Australian household electricity prices jump nearly 8% in two years as debate over renewables costs intensifies

Australians are facing a sharp increase in household electricity costs, with new research showing retail prices climbed almost 8 percent in two years amid an ongoing political and industry debate about the cost of the transition to renewable energy.

Energy comparison service iSelect found the average household electricity rate rose from 36.1 cents per kilowatt-hour in June 2023 to 38.9 cents in June 2025. That increase outpaced Australia’s 2.1 percent inflation rate recorded in July and has intensified pressure on households already coping with a broader cost-of-living squeeze.

MacroBusiness chief economist Leith van Onselen attributed the rise largely to the costs of the transition from coal to variable renewable generation, saying investments in transmission are being capitalized into the regulatory asset base and passed on to households. "Labor lied when it promised that power bills would fall," he said, referring to the government’s 2022 pledge to deliver a $275 cut to power bills under its climate plan.

Van Onselen said the phasing out of baseload coal in favour of weather-dependent solar and wind has increased reliance on more expensive gas, batteries and pumped hydro to balance the grid, driving overall costs higher. He pointed to South Australia — which has around 75 percent wind and solar penetration — as an example of a state with high retail power bills. He also argued Australia exports far more coal and gas than it uses domestically and noted the country’s ban on nuclear generation despite large uranium resources.

Not all analysts frame the issue the same way. The Clean Energy Council’s policy chief William Churchill said a federal climate report warning millions of Australians could lose homes to rising seas underlined the urgency of speeding up clean-energy rollout. "The need to prepare and act is now beyond question," he said, arguing the risks described in the report support fast-tracking renewables to reach net zero targets.

The Commonwealth Bank’s August Household Spending Insights report found household spending on utilities rose 2.9 percent, marking the biggest hit to household budgets among spending categories. Institute for Energy Economics and Financial Analysis energy finance analyst Jay Gordon said technological and behavioural changes at the household level could substantially reduce bills.

"Upgrading household energy systems could cut bills by 80 to 90 percent for a typical Australian home," Gordon said. He noted rapid rooftop solar uptake has driven daytime wholesale prices to record lows, but said rising fossil-fuel prices, high network costs and an ageing generation fleet continue to put upward pressure on household bills. Gordon described recent federal battery rebates as an important step but said the program missed opportunities to support a wider range of household upgrades, including thermal solutions that reduce energy consumption and emissions.

The competing explanations highlight several drivers cited by experts: wholesale energy prices influenced by global gas and coal markets, the cost of connecting large-scale renewables through new transmission lines, network charges set to recover capital investments, and the composition and age of generation assets. Policy settings such as subsidies, mandates and support for household-level upgrades also shape net costs for consumers.

Some economists and commentators have framed the issue in geopolitical and emissions terms. Van Onselen noted Australia’s share of global emissions has fallen from about 1.5 percent in 2000 to 1.1 percent now and pointed to the much larger emissions trajectories of China and India, which continue to expand coal-fired generation. Those observations are used by some to question the domestic economic trade-offs of an ambitious renewables rollout, while others argue the physical risks of climate change and long-term cost declines in renewables justify accelerated deployment.

Government and industry responses so far have included targeted household bill relief and incentives for battery storage, along with debates at federal and state levels over how to manage transmission investment, generation retirements and the pace of large-scale renewables development. Analysts such as Gordon advocate broader programs to support household energy efficiency and on-site generation as a way to reduce reliance on grid energy and lower bills over time.

The diverging views among economists, industry groups and conservation advocates underscore a central policy challenge: balancing near-term affordability for consumers with investments intended to ensure reliable, lower-emission energy supply over the longer term. As households continue to report rising utility costs, pressure on policymakers to reconcile those objectives is likely to increase ahead of future budget and energy policy decisions.