It’s not much wonder that the public is confused about electricity pricing when journalists and politicians use the terms “prices” and “bills” interchangeably, and when Opposition spokespeople deliberately lie about the reasons electricity prices are high and make up ridiculous claims about how electricity prices and bills would tumble if they were elected. Peter Dutton’s speech in reply to the budget added to that confusion.
Polling reported in William Bowe’s Poll Bludger reveals that more than half of voters (53%) believe that “the Albanese Government’s renewable energy policies and timelines are pushing the costs of energy through the roof”, with only 23% disagreeing. The same poll finds 38% of voters believe that “if Australia were to produce nuclear energy it would be cheaper for consumers like me than renewable energy” with 28% disagreeing.
If we are to avoid the crushing economic burden of Dutton’s nuclear power, and his high-cost gas plan while we wait for nuclear power, voters need to be much better informed before the election.
Energy prices aren’t going ‘through the roof’: they’ve actually been falling
The pre-rebate price of electricity rose rapidly in mid-2023, as higher coal and gas prices following Russia’s invasion of Ukraine flowed into electricity prices. (This is the trap Labor fell into when it made that $275 promise.) Since then, electricity prices have fallen by about 2%. That’s pretty well within the margin of error, but it contradicts the assertion, made by many politicians and journalists, that electricity prices are rising. We can see these price movements on the ABS Monthly Consumer Price Indicator site, which shows an index for electricity price movements, before and after rebates.
The price before rebates may rise for some customers in New South Wales and in the Brisbane area, depending on the final determination by the Australian Energy Regulator. But as Sophie Vorrath of Renew Economy points out, the regulator’s price would be much higher if there weren’t renewables in the mix. We’re exposed to high world prices for coal and gas because we haven’t invested enough in renewables.
Clarification: ‘bills’ and ‘prices’ are different
Much of the argument abut electricity is about people’s bills. Labor made the promise to reduce your bills by $275, the government is giving you $75 towards your power bill, Dutton promises that power bills will be 44% cheaper under his nuclear plan.
In terms of public policy, it’s a useless discussion. Your bill depends on your usage, over which you have control. Is your house well insulated? How much do you rely on electricity for heating, cooking and providing hot water, or do you use gas, or perhaps a direct heat solar hot water system? Do you have photovoltaic panels, a battery? Do you have an electric car? Where do you live – in Townsville or in Huonville? What’s your lifestyle – is your house occupied in the daytime? How many people live in your house?
You have some control over most of these variables. Your decision on these matters will depend on the price of electricity, essentially the price per kilowatt hour (kWh), and that’s what is subject to government policy.
The Albanese Government is remiss in having allowed the public debate to be framed in terms of bills. This frame has allowed Coalition spokespeople to assert in interviews that bills will be X percent lower under the Coalition (usually 44%), and it allows poorly-prepared journalists to segue into stating that the Coalition is promising to make prices X percent lower. That sloppy journalism plays right into Dutton’s hands.
Policies compared – short term
So far, the Coalition is offering nothing for the short term that the government isn’t offering. They match that promise to give two rebates of $75 for the next two quarters. Even if Dutton’s gas reservation were viable, it would take a long time to take effect.
Policies compared – medium term
Here’s where differences arise, particularly in relation to the role of gas.
Both the government and the Coalition see gas playing a part in the medium to long term. For the government, gas plays only a minor role as a firming fuel in peaking power stations, when there may be inadequate stored power in batteries and reverse hydro. Eventually gas should be only a standby power source. For the Coalition, gas plays a major role, providing “base load” power between now and when their nuclear plans can be realised, which could be a long time.
The government’s plans are laid out in the Australian Energy Market Operator’s Integrated System Plan.
The Coalition’s ideas are not well-developed (oppositions don’t have the resources available to governments), but the ABC’s Jacob Greber describes what seems to be emerging as Coalition policy, about which Dutton gave a few more details in his budget reply speech. Under its reservation policy, the Coalition would require the retention of gas which would otherwise be exported: Gas giants could be forced to divert supply to Australia. The Coalition would also implement fast-track approval of gas development, including Woodside’s North West Shelf gas project. (This project has its own political and legal dimensions, as explained in a Conversation contribution by Melissa Haswell of the University of Sydney and Davis Shearman of the University of Adelaide: Woodside’s bid to expand a huge gas project is testing both major parties’ environmental credentials.)
Dutton in his budget reply speech glossed over contractual problems and issues to do with states’ and Commonwealth powers in relation to gas and issues of sovereign risk. Previous Coalition Governments have tried to secure gas supply and have found it too hard.
The government’s policy is to let an expanding supply of renewable energy bring down the price of electricity, while the Coalition seeks to cap renewables at around 49% of generation. The Coalition mocks the government’s “renewables only” policy with the usual mantra “the sun doesn’t always shine, the wind doesn’t always blow”), which is why it holds to the old “base load” model.
