First published: 13 March 2025; Updated 1 December
Australians are struggling with the cost of living, and rising power bills are putting even more pressure on household budgets. Three in 10 parents say they’re struggling to afford food, power bills or insurance. The key question is: how did we get here, and what can actually be done about it?
While power prices are complex, the short answer is, Australia’s reliance on polluting and expensive coal and gas is a major driver of high power bills. They are driving up wholesale power prices (the prices our electricity retailers pay), which make up up to 40% of bills.
key reasons your power bills are sky high
1. Australia’s energy system still relies too heavily on expensive fossil fuels
Australia is adding renewable power, like solar and wind at record rates – but for now, the majority of our electricity still comes from expensive and polluting coal and gas. These days, electricity made from fossil fuels is far more expensive than renewable power. In 2025, the average price of electricity from fossil fuels is $123 per megawatt hour (MWh), almost twice the average price of electricity from renewables ($64 per MWh). Already, more than 40% of our power is from renewable sources, and adding more will avoid even larger power price hikes.
Fossil fuel prices are so high because on top of general inflation, coal and gas-fired power stations pay international prices for the fuels. Prices have eased since the extreme spikes driven by the Russia-Ukraine conflict in 2022, but are still high. As long as our energy system continues to rely on fossil fuels that are bought and sold as international commodities, we will remain at risk of sudden and unexpected spikes in power prices. In contrast, the wind and sun are free, and when backed up by storage like batteries, they can provide abundant, locally produced power forever.
Read more: An Aussie Roadmap: building a clean, reliable and low-cost electricity grid.
2. Gas companies export the vast majority of Australia’s gas for eye-watering profits, at the expense of Australian families and businesses
Fossil gas prices are high because we are one of the largest exporters of gas in the world, exporting around 80% of our gas, which means we have to compete with global export prices. Gas companies ship so much of their gas offshore because that’s how they maximise their profits.
Companies exporting fossil gas have made close to $100 billion in profits since the Russia-Ukraine conflict began in 2022, at the expense of Australian families and businesses. More and more Australian households are struggling to stay on top of their power bills, and industries are under significant pressure, and even closing down, due to high gas costs. These multinational corporations are making billions while providing almost no benefit to our economy and costing us thousands of dollars every day. At the same time, they are responsible for huge amounts of climate pollution both in Australia and worldwide.
Because gas is so expensive, electricity made using gas has a disproportionate impact on overall power prices. Even though only about 5% of electricity in Australia’s main grid comes from gas, research from Griffith University shows that because gas is so expensive, gas prices drive 50-90% of pricing periods in Australia’s main grid.
Expensive gas often sets power prices
Read more: 5 reasons Australia needs to break up with gas.
3. Our ageing and unreliable coal-fired power stations are driving severe price spikes
Most of Australia’s coal generators are more than 40 years old, and their ability to reliably produce power has dropped off dramatically – driving severe price spikes when there are unplanned outages. For example, Australia’s largest coal-fired power station, the 43 year-old Eraring Power Station in NSW’s Hunter Valley, had more than 6,000 hours (250 days) of planned and unplanned outages in 2024. Yallourn in Victoria is limping to its retirement date, with at least one of its generators unexpectedly out of action for one-third of the year in 2024.
When there are coal outages, power prices go up due to reduced supply and the increase in expensive gas generation to meet our electricity needs. Four of the most severe power price spikes in the past seven years have been driven by unplanned coal outages (Analysis by Baringa 2024). Coal outages contributed to yet another severe price spike in June this year.
Building a diversity of projects, like solar, wind, and storage, in more places makes our grid more reliable. Instead of relying on a small number of large generators that must run constantly (no matter how much electricity we need), and cause huge shocks to the energy system whenever outages occur, renewables create a flexible, distributed system. Modern grids need a mix of technologies, not traditional baseload generation.
Read more: Lights Out: Ageing Coal and Summer Blackouts.
Coal outages are driving major power price spikes
It’s not all bad news – here are two ways we can help keep power prices in check.
4. Replacing our ageing coal-fired power stations with renewables will save Australians billions on their power bills
We need to replace our ageing coal-fired power stations to keep reliably powering homes and businesses. Renewables are not only the least expensive option to build, but are also the lowest-cost source of power. This is because unlike fossil fuels, Australia’s abundant wind and sun provide locally produced power without needing to extract and burn expensive, polluting fuels.
Australia’s energy market operator is preparing for nearly all our coal-fired power stations to close by 2038, and 90% to shut down over the next ten years. We need new sources of electricity to keep the lights on. The fastest, lowest cost way to replace coal is with renewables and storage. CSIRO recently found for the seventh year in a row that renewables (wind and solar), including storage and transmission, is the lowest-cost option – far cheaper than gas and nuclear.
As more and more lower-cost renewables enter our grid and displace coal and gas, this will help put downward pressure on power prices. Modelling shows that if we delayed the expected roll out of renewables and continued our reliance on coal and gas, power bills could be between $449-606 higher for households, and $877-$1,182 for small businesses in 2030. This adds up to between $4.5 – $6 billion in additional costs for households in Australia’s main grid in 2030.
Delaying the shift to renewables could cost Aussie households billions
Read more: What is the cheapest form of energy for Australia?
5. Aussie households can take control of their power bills by installing rooftop solar, switching to electric appliances and improving their energy efficiency
The best way governments can help Aussies struggling with rising energy costs is to deliver more lower-cost, clean power, backed by storage like batteries, and make sure all Australians can access opportunities to reduce their energy bills and make their homes more comfortable and safe to live in.
Electrifying our homes, improving their energy efficiency and increasing rooftop solar uptake will directly help households deal with the rising costs of living while cutting our climate pollution. Already, more than 4 million Australian households have already installed rooftop solar, with each saving on average more than $1000 on their power bills every year. Australians are also installing batteries in record numbers to store their cheap excess solar to use whenever they need it. Batteries can boost the savings of a solar system to more than $3000, depending on where you are in Australia and your energy use.
On top of this, households in all Australian capital cities could save between $500 and $1900 every year by getting off gas and switching to electric, efficient appliances. When combined with solar and batteries, all-electric homes could slash household energy bills by up to 90% in many parts of Australia.
Read more: Seize The Sun: How to supercharge Australia’s rooftop solar.
