{"id":829688,"date":"2026-07-28T19:34:11","date_gmt":"2026-07-28T19:34:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/829688\/"},"modified":"2026-07-28T19:34:11","modified_gmt":"2026-07-28T19:34:11","slug":"gencost-the-seven-caveats-behind-csiros-no-progress-scenario-and-why-it-isnt-cheaper","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/829688\/","title":{"rendered":"GenCost: The seven caveats behind CSIRO’s “No Progress” scenario\u00a0\u2013 and why it isn’t cheaper"},"content":{"rendered":"

CSIRO recently published its GenCost 2025-26 report<\/a>, estimating the cost of various electricity technologies. This year\u2019s report echoed the findings of the last few years, with solar PV and onshore wind shown to be the lowest cost new build technologies.<\/p>\n

This year, as a new, secondary step \u2013 distinct from GenCost\u2019s long running technology cost estimates \u2013 CSIRO modelled overall system costs across five scenarios, defined by 2050 electricity sector emissions intensity. <\/p>\n

Only one, NoProgressToNetZero, is anchored to the emissions intensity consistent with Australia\u2019s 2030 82% renewables target; the other four are scaled to progressively greater consistency with net zero by 2050. <\/p>\n

NoProgressToNetZero does not represent \u201cno action\u201d: it still reaches 70% renewables, 19% gas and 11% coal by 2050, a substantial transition from today. Across all scenarios, deploying solar PV, wind, gas and storage for the majority of generation was found to be the least-cost 2050 option.<\/p>\n

One result of the CSIRO modelling was that electricity system costs could be 5% lower in NoProgressToNetZero than in the next-least-ambitious scenario. <\/p>\n

Some stakeholders have cited this finding to argue net zero should be abandoned. However, this scenario comes with seven caveats \u2013 a number of them explicitly put forward by CSIRO \u2013 meaning it can\u2019t be relied on as the lowest-cost pathway for Australia\u2019s economy overall. <\/p>\n

These caveats relate to this new 2050 scenario modelling specifically, not to GenCost\u2019s separately established technology cost findings.<\/p>\n

The seven caveats are:\u00a0<\/p>\n

1. NoProgressToNetZero is not lowest-cost overall \u2013 abatement costs across the wider economy would be higher\u00a0<\/p>\n

CSIRO finds this scenario is not the cheapest option overall: choosing it means higher emissions reduction costs across the rest of the economy. <\/p>\n

CSIRO says: \u201cAchieving weak or no progress in reducing electricity sector emissions is not efficient for achieving net zero because electricity sector emissions reduction is a third to a half the cost of emissions reduction elsewhere in the economy.\u201d\u00a0<\/p>\n

CSIRO found the efficient range for the electricity sector\u2019s emissions intensity level sits between the ModerateNetZero and StrongNetZero scenarios, at 0.05\u20130.02 tonnes of carbon dioxide equivalent per megawatt-hour (tCO2e\/MWh), where the electricity sector\u2019s marginal cost of abatement remains below the cost of abatement elsewhere in the economy.<\/p>\n

2. CSIRO\u2019s model is a 2050 snapshot, not a full build pathway like the ISP<\/p>\n

CSIRO\u2019s modelling costs the system in 2050, only, generated almost from a clean-slate starting point. The 2050 scenarios assume nearly all existing generation has retired, except for the long-lived assets of transmission, hydro and pumped hydro. <\/p>\n

CSIRO says: \u201cBy 2050, we assume all current generation is retired and only currently existing or committed hydro, pumped hydro and transmission remains.\u201d\u00a0<\/p>\n

By contrast, the Integrated System Plan (ISP) builds the system year by year from today\u2019s fleet, accounting for the project pipeline. <\/p>\n

CSIRO describes its 2050 scenario tool as \u201ca simplified electricity model\u201d that is \u201csubstantially less sophisticated than the multi-model state-of-the-art framework deployed in the ISP\u201d. It recommