This post builds on themes from my earlier blogs: The Energy Revolution Won’t Wait for Baseload’s Obituary and Nuclear vs Renewables: Australia’s Energy Future, which explore how outdated baseload thinking and nuclear distractions are holding back Australia’s clean energy progress.
Australia has some of the cheapest solar and wind in the world. Yet households are still paying some of the highest electricity prices among developed nations. What gives?
This paradox—cheap generation, expensive bills—is being exploited by fossil fuel defenders to push back against the renewable transition. But the truth is more nuanced—and more solvable—than they’d like you to believe.
The Paradox: Cheap Power, Expensive Bills
(Gas peakers can inflate wholesale prices by 30–50% even when renewables provide the bulk of supply—because they set the marginal price.)
Renewables are now the lowest-cost form of new electricity generation globally. In Australia, the levelized cost of solar and wind is well below coal or gas. And yet, end-user power bills remain stubbornly high.
Why?
- Marginal pricing: In our energy market, the price is set by the last generator needed to meet demand—often a gas peaker. So even if solar or wind meet 80% of demand, gas sets the price.
- Lack of storage: Without enough grid-scale batteries or dispatchable clean backup, we’re forced to fall back on expensive fossil fuels during peaks or lulls.
- Grid fees and hedging: Transmission upgrades, distribution costs, and risk premiums from market volatility all inflate the final bill.
Why Global Comparisons Fall Short
Countries like Uruguay, Spain, Denmark, and China are often cited as examples of renewables lowering prices. But none provide a perfect comparison:
- Uruguay: 98% renewable, yes—but heavily reliant on legacy hydro. Also a different economic structure.
- Spain: Wholesale prices dropped dramatically with solar, but retail prices still vary due to taxes and tariffs.
- Denmark: Wind-powered and efficient, but still among the highest taxed power markets in the world.
- China: Huge renewables rollout, but massive government control and unique industrial pricing.
Where’s the peer economy with high renewables, a similar grid, and lower stable retail prices? We haven’t seen one—yet.
The Real Problem: Market Design
The problem isn’t renewables—it’s that our system wasn’t designed for them.
- Marginal pricing rewards dispatchable fossil fuels.
- Flexibility has no formal market value.
- Batteries, VPPs, and demand response aren’t yet core to dispatch strategy.
This is like trying to run a Tesla on coal-era fuel rules.
Unlocking Flexibility: Storage and V2G
Before we can fully reap the benefits of cheap renewables, we need to unlock flexibility across the grid.
Storage is the key enabler of cheap, reliable renewables—but we need more of it, fast.
- Grid-scale batteries like those being built in Victoria and NSW are part of the solution.
- V2G (Vehicle-to-Grid) could be Australia’s biggest untapped resource—but it comes with challenges. Adoption requires widespread EV uptake, compatible chargers, bi-directional inverters, and utility cooperation.
Imagine 5 million EVs in 2030, each contributing just 10 kWh of backup to the grid during peak demand:
That’s 50 GWh—more than 10x Australia’s current grid-scale battery storage.
Combined with rooftop solar, smart meters, and AI-based orchestration, V2G could turn our EV fleet into a national battery.
How We Fix This
- Redesign the market to reward flexibility, not just raw generation.
- Invest in BESS and V2G infrastructure.
- Enable dynamic tariffs so users benefit from low-cost solar oversupply.
- Phase out gas price exposure by building dispatchable clean backup.
Conclusion: Renewables Are Not the Problem
They are the foundation—but not the whole system. Without redesigning the rules, we’ll keep blaming the tools for the flaws of the framework.
Australia has the sun, the wind, the EVs, and the technology. Now it needs the courage to finish the job.
Let’s stop asking why renewables aren’t lowering prices—and start building the system that lets them.
References
- Griffith University (2022): Gas Price and Electricity Price Relationship
- ARENA: EVs and Australia’s Energy Storage Future
- Energyse (Apr 2024): Electricity Prices by State
- Energy Insights: Gas vs. Electricity Price Correlation
- RACE for 2030: National V2G Roadmap
- IEA: Clean Technologies Make Energy Cheaper
- AER: Wholesale Electricity Price Trends
- CEIC: Electricity Prices in Australia
- ARENA: Bidirectional Charging Roadmap
- AEMC: Residential Electricity Price Trends 2024