Those in the Coalition who are opposed to targeting net zero carbon emissions, argue that it will cost too much. But that claim is false and not supported by the evidence. How can they get away with it?
In the last week or so, since the Nationals dropped their commitment to net zero carbon emissions, the Liberals have been tearing themselves apart over what should be their policy response. The Liberal members of parliament are now expected to meet in Canberra on Wednesday to discuss net zero, with the Shadow Cabinet to finalise the Liberal Party position the next day.
There is much speculation as to whether the Liberals will split over this issue, or whether a compromise will be found. Certainly, the leader, Sussan Ley, has made it clear that there “cannot be net zero at any cost”.
Ley then went on to castigate Labor for what she claimed was a 40% increase in Australian electricity bills since Labor was elected, a bit over three years ago. Ley’s clear implication is that this increase is excessive and is due to Labor’s support for switching to renewable energy, in pursuit of its net zero target.
In effect, Ley is inviting us all to believe that there is a trade-off between reducing carbon emissions and the cost of electricity, and thus the cost of living. But where is the evidence to support this presumption that mitigating climate change may well involve an unacceptable cost to the economy and living standards?
Certainly, Ley and the Liberal Party have provided no evidence in support of this critical contention. But what is even more strange, and disturbing, is that neither the Labor Party nor the commentariat have thought to examine the evidence as to whether renewable energy can only come at a cost to the economy.
This failure to consider the evidence risks the establishment of a public presumption that action to reduce the risks of climate change can only come at a cost, which may or may not be acceptable.
As will be shown below, however, in fact the evidence is that renewable energy is cheaper than fossil fuels. Further, this evidence is readily available, so it is a matter of real concern that it has been ignored so far in the public debate about net zero.
The cost of renewable energy
A couple of months ago, in August, the Climate Council produced a report on “What is the Cheapest Form of Electricity in Australia?”. This report was based on evidence from Australia’s leading energy and science bodies, including the Australian Energy Regulator, Australian Energy Market Operator, Australian Energy Market Commission, and the CSIRO.
The principal conclusion was that “Their analysis consistently shows that renewable power, backed by storage like pumped hydro and batteries, is the most cost-effective way to keep reliably powering Australian homes and businesses”.
Renewables are the cheapest form of power because, unlike fossil fuels, the sun and wind are infinitely and freely available in Australia. In contrast, coal and gas-fired power stations pay international prices for these fossil fuels. Thus, according to the Climate Council Report, “on average in 2024-25, the wholesale price for power from renewables was $74/MWH – compared to $136/MWH for power from coal or gas”.
Further, it is the high international price of gas which has played a big part in driving up household power bills over the past few years. According to the Climate Council Report, research from Griffith University “shows that because gas is so expensive, gas prices drive 50-90% of pricing periods in the National Electricity Market”. In addition, outages at coal-fired power stations are responsible for some of the most severe power prices spikes in recent years.
Overall, the CSIRO’s 2024-25 GenCost Final Report found for the seventh year in a row that renewables backed by storage and transmission are the lowest cost new-build electricity generation technologies. A mix of wind and solar cost between $120 and $170 per megawatt hour on average in 2024, while the cost of building new gas generation was up to $199 per megawatt hour.
Already, more than 40% of Australia’s electricity comes from solar, wind and hydro power, and this is rapidly increasing. Further, renewable energy is, in fact, reliable. The Climate Council has found that “a combination of household, community and big batteries and pumped hydro can store excess power when it is available and make it available later on when we need it”.
Also, over time the cost of renewables is expected to fall further: by 2030 the costs of renewable projects are expected to be between $76 and $131/MWH. Since 2013, global battery prices have fallen by 86%. In the past year alone, the cost of battery storage has decreased by about 20%, and the cost of large scale solar has dropped by 8% for the past two years in a row.
In future, renewables can therefore help keep power prices in check, whereas if we continued our reliance on coal and gas rather than increasing renewables, the Climate Council estimates that power prices would increase by $449 a year for households, and $877 for a small business this decade.
No wonder the Climate Council expects that “Australia’s entire fleet of coal-fired power stations is expected to retire by 2038, and 80% of them will shut down over the next decade”.
Clearly we need to get on with investment in renewable energy projects. Fortunately, the opportunities are being recognised, with the Climate Council forecasting that private investors will invest as much as $68 billion in renewable energy projects over the next five years. But the biggest risk is that the climate change sceptics succeed in creating so much uncertainty causing investment delays.
Conclusion
The evidence provides overwhelming support for the conclusion that Australia will gain financially from the switch to renewable energy, and that there is no cost to pursuing net zero. Rather the reverse.
Net zero is very much to our economic advantage as well as reducing the risks and consequent costs of climate change.
But that still leaves the puzzling question as to why the debate about net zero emissions in Australia has so far so completely ignored the evidence.
Clearly the Coalition is at fault, as it is considering abandoning net zero. But a competent Labor Government could reasonably have been expected to point out how the evidence does not support abandoning net zero, and the economic advantages that could be expected to flow to Australia.
Frankly, I cannot understand why Labor has preferred to sit on the sidelines in this Coalition debate and has not cited the evidence to support its own policies to achieve net zero emissions. After all, Labor knows that renewable energy is cheaper, and especially so in Australia, as that is the basis for its planned “Future Made in Australia”.
The views expressed in this article may or may not reflect those of Pearls and Irritations.
Michael Keating is a former Secretary of the Departments of Prime Minister and Cabinet, Finance and Employment, and Industrial Relations. He is presently a visiting fellow at the Australian National University.