The government’s vision is past base load: its plan is to see users provided with “dispatchable” electricity, when renewable sources aren’t generating, drawing on batteries, pumped hydro, and gas if necessary. As Giles Parkinson explains in Renew Economy Solar and batteries are the new “base load”, and now the engine room of the energy transition.
Parkinson also points out that even if gas is available, it takes time to build a gas-fired power station: You want to build a gas-fired power station before 2030? Good luck with that. It’s a warning to both parties, particularly to the Coalition, because it would require much more gas capacity than would be required under the government’s plan.
The political appeal of gas reservation is understandable. Why should we let those multinationals export our gas when we need it here? It’s an argument with popular appeal.
But it’s because they can get good prices overseas that we should not try to block that trade. It’s a good earner of export income. If we divert gas to domestic consumption, we lose that income. It’s an expensive way to provide ourselves with energy when we have cheaper alternatives in the form of renewables. Dutton says a Coalition Government would bring down the cost of gas, but he ignores the fact that there is already a much cheaper power source available.
Some argue, on quite reasonable grounds, that we should not export gas at all, and some others agree, also on reasonable grounds, that we don’t collect enough tax from multinational gas companies. These are separate arguments, but they don’t justify reservation for domestic use.
Policies compared – long term
The government’s long-term policy is to continue with the Integrated System Plan, referred to above. That involves expanding the use of electricity to replace gas in domestic and in many industrial situations, and to replace gasoline and diesoline in transport as electric cars and trucks penetrate the market.
The price of electricity will fall as renewables increase their share of supply, but it is quite possible that people’s electricity bills will be higher, if they use more — much more — electricity.
While households’ electricity bills may be larger, their energy bills would be lower. Those are the consolidated payments for electricity, gas, gasoline, and firewood. That’s why it’s so misleading for the Coalition (and so stupid for the government) to keep on referring to electricity bills, rather than the price of electricity. If they must talk about bills, it should be about total energy bills.
The Coalition’s nuclear scheme involves spending a lot of money, almost certainly public money, to build seven nuclear power stations. They may release more information, but so far all we have to go on is the Frontier Economics report, and the Coalition’s interpretation of that report, covered in the roundup of 21 December, and in Giles Parkinson’s explanation of the cost data in the CSIRO’s GenCost report: CSIRO patiently and methodically slaps down Peter Dutton’s nuclear nonsense, in which he provides detailed comparisons of the cost of nuclear and renewables on the basis of $ per MWh. (To make sense of these figures in household terms, convert $ per MWh to cents per kWh by dividing by 1000. That is, $1.00 per MWh = 0.1 cents per kWh.)
The Coalition has promised to provide more details on its nuclear power plans, but although Dutton repeated his “44% less expensive” claim (less expensive than what?) in his budget reply speech, no more details gave been forthcoming.
Besides the cost of generating electricity there is a cost in transmitting it and distributing it to users. At present, about half of what you pay for electricity is the cost of transmitting and distributing it – the “poles and wires”. Because some of the renewable hotspots identified in the Integrated System Plan are a long way from users, and because smoothing out supply requires bigger interconnectors, renewables would require more investment in transmission lines, the cost of which should be picked up in any comparison. In his budget reply speech, Dutton reiterated his emotive balderdash about powerlines criss-crossing our beautiful farmland.
In that same speech, Dutton made it clear that he would immediately cancel the Rewiring the Nation scheme. In itself, that would stop meaningful expansion of renewable energy in its tracks.
The Coalition, in its comparisons, seems to have understated the amount of new transmission required by its nuclear plan, and to have ignored the possibility that small-scale solar and similar distributed sources could result in comparatively little new transmission being needed. All the time costs are moving in favour of renewables.
The biggest fault with the Coalition’s comparison is that it assumes electricity consumption will be much lower than is envisaged under the government’s Integrated System Plan. That’s the main reason why it would cost less, because there would be less electricity generated.
Of course, Australians will use less electricity if we keep using gas for cooking and heating, if we don’t buy electric cars because the Coalition intends to scrap the recently-implemented vehicle emission standards, and if we slow down immigration so that there are fewer customers. That’s why the nation’s electricity bill would be lower, and the Coalition asserts that therefore households’ electricity bills would be lower – without saying anything about the price of electricity or people’s total energy bills. The only mention of price in Dutton’s budget reply speech was, “Energy prices will always be lower under a Coalition Government”. Again, lower than what? What forms of energy?
Journalists let Coalition politicians get away with this deceit by not asking them what nuclear power will do to the price of electricity: “what will be the average electricity price per kWh?” is the question journalists should be asking. Unless it is massively subsidised from the budget, presumably by cutting back savagely on other government expenditure, nuclear power is bound to be much more expensive per kWh than electricity generated from renewables, and we will be paying a lot more for energy.
Republished from Ian Mcauley.com/saturdays, March, 2025
Ian McAuley is a retired lecturer in public finance at the University of Canberra. He can be contacted at “ian” at the domain “ianmcauley.com” .