Clean energy is the cheapest
by Aaron Dias
The long-standing debate over energy in Australia often feels like an impossible choice: have a clean planet, or have cheap power. The Institute for Energy Economics and Financial Analysis (IEEFA) Australia’s recent report flips that script entirely. The findings claim the exact same moves needed to reach net zero are also the most effective ways to lower household bills.
“The narrative that Australia must choose between lowering bills and cutting emissions is simply false. Our analysis shows that the cheapest energy future is also a clean one. By focusing on renewables, efficiency, electrification and fairer energy markets, Australia can lower household energy bills while accelerating progress toward net zero”, CEO of IEEFA Australia and the report’s lead author, Amandine Denis-Ryan, said.
The high cost of standing still
One of the report’s most critical insights is that doing nothing is not tenable. Australia’s coal fleet is ageing, with most plants set to retire within a decade. Replacing this infrastructure is inevitable. The only choice is how we handle it.
The analysis warns that extending the life of old coal plants or building new gas infrastructure risks locking Australians into higher costs. Coal extensions come with rising maintenance bills and reliability risks, while gas has become increasingly expensive due to global market exposure and the high cost of developing new fields.
By contrast, renewables, backed by storage and transmission, are already the lowest-cost form of new generation. According to Ms Denis-Ryan, they are currently on par with new coal costs and will be significantly cheaper by 2030.
A smarter fix for gas
Instead of opening costly new gas fields, the report suggests redirecting a small fraction of “uncontracted” LNG exports back into the domestic market. Diverting just a small amount of uncontracted gas to local users would be the cheapest way to secure domestic supply, and would save billions in capital costs required for new extraction projects.
“We have found before that there is more than enough uncontracted LNG to redirect, and there are several ways in which the government could go about it. At this stage it looks like the most likely mechanism government would take would be an export licensing framework requiring LNG producers to supply a certain volume of gas domestically to be allowed to export LNG,” Ms Denis-Ryan said.
Shifting to efficient electric appliances combined with solar panels and a battery, could cut net energy bills by up to 67%, even after accounting for upfront costs, the report states. Furthermore, simple swaps, like replacing inefficient heaters and hot water systems with modern electric alternatives, could collectively save Australian households $3.4 billion annually.
In Melbourne’s east, one household has shown just how transformative going all-electric can be. After decades of shivering through long winters in their 1977-built home with no insulation, single-pane glass and an exposed concrete floor, Julie Mulhauser and her family undertook a major retrofit in 2020. The works included new insulation, solar panels, and replacement of gas appliances with efficient electric ones, supported by a heat pump hot water system. For the first few years after the transition her energy cost per year was only $300. She said that: “In terms of energy use the combination of the retrofit for energy efficiency, rooftop PV and efficient electric appliances reduced our energy use 80%. We make a further saving by using energy from our rooftop PV of around 8 percentage points. This means that we use around 12% of the energy of a comparable home”.
Mulhauser believes the biggest barrier households face to going all electric is simply not knowing where to start. “Households are unfamiliar with heat pump hot water systems, PV systems, inverters and batteries. This is why many households turn to peers such as friends, family, neighbours, community groups (such as Electrify Boroondara) and Facebook (the My Energy Efficient Home Facebook group has 162,000 members) for advice – particularly for brand and service provider recommendations,” she said.