Australia's energy bills will halve by 2050 as solar panels, batteries, electric vehicles and home appliances become the norm, easing pressure on the federal government over the cost of living and creating opportunities for greater action on climate change, a think tank study suggests.
Modeling by the Grattan Institute found that reducing greenhouse gas emissions from electricity generation in line with the net-zero emissions target by 2050 would reduce average household energy costs from around $5,800 today to around $3,000.
The report said a drop of roughly this magnitude would occur under current policies as households use less gas and gasoline and more clean energy. The biggest savings is expected in gas-dependent Victoriawhere modeling suggests average annual gasoline, gas and electricity costs could drop from $6,036 to $2,767.
The report says cutting emissions from the power sector is not happening fast enough and the goal of net zero emissions by mid-century will not be achieved without policies requiring cuts in electricity pollution.
The Grattan Institute has called on the government to consider expanding the policy that applies to major industrial polluters (the protection mechanism) to include power stations. It says this will limit household energy savings compared to what would have happened otherwise, but only slightly – by about 3%.
It says the safeguard mechanism is already a form of carbon pricing – language that the Labor government avoided as it lost a bitter political battle that culminated in Tony Abbott's coalition government scrapping current carbon pricing scheme in 2014. The institute's energy and climate change program director Alison Reeve said the way people use energy has changed since then, “and carbon pricing policies need to change too.”
“For too long, federal governments of both political stripes have avoided carbon pricing because they feared higher energy prices,” Reeve said. “Our report shows that the source of this fear is becoming obsolete.”
Coalition introduced a safeguard mechanism and Labor renewed it in 2023. This requires around 200 industrial sites that emit more than 100,000 tonnes of carbon dioxide in Australia each year, including liquefied natural gas plants, coal mines, smelters and factories, to reduce emissions intensity by 4.9% each year until 2030.
Emission reductions can be achieved either locally or through the purchase of carbon offsets. Companies that reduce emissions below the baseline also receive “safeguard credits” that they can sell to polluters that do not meet their baseline.
Government data suggests that the overall amount of direct pollution from facilities covered by the protection mechanism has decreased. almost 2% in the first year after the reform of the Labor Party. However, the scheme has been criticized for allowing unrestricted use of offsets, despite peer-reviewed research suggesting they don't deliver what they promised.
A review of the protection mechanism is planned for next year.
Reeve said the institute's modeling assumed electricity companies would cut emissions directly and could not rely on Australian carbon credits created through methods including improving natural cover.
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She said a “clean” carbon tax or emissions trading scheme would be better than current policies, including the safeguard mechanism – a point also made by long-time Labor Party climate and economics adviser Ross Garnaut – but Grattan focused on what was politically achievable.
“None of these horses are currently racing,” she said. “You can only bet on horses that are racing.”
Labor has faced criticism for delays in rolling out solar and wind farms needed to meet its target of 82% of electricity coming from renewable sources by 2030.
Renewable energy in homes has been booming ever since introducing a subsidy for batteries in July. But investment in large-scale developments – especially wind farms – has slowed, partly due to delays in planning approvals, transmission line construction and supply chains.
Federal Climate Change and Energy Minister Chris Bowen said the government was focused on implementing existing policies, including an insurance program for large solar, wind and battery development projects (known as the Capacity Investment Scheme), a $20 billion “rebuild the nation” program and battery subsidies. He said he was “looking at a number of parameters beyond 2030” but had no plans to include electricity in the safeguard mechanism.
Renewable energy provided 42% electricity in the country's main power grid over the past year.
