Does more renewable energy make power prices go up or down?

There’s been a lot of talk in the press over the last few days about whether renewable energy makes power prices go up or down. The short answer is that renewable energy targets have a minor impact on retail electricity prices, and actually often result in lower prices for households and businesses. For many households roof-top solar is already reducing power costs. Moreover, investing in renewable energy is an important step to cleaning up and modernising our energy systems, as well as growing jobs, attracting investment and being good for our health and the environment.

For more detail, read on!

1. The Renewable Energy Target has a minor impact on retail electricity prices, while millions of are powering their homes with solar and simultaneously reducing their bills. Furthermore, an increase in renewable energy will attract investment, grow jobs and help us tackle climate change.

Over 1.4 million households are already using solar to control their electricity bills. And importantly, households that invest in renewable energy can reduce their power bills over time. This is one of the reasons that renewable energy is primarily taken up by lower - middle income earners (Green Energy Trading 2014).

Economic modelling of renewable energy targets has found these policies have a minor impact on retail electricity prices, and actually often result in lower prices for households and businesses. This modelling by ACIL Allen Consulting (2014) for the 2014 Warburton RET review found that if Australia’s Renewable Energy Target was removed electricity prices for an average household would increase. Furthermore, the modelling also found a higher target (30% by 2020) resulted in the lowest retail electricity prices compared with a lower or no renewable energy target.

While a 50% renewable energy target by 2030 involves a greater structural change for Australia's electricity sector, analysis (Saddler H 2015) of the likely price impacts of such a target found the increase would be minimal, and may even be cancelled out by falling demand and energy efficiency improvements if current trends continue.

But of course, increasing renewable energy is about more than power bills! Increasing renewable energy is important for reducing pollution and tackling climate change. Research shows that to tackle climate change effectively Australia must achieve a minimum of 50% renewable energy by 2030 (Climateworks, 2014).

So, while the potential for lower retail energy prices is good news in itself, more renewable energy also means more jobs and investment too!

2. Renewables are the cheapest way to replace Australia's ageing and inefficient coal-fired power plants.

Australia’s coal fired power stations are already significantly older than the global average and will need to be replaced - by 2030 nearly half of Australia’s coal fired power stations will be over 50 years old! Once power stations get to this age, they become increasingly expensive to run as they’re inefficient to operate, and costly to maintain. Most power plants this old are candidates for closure or have already been decommissioned (AEMO 2012; Climate Council 2014).

Regardless of action on climate change, planning to replace Australia’s ageing generators needs to start this decade.

3. Renewable power generation already competes on price with fossil fuels in many parts of the world.

Renewable energy is booming globally as the costs of wind and solar decline rapidly. Hundreds of thousands of Australian households have benefited as the cost of solar PV has dropped 75% in 5 years. What’s more, solar panels are expected to fall another 45% in the next 5 years making it the cheapest form of electricity generation in many parts of the world.

When building new power plants, the cost of electricity generated by wind and solar PV is now similar or lower than fossil fuelled power in OECD countries. And the cost of generating renewable electricity is expected to continue to fall as deployment of renewable energy accelerates worldwide.

Australia is the sunniest country in the world and one of the windiest. We have enough renewable energy resources to power Australia 500 times over, so the opportunity for us to seize the benefits presented by an increase in renewables is ours for the taking.

The long and short of it? Investment in renewable energy has lots of upsides!


ACIL Allen Consulting (2014) RET Review Modelling. Market Modelling of Various RET Policy Options.

AEMO (2012) National Electricity Forecasting Report (NEFR) 2012. Appendix C: Small non-scheduled generation.

Climate Council (2014) Australia’s Electricity Sector: Ageing, Inefficient and Unprepared.

Green Energy Trading (2014) Postcode and income distribution of solar.

IEA (2015) Tracking Clean Energy Progress 2015.

IRENA (2015) Renewable Power Generation Costs in 2014.