kilometre, while flagship projects such as HumeLink and VNI West have seen estimated costs more than double since their original business cases were prepared.
“Even the Australian Energy Market Operator now acknowledges that these costs will be reflected in consumer electricity bills, a reality the government has consistently sought to downplay.
“When the hard data is separated from the political spin, the explanation for rising electricity prices becomes much clearer. Two decades of government intervention designed to reshape Australia’s electricity system around emissions reduction have been a major driver of household electricity bills, which have risen by almost a quarter in the past 12 months.
“Electricity would almost certainly be cheaper today had governments allowed capital markets to determine which technologies offered the best returns rather than directing investment towards politically preferred forms of generation.”
This is certainly a perspective to which I subscribe and, in various ways, have been raising in this newsletter over the current decade.
Cater also makes the point that consumers not only fund the growing costs of transmission, storage and system security – “beyond that,” he says, “sits billions of dollars in explicit and implicit subsidies, concessional finance, underwriting arrangements and off-budget government support that future taxpayers will ultimately have to carry, reducing the resources available for priorities such as health, education and defence.”
And he emphasizes something this newsletter has frequently also fretted about: “The tragedy is not merely that households will pay more. It is that industries of the future may be built elsewhere.”
The punchline of his latest commentary is that, in this event, Australia’s “great energy transition will have succeeded in turning a land of abundance into a nation of government-enforced scarcity.”
The truth is that these points can’t be repeated sufficiently often – this has to go on until they have a signal effect on our political debate and until political leaders across the spectrum have hit on a way forward (other than kneejerk reactions to opinion polls) that changes this worrisome trajectory.
Keith Orchison
28 July 2026