Reduction path plotted
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The Australian Energy Market Commission (AEMC) says electrification will see significant reductions in household energy costs.
A new AEMC report (PDF), which extends beyond the usual three-year scope to look at the next decade, examines how changes to energy systems could reshape what households spend on electricity, gas, and petrol, highlighting opportunities for savings and the challenges of equitable implementation.
AEMC Chair Anna Collyer says benefits will be driven by careful planning.
“Our modelling shows that with effective planning and investment, Australian households could see their total energy spending fall substantially over the next decade through electrification,” she said.
Collyer noted that ensuring equitable access to these benefits would be crucial, as not all households can immediately adopt new technologies.
The findings show that electricity prices across the National Electricity Market (NEM) could drop by about 13 per cent over the next ten years.
This reduction would be driven by the increasing connection of renewable energy to the grid and falling network costs, as household electrification spreads these costs over a broader base.
For those who adopt electric vehicles, solar panels, or switch from gas to electric appliances, total energy expenses could decrease even more dramatically, by as much as 70 per cent. Average households might save around $1,000 annually, which represents a 20 per cent cut in current spending.
Electrification’s impact varies by region.
In Victoria, for example, rising electricity demand is expected to ease network costs, enabling a 9% price reduction while maintaining prices below the national average.
Queensland and South Australia are also set for significant savings, with prices in both regions projected to fall by 15%. The ACT could see the largest decrease, a striking 31%, thanks in part to its Large Feed-in-Tariff scheme.
Conversely, Tasmania bucks the trend, with prices predicted to rise slightly by 6%, though they would remain the lowest nationally.
Regional differences stem from unique local factors, including existing energy infrastructure, policies, and generation mixes.
“While different regions face different challenges and opportunities in this transition, our analysis finds the overall trends in residential electricity prices are generally consistent across the National Electricity Market,” Collyer said.
The report also introduces the concept of an “energy wallet”, which accounts for all household energy spending, not just electricity.
This further reveals the cost-saving potential of electrification, despite increased electricity use.
Households with electric vehicles could save approximately $2,000 annually on fuel alone, and these benefits could begin immediately upon vehicle purchase.
Additional savings could be achieved by charging during sunny periods when solar energy is abundant, though this optimisation is not necessary to see gains.
Achieving these outcomes will depend on several factors, including timely investments in transmission infrastructure and the integration of renewable energy sources.
The report highlights the importance of effectively coordinating consumer energy resources such as home solar systems, batteries, and electric vehicles. Without these efforts, delays in connecting renewable projects or mismanagement of new energy demand could drive costs up rather than down.
Equity remains a central concern.
Many households face barriers to adopting solar panels, batteries, or electric vehicles, including high upfront costs and constraints associated with rental housing or properties unsuitable for retrofitting.
“While some households will be able to significantly reduce their energy costs through solar panels, batteries, and electric vehicles, others face barriers to adoption. This highlights the importance of considering equity in policy development,” Collyer said.
