Budget reaction: Australia is sleepwalking into a more expensive energy future

Getting the energy transition done is a cost of living and energy security imperative.

Australian governments must get our clean energy transition back on track, or we will pay more for our power than we have to, and we will remain vulnerable to global shocks in cost of living and fuel supply.

Australia is once again being reminded of a hard truth: we are dangerously exposed to global fuel shocks. We rely heavily on imported fuels supplies and have limited control over the price we pay.

That is today’s ‘headline’, but there are deeper issues to be faced about power reliability, security and affordability for Australian families and businesses.

The Federal Budget recognises one part of the problem, fuel security in our current power and transport system.

The government has committed more than $10 billion to measures that may help manage near-term exposure to global fuel shocks. But the deeper task is to reduce Australia’s dependence on fossil fuels altogether.

That means accelerating electrification, renewable generation, storage, demand flexibility and smarter use of the grid.

Nexa Advisory’s work shows why this matters.

Wholesale energy costs

Our Gas is a Bridge, Not a Destination report found that delays to building renewable generation, transmission, and storage risk pushing Australia into reliance on expensive gas-fired generation, when it should just have a small back-up role in the electricity system of the future. Under a delayed transition, wholesale electricity costs could increase by $115.7 billion by 2050 more than with an orderly transition.

That means, even without the current global fuel crisis, failing to build infrastructure for the energy transition is costing us.

Those numbers are stark but what is more, modelling shows Australia needs to add between 4.3 GW and 8 GW of new renewable generation capacity every year through to 2030 to avoid the need for additional gas-fired generation – we added 5.2 GW in 2024, up from 2.8 GW in 2023, but we need to sustain at least that. If renewable and transmission projects continue to be delayed, up to 2.8 GW of additional gas capacity could be needed to meet electricity demand.

That would be even more cost to consumers, and it’s not a given either; global supply chain constraints are pushing lead times for new gas turbines to more than five years, and we aren’t even in the queue.

Rising infrastructure costs

The other part of the story is that the cost of actually building is also going up the longer we drag our feet. Our modelling has shown that a three-year delay to just transmission projects could add more than $1,100 to the bill of an average New South Wales residential customer. For small businesses, the impact is even sharper, with a New South Wales business using 40 MWh a year potentially paying an additional $7,716 over 20 years. It is a similar situation for consumers in other states.

The solution

The reality is, Australia’s energy transition is not short on ambition, targets, technology or capital. It is short on delivery.

The transition is being slowed by transmission approval and build delays, grid connection bottlenecks, planning complexity, social licence challenges, skills shortages, uncertain coal closure timelines, and fragmented coordination across governments.

This cannot be solved by more funding – the solutions aren’t ‘ribbon worthy’, they will take focus, leadership, and ‘shoe leather’.

Governments need to create an environment and framework that ensures delivery. That means:

• prioritising removing the regulatory and approval quagmires,

• enforcing accountability for delivery, and

• ensuring investor certainty to allow private capital to do its job efficiently, innovatively, and cost effectively.

The Federal Budget put energy security on Australia’s economic agenda.

That is welcome.

But the real test is not how much money is announced, it is whether governments help remove the roadblocks that are holding us back, and whether they hold everyone (including themselves) accountable for getting it done.

If Australia does not get the transition back on track, we risk drifting into a gas and fossil fuel future by default. That would come at a major and unnecessary cost to households and businesses, in their bills and in unreliable power.