Australian household electricity prices climb nearly 8% in two years as debate rages over renewables costs

Australian household electricity prices have risen sharply, with new research showing an almost 8% increase in average retail rates over the past two years, a rise that is intensifying cost-of-living pressures.

Energy comparison service iSelect reported that the average household electricity price increased from 36.1 cents per kilowatt-hour in June 2023 to 38.9 cents in June 2025. That rise outpaced Australia’s 2.1% inflation rate recorded in July and coincides with higher household spending on utilities identified in recent banking sector data.

Commonwealth Bank of Australia’s August Household Spending Insights report found utilities spending surged 2.9%, making it one of the largest hits to household budgets. The rise in retail prices and household spending has prompted debate among economists, industry bodies and analysts about the drivers of the increase and how governments should respond.

Leith van Onselen, chief economist at MacroBusiness, attributed the higher bills to costs associated with the transition to renewable energy. He said investments in new transmission infrastructure are being capitalised into the regulatory asset base and passed through to consumers. "Labor lied when it promised that power bills would fall," Mr. van Onselen said, referring to a 2022 pledge by the federal Labor government to deliver a $275 cut to power bills as part of its climate plan.

Mr. van Onselen argued that the phasing out of baseload coal and the shift to intermittent solar and wind have made the grid more reliant on gas, batteries and pumped hydro, raising overall system costs. He pointed to South Australia — which has reached about 75% wind and solar penetration — as an example, saying it also has some of the highest retail power bills. He said large renewable developers, transmission companies and consultants are benefiting while renters, pensioners and low-income households bear the costs.

His comments also touched on broader energy policy choices. Australia’s share of global emissions has declined, he said, arguing that because the country accounts for a small share of global CO2 output, domestic changes will have limited impact on global emissions. He criticised the ban on nuclear power and highlighted Australia’s substantial uranium reserves, saying nuclear generation could provide long-lived, low-emission baseload capacity.

Industry and policy groups urged a different reading of the data and different policy priorities. William Churchill, policy chief at the Clean Energy Council, said a recent federal climate report that warned of risks such as homes at risk from rising seas underlined the need to accelerate the clean energy rollout. "The need to prepare and act is now beyond question," he said, adding that the risks described in the report show why Australia must speed up deployment of clean energy projects and stay on track for net zero.

Jay Gordon, an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), said households can substantially reduce bills by upgrading their home energy systems. Gordon said rapid uptake of rooftop solar had driven daytime wholesale prices to record lows, but rising fossil fuel prices, high network costs and an ageing generation fleet have kept retail bills rising. He estimated that upgrades could cut household bills by 80% to 90% for a typical Australian home and described federal battery rebates as an important but incomplete step, noting support for other upgrades such as thermal solutions could further reduce bills and emissions.

The competing views reflect fault lines in current public debate: whether higher retail bills are primarily the result of the clean energy transition and infrastructure costs, or whether those costs can be offset by faster deployment of distributed technologies, efficiency measures and targeted government assistance.

System costs are indeed changing. The integration of renewables typically requires investment in transmission to connect remote wind and solar projects to the grid, grid-strengthening measures to manage variability, and firming capacity such as gas, batteries or pumped hydro to meet demand when wind and solar output is low. Regulators typically allow network and generation investors to recover these capital costs over time, which can be reflected in consumer tariffs.

Policy responses being discussed include subsidies and rebates for household batteries and energy-efficiency upgrades, changes to network cost allocation, measures to encourage behind-the-meter solar and storage adoption, and debate over the pace and location of large-scale renewable projects. Banks and analysts have also pointed to short-term relief measures, such as power bill subsidies, which some commentators argue are insufficient without longer-term structural reforms.

The government’s 2022 promise of a $275 average cut to household power bills has not materialised as a clear, across-the-board reduction, and political scrutiny of energy policy decisions has intensified ahead of future policy reviews. Energy market dynamics — including international fossil fuel prices and investment in the generation and transmission fleet — will continue to affect wholesale and retail prices.

Analysts say households can take steps to reduce bills now through solar panels, batteries, energy-efficiency measures and smarter consumption, while the industry and government debate pursues broader options that range from accelerating renewables deployment to reconsidering baseload alternatives. The policy choices made in coming years will determine whether the recent price rises are sustained, mitigated, or reversed as Australia balances affordability, reliability and emissions goals.