Australians to pay more for their energy as transition accelerates, Alinta Energy says
Australians face higher bills as the country struggles to build adequate replacements for coal with soaring costs for new sources of green power and transmission, Alinta Energy chief executive Jeff Dimery has warned.
The stark comments, described by the energy boss as “truths and straight talking” comes amidgrowing concern about the toll of Australia’s energy transition.
Mr Dimery said Australian energy stakeholders must be honest with the public about the toll of the transition.
“Australians will have to pay more for energy in the future. We will spend more as a percentage of GDP on energy, energy services, and energy infrastructure,” Mr Dimery said in a speech in Canberra.
“Whether we pay through our taxes, or pay the large upfront costs of an EV, or batteries and solar … or we’re paying more for electricity from the grid – we’ll all pay more in the aggregate. We need to be honest about that, and, I don’t think the average Australian is prepared for that reality.”
Mr Dimery’s comments will heighten tensions between Alinta and the federal Labor government, which came to power promising to cut power prices by $275 a year by 2025. Power bills have, however, surged in recent years amid a global energy crunch ignited by Russia’s invasion of Ukraine.
Australian households will see a small decrease in annual electricity prices from July, but Mr Dimery described this as a brief reprieve.
“There will be some relief coming through in wholesale over the next year or two, but I think that will be short-lived,” Mr Dimery said.
Mr Dimery said there are significant inhibitors to new renewable energy being built, and even if those can be overcome – the electricity produced will far exceed current prices.
He said the capacity of Australia’s energy industry to invest substantial amounts in renewable energy has been severely diminished by record low margins, as confirmed by the Australian Competition and Consumer Commission, and while there is a growing need – the cost of building new green energy is rapidly rising.
“I spoke at a conference two years ago and said that it would cost $8bn to hypothetically replace our brown coal-fired power station, Loy Yang B, with pumped hydro and offshore wind. Well, that’s more like $10bn today with movements in various cost components,” Mr Dimery said.
He said the investment landscape is also severely inhibited.
“When I sat down to write this speech, the future Victorian energy price for the 2026 calendar year was $58 a megawatt hour,” said Mr Dimery.
“At $58, I can’t build anything to meaningfully prepare for coal to come out of the system. I can’t build more solar, because we already have a glut of solar in the middle of the day, which is sending spot prices deeply negative. If I was just looking at the forward price, I would also be very wary about building new wind, because the margins would be slim to non-existent, and any curtailment – which is a growing problem – could be disastrous.”
If Australia is unable to build sufficient replacements for retiring coal, the country risks higher prices or blackouts, and Mr Dimery said he expects Victoria – which has the most ambitious of all transition plans – will have to rely on fossil fuels for longer than the state Labor government’s scheduled 2032 timetable.
While the comments may be seized on by the Coalition, which has proposed developing nuclear energy at the sites of retiring coal power stations – Mr Dimery offered a thinly veiled rebuke.
“This means maintaining clear public policy, and not getting distracted with new ideas without a firm social mandate,” Mr Dimery said.
Mr Dimery said recent Labor policies indicated that the government understands the problems, as he praised the intention of the so-called Capacity Investment Scheme.
The Capacity Investment Scheme, underwritten by taxpayers, will guarantee developers a minimum return on new solar and wind projects. In exchange, should the wholesale electricity price fall below an agreed threshold, taxpayers will compensate the renewable energy project.
But Mr Dimery called for reform around solar subsidies.
Australia has the highest rooftop solar penetration in the world as households and businesses look for shelter for high bills. But Mr Dimery said the uptake has been incentivised by federal and state subsidies, which has been useful – the uptake has curtailed other renewable energy developments.
Origin Energy’s Eraring coal power station, which supplies 25 per cent of NSW’s electricity, is set to retire – though the state government is looking to strike a deal to extend is use – and the country’s east coast faces a looming gas shortfall.
Gas is used as a peaker, where power stations are run for short periods of time to meet high demand. If there is insufficient gas, wholesale electricity prices will rise.
Labor insists its plan to rapidly accelerate the development of renewable energy will lower household and business bills, and an increase in zero emission generation has put downward pressure on wholesale electricity prices. Labor has set an aggressive target of having renewable energy generate more than 80 per cent of Australia’s electricity by 2030.
