Explainer: If Renewable Energy is So Cheap, Why Are Power Bills Still Rising?

Tasmanians are frequently told that electricity should be getting cheaper. Federal Energy Minister Chris Bowen has repeatedly said renewable energy is the “cheapest form of new generation”. Tasmania’s Energy Minister Nick Duigan has echoed this message, highlighting our state’s clean energy advantage and its potential to deliver affordable power for households and businesses.

Yet over the past five years, Tasmanian electricity prices have continued to rise. For many families and small businesses, the promise of “cheap” or even “free” renewable energy feels increasingly disconnected from reality.

The explanation lies in how the electricity system actually works.

Power bills are made up of three components: wholesale electricity prices, network costs,and retail costs. While political commentary often focuses on generation cost, it’s the network costs that are now driving much of the increase.

The Australian Energy Regulator (AER) oversees network pricing, while the Australian Energy Market Operator (AEMO) manages the operation of the national electricity market.

Both AER and AEMO are designed to encourage investment and system reliability first and foremost, and while they say they seek to minimise costs for consumers, it is more the case of agreeing to the cheapest mega-project, not questioning if the mega-project is warranted.

Tasmania is currently committing to enormous network investments. Projects such as Marinus Link and the North West Transmission Developments (NWTD) involve billions of dollars in new infrastructure. Once approved by the AER, these costs are recovered from electricity users over decades, regardless of whether wholesale prices fall.

A little-known but significant change is also approaching.

The AER has confirmed it is considering making Basslink a regulated asset. If approved, the cost of Basslink will shift from Hydro Tasmania paying for its use to households, small businesses, and industry paying through their power bills. The Tasmanian Government actively lobbied for this cost transfer.

Many consumers will be surprised to learn they are about to start paying for an asset that has existed for years and was previously paid for by a government-owned generator.

In this series authored by the CEO of the Tasmanian Minerals, Manufacturing, and Energy
Council (TMEC) Ray Mostogl, with TMEC representing the state’s biggest consumers, where every move made by energy suppliers has and will be analysed and modelled for many years.

In the following three articles, Ray explains how we got here, why “cheap renewables” don’t automatically mean cheap bills, and what decisions today will lock in costs for generations.

Smarter

Decarbonisation is a complicated but essential transition in a fight that affects everyone in any part of the world…climate change. For Tasmania this affects the economy, people, and our global opportunity. Tasmania has been a leader and we should be helping the rest of the world decarbonise.

Cleaner

Renewable energy is a critical part of the fight against climate change. Tasmania delivers these projects to the highest of standards and we’re currently one of few Net Zero jurisdictions in the world which means any product or energy created in Tasmania will start its life cleaner than anything made in most other parts of the world. We should be proud of that advantage but we cannot be complacenet.

Diverse

Great minds and diverse perspectives serve as a chance for more Tasmanians to be part of collective solutions and meaninful action. When we appreciate diverse views and look for common ground, we can ensure Tasmania stops falling behind. We must collaborate and work together.