Australia’s transition to renewable energy will be extremely expensive, raising power bills.
The reasons are simple. Renewable energy sources are weather-dependent, resulting in intermittent power and low capacity factors.
As a result, renewables require backup hydrocarbon generation and lots of expensive storage. They also require far greater network infrastructure to connect the distributed web of generation sources spread far across the countryside.
The federal government’s rush to meet its contrived 82% renewable energy target by 2030 will also drive up costs by exacerbating shortages of labour and resources.
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Indeed, recent estimates from the Australian Energy Market Operator (AEMO) showed that the cost of overhead transmission line projects increased by 25% to 55% in real terms in 2025 versus those in the 2023 update. Costs were also 10% to 35% higher (in real terms) for substation projects.
AEMO warned that these costs will inevitably be reflected in households’ electricity bills via additions to the regulatory asset base.
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The Snowy Hydro 2.0 pumped hydro project is another prime example of the exorbitant cost of renewable projects.
Snowy Hydro 2.0 will use excess renewable energy generated during the day (mostly from solar) to pump water up to an elevated reservoir, which will then be released at night to generate hydroelectricity when there is no solar generating.
The cost of the Snowy Hydro 2.0 has risen dramatically. The former Coalition government of Malcolm Turnbull stated that the project will cost $2 billion and be completed by 2021. The government raised the cost to $6 billion, then $12 billion. Heaven knows where it will end up.
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Problems plague the Snowy Hydro 2.0 project, which remains under construction and years from completion.
Underground construction was interrupted in February 2025 after an industrial-sized ventilation fan collapsed.
Workers on the project recently went on strike, requesting a pay increase of more than 30% over four years, a 15% superannuation contribution, and a variety of additional benefits.
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The Australian reported on Wednesday that workers on Snowy Hydro 2.0 “will receive upfront pay rises of at least $50,000 under a new deal that will see their annual wage soar to $300,000, without any explicit productivity trade-offs”.
“In an agreement that will significantly increase labour costs on the troubled $12bn project, the Australian Workers Union said tunnel workers would receive upfront an extra $6000 over a six-week roster cycle, equivalent to $1000 extra a week, followed by 2.25% rises every six months for four years, with the upfront increase higher for nightshift workers”, The Australian reported.
“This is the best bargaining outcome that we have achieved in the industry for a very long time”, AWU NSW secretary Tony Callinan told The Australian on Tuesday.
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Callinan added that the project “is that far in a hole that people have sort of lost track of what the total cost is going to be. I don’t think anyone knows, to be honest with you”.
To rub salt into the wounds, Snowy Hydro 2.0 will be connected to the 365-kilometer HumeLink in southwest New South Wales. This ‘green’ project is likewise behind schedule, and the estimated cost has risen to about $5 billion.
The estimated cost of the 2,000-megawatt QLD Borumba Pumped Hydro project has also ballooned by $4.2 billion to $18.4 billion, with completion not expected until 2033 at the earliest. The costs will probably rise further.
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Snowy Hydro 2.0 and Borumba are microcosms of the staggering costs of the renewable ‘revolution’.
Pumped hydroelectric projects do not produce any net power. They simply act as storage vehicles for excess renewable energy generation (mostly solar) in the middle of the day.
Battery storage and the distributed network of solar and wind generators strewn throughout the countryside are incredibly costly.
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Weather-dependent energy is inherently unreliable. It is also extremely expensive due to the large infrastructure, transmission, and storage requirements, as well as the need to have hydrocarbon generators on standby in the event that wind and solar power fails.
The cost of transmission associated with renewable projects increases the regulatory asset base, which feeds into higher retail electricity rates.
As a result, consumers will pay higher energy costs directly via their bills and indirectly through their taxes to support renewable energy subsidies.
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Australian policymakers should be upfront and open about the huge costs and trade-offs associated with Australia’s renewable energy transition.