Power Prices Expected to Increase 20-35% Over Next Decade Amid Carbon Transition
The net zero transition is estimated to cost between $150 billion and $190 billion, as reported by Moody’s.
In order to achieve net zero, Australians may experience a 20 percent to 35 percent increase in power bills over the next decade, with real wholesale prices potentially increasing by 5 percent to 15 percent, according to a report by Moody’s.
The report highlights the need for significant investment in Australia over the next ten years to reach net zero emissions by 2050.
“We project that the National Electricity Market in Australia will require an investment ranging from $150 billion to $190 billion (US$95 billion to $120 billion) in real terms by 2035,” the report states.
The analysis suggests that Australia is an appealing investment location, but higher power prices may be necessary to fund this investment.
“This could result in higher social risks if customers have to pay increased energy bills. Additionally, the execution and financing of this investment could impact the credit quality of Australia’s power companies,” the report adds.
The report also acknowledges the significant challenges in achieving the targets set for the carbon transition.
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Financial analysts suggest that the estimated cost, excluding inflation, would account for 0.7 percent to 0.9 percent of the gross domestic product (GDP) each year.
“There is a risk of delays considering the need for a significant increase in renewable energy installations to meet national goals,” Moody’s explains.
Additional Funding from Taxpayers May Be Necessary
Moody’s highlights that the expected rise in power prices of up to 35 percent is essential for utilities to maintain their credit standing, and mentions the possibility of more government funding to enhance affordability.
“While we anticipate that Australian governments have the fiscal capability to offer further support, [utilities] are under considerable financial strain. This could lead to a reevaluation of government assistance for the transition, potentially causing a delayed implementation or reduced credit metrics for the utilities,” the report states.
Moody’s, one of the leading credit ratings agencies, provides analyses and financial research for governments and businesses.
Coalition Criticizes Labor’s Renewable Energy Plan
In response to the report, Shadow Minister for Climate Change and Energy Ted O’Brien expresses concerns about the high costs associated with renewable energy.
“Moody’s latest report confirms that Labor’s ambitious energy plan could cost Australians up to $230 billion over the next decade,” stated O’Brien on Feb. 7.
O’Brien argues that the federal government’s focus on renewables is driving up costs for families and businesses, leading to higher energy bills.
However, Bowen defended the government’s actions regarding power bills in parliament on Feb. 5.
“The Albanese government is providing $300 in bill relief to every Australian household,” Bowen stated.
Bowen Stands by Government’s Efforts on Power Bills
Bowen highlighted that the Labor government had introduced 15 gigawatts of renewables to the electricity grid since taking office.
“The interesting aspect of the 15 gigawatts of new renewable energy added over the past three years is that it exceeds the opposition’s proposed nuclear power addition by 2050. We have achieved more in three years than they plan to in the next 25,” he noted.
“The majority of this capacity has been built by private companies, supported by government policies but financed by the private sector. We believe that if the private sector is capable, they should fund such initiatives, not the taxpayer. That is our approach on this side of the aisle,” he stated.
The Australian Labor Party aims to achieve 82 percent renewables by 2030, in contrast to the Liberal Party’s strategy, which includes nuclear and gas in the energy mix.
