Australia's energy transition is a success story in the making, and it couldn't have come at a better time! Just a decade ago, a heatwave like the one we experienced recently could have caused a major power outage on the east coast. But this time, our power system held up remarkably well, despite a few hiccups.
The latest quarter saw a significant shift towards renewable energy and energy storage, with renewables and storage contributing over 50% of the electricity supply for the first time. And here's the kicker: wholesale power prices dropped by more than 40% compared to the previous year.
But here's where it gets controversial... Some argue that Australia's energy transition has been long, complicated, and difficult. However, our recent research suggests that if these positive trends continue, we could see lower retail electricity bills by mid-2026. As more coal plants shut down and new transmission and storage infrastructure comes online, prices might rise again. But overall, the shift away from gas and coal for power and petrol for cars is expected to result in significantly lower energy costs for households.
So, is it job done? Not quite. There are still challenges ahead, but the immediate outlook is promising.
Let's dive into the numbers. Last quarter, wind generation increased by nearly 30%, grid solar by 15%, and grid-scale batteries almost tripled their output. Meanwhile, gas generation took a hit, falling by 27% to its lowest level in a quarter century. Coal generation also decreased by 4.6%, reaching its lowest quarterly level ever.
Gas has traditionally been the most expensive way to produce power, and its peaking plants are typically fired up only when supply struggles to meet demand, leading to soaring power prices. With less demand for gas, wholesale prices have dropped, which is great news for consumers.
However, don't expect an immediate reduction in your power bills. Wholesale prices make up only about 40% of your power bill, and most retailers only adjust their prices once a year. But if these lower wholesale prices persist, consumers should start to feel some relief.
The power system has been holding up under strain. Last quarter was unusually good for the system, with ageing coal plants performing reliably at critical times. Rainfall filled Snowy Hydro's reservoirs, boosting hydro power, while solar and wind generation were strong.
In early January, intense bushfires caused some areas to lose power when timber power poles burned or trees fell on transmission lines. Sustained heat can also cause power substations or transformers to fail more frequently. But these issues were mostly localized, and the system overall coped well.
Summer heatwaves used to put immense strain on the power grid as millions of people turned on their air conditioners simultaneously. But this summer, the system handled the demand admirably. Not only were most fossil fuel generators available most of the time, but the high output from rooftop solar paired exceptionally well with the demand for air-conditioning.
The expansion of electricity storage is a game-changer. Until recently, electricity had to be generated and used immediately, with storage limited to expensive and rare pumped hydro facilities. But batteries have revolutionized the game. For the first time, power can be generated and easily stored for later use.
Plummeting battery prices have led to a surge in installations across Australia. Since 2024, nearly 4,000 megawatts of grid storage have come online. Grid batteries are no longer just stabilizing the grid; they're now outcompeting gas by soaking up surplus solar and wind energy and releasing it during evening peak demand.
At a smaller scale, the government's home battery rebate has been incredibly popular, leading to cost blowouts and rapid uptake. Many households have found these batteries to be a lifeline during power outages. In the future, medium-scale community batteries could power entire towns or suburbs, boosting grid resilience.
One of the challenges in reaching higher levels of renewables is the need for new transmission lines. While some projects are on track, others are significantly behind schedule.
This is one reason why NSW's Eraring coal plant will continue operating until 2029. Delays in completing the new NSW-South Australia transmission line, EnergyConnect, have also pushed back the planned closure of the Torrens Island gas power plant near Adelaide.
Gas still has an important role to play. It can quickly fire up and fill gaps when wind and solar generation are low, making it an essential backup. However, the gas market has its own set of challenges, and governments are working to address long-standing issues. Late last year, the federal government proposed a mandatory east coast gas reservation scheme to tackle these problems.
Victoria, Australia's most gas-dependent state, faces looming challenges. Bass Strait wells are drying up, and most of Queensland and WA's gas is exported as liquefied natural gas (LNG). The Victorian government recently opened up new areas for gas exploration after initially rejecting the idea.
A new plan by federal, state, and territory energy ministers aims to give the Australian Energy Market Operator more power to intervene in the gas market, potentially through contracting for new infrastructure like pipelines and import terminals.
The Victorian government is trying to reduce its reliance on gas, but it's a slow process. The state has high hopes for offshore wind farms to harness the stronger and more reliable winds across Bass Strait. However, progress towards the goal of 2 gigawatts by 2032 has been slow, and no turbines have been installed yet.
Some developers have withdrawn applications due to global uncertainty and delays in the auction process. Last week, Victoria announced that the auction process will finally begin in August. The question remains: Is there enough time to replace retiring coal plants with new offshore wind farms?
Australia's progress towards renewable energy is undeniable. Not so long ago, it was widely believed that the grid could never accommodate more than 20% renewables. Now, we've reached 50%.
While there may be bumps along the way, the government's goal of 82% renewables in four years might be a stretch. But it's clear that real progress is being made, and it couldn't have come at a better time.
And this is the part most people miss... The energy transition is a complex process, and there are always going to be challenges and controversies. But the benefits of a cleaner, more sustainable energy future are worth fighting for.
What do you think? Is Australia's energy transition on the right track? Share your thoughts in the comments below!
