As Australia faces the retirement of ageing coal plants and electricity network assets, new analysis from the Institute for Energy Economics and Financial Analysis (IEEFA) finds that the lowest-cost path to replace them also aligns with the nation’s clean energy goals.
The report, Improving Energy Affordability Aligns with Net Zero, concludes that all major ways to improve energy affordability in electricity and gas either support or are neutral to Australia’s net zero pathway. It identifies renewables, transmission upgrades and storage as the cheapest options for new generation, while reforms to energy markets and greater competition could deliver immediate cost relief.
Amandine Denis-Ryan, CEO of IEEFA Australia and lead author of the report, said:
“The narrative that Australia must choose between lowering bills and cutting emissions is simply false. Our analysis shows that the cheapest energy future is also a clean one. By focusing on renewables, efficiency, electrification and fairer energy markets, Australia can lower household energy bills while accelerating progress toward net zero.”
Ageing coal and network assets
The report notes that Australia’s coal-fired power stations are nearing the end of their operating life, with most expected to close within the next decade. Many network assets are also approaching retirement. Replacing these is unavoidable, but IEEFA finds that renewables supported by storage and transmission are already cost-competitive with new coal and will be cheaper by 2030.
Gas generation, by contrast, has become less competitive due to rising prices. IEEFA states that the lowest-cost way to supply domestic gas users is to redirect small volumes of uncontracted liquefied natural gas (LNG) from exports.
“Renewables are not driving up electricity costs – ageing coal plants, high gas prices and inefficient markets are,” Denis-Ryan said.
“There is a lot of room for improvement when it comes to energy affordability – but it is not about choosing a different electricity generation mix. It is about fixing inefficient energy markets and regulation, increasing competition, and acting on the demand side.”
Fixing markets and regulation
IEEFA argues that making Australia’s energy markets and rules work better should be a priority. It points to regulatory issues such as excessive profits by electricity and gas networks, as well as limited transparency and market concentration. The report says that reforms to improve competition could deliver billions in consumer savings.
Demand-side savings potential
Households and businesses can also make the biggest difference to energy affordability through efficiency and electrification. The report estimates that replacing inefficient gas heaters and hot water systems with electric alternatives could save households $3.4 billion a year.
Installing efficient appliances, rooftop solar and battery systems could cut net household energy bills by up to 67 per cent, even after upfront costs are considered. Widespread adoption of distributed energy resources such as rooftop solar, batteries and smart demand management could also reduce the need for large-scale generation and network investments.
Industrial users also stand to benefit from efficiency and electrification measures that can pay back quickly but remain underused.
The IEEFA’s findings suggest that the transition to a cleaner energy system offers not only emissions reductions but also a pathway to lower costs for Australian households and businesses.
