Bowen’s strategy to reduce bills hides $360 billion in costs by 2050

Chris Bowen’s recently released National Energy Performance Strategy is yet another example of the Energy Minister promising bill relief while shunting billions of dollars of costs onto consumers.

The government will invest $15.2 million to deliver the strategy, which promises up to $18 billion in cost savings for energy consumers by 2040. Its strategy is ‘flexible demand’ — industry-speak for shifting usage from periods of low solar and wind output to periods of high output, and reducing usage when demand is high (e.g., during the evening peak).

A crucial element of flexible demand is reliance on consumer-owned rooftop solar and home batteries (including EVs), which consumers can use to reduce their demand on the grid and export surplus electricity. This is where the biggest costs of the energy transition are hidden.

Our estimates suggest that under the current energy transition plan, the amount of rooftop solar and home batteries assumed to be available to support the grid in 2050 will require consumers to fork out around $360 billion.

The 2022 Australian Renewable Energy Agency (ARENA) report providing the $18 billion figure does not take into account these enormous costs, paid for directly by consumers.

This is not the first time Bowen has vaunted the savings his energy plan will provide, while sweeping significant costs under the carpet.

He frequently cites the blueprint for Australia’s energy transition — the Integrated System Plan (ISP) developed by the Australian Energy Market Operator — as proving that a grid dominated by wind and solar will provide cheap electricity for consumers.

But, as with the ARENA report, the ISP treats rooftop solar and home batteries as ‘free’ for the energy system. Shockingly, the ISP then relies on these ‘free’ consumer investments to provide the lion’s share of the grid’s solar and storage capacity over the next few decades.

The ISP essentially offsets the need for investors to fund more large-scale generation and storage projects by thrusting the responsibility on consumers to buy rooftop solar and home batteries to support the grid.

By including large-scale projects as a cost in the model, and excluding the much larger portion of supply provided by consumers, the ISP allows the Minister to make the energy transition look a lot cheaper than it is.

To understand the scale of the costs the ISP has excluded, we estimated that at today’s prices (using the latest capital cost estimates from CSIRO), consumers will be expected to pay for around $129 billion in rooftop solar and around $229 billion in home batteries by 2050 — bringing the total to almost $360 billion.

Costs of this magnitude make $18 billion in savings look miniscule.

By comparison, the ISP expects investors to pay for only an estimated $130 billion worth of large-scale batteries and solar farms by 2050.

The ISP also predicts the vast majority of home battery owners will sign away control of their battery to an operator who will charge from and discharge to the grid at the grid’s convenience — not the owner’s.

This assumption fails to recognise most consumers buy a home battery to be more self-sufficient and less exposed to the fluctuations of grid supply.

The same is true for EV owners, who will be expected to shift charging habits to support an increasingly needy grid — so they don’t charge in the evening when solar output is low and demand is high, but instead discharge to provide additional supply to the grid.

Bowen is effectively asking consumers to hand over control of their batteries and upend their driving schedules without any financial incentive to do so, as no such incentives are costed in the ISP model. This is unsurprising given that even existing subsidies, such as rooftop solar feed-in tariffs, are not included as a cost.

Announcing a $15.2 million investment in a new strategy will not solve the deep problems inherent in the government’s energy transition plan.

The National Energy Performance Strategy is too much performance and not enough substance, with consumers once again left to foot the bill.

Zoe Hilton is a Senior Policy Analyst in the Centre for Independent Studies energy research program.

Photo by Vladimir Srajber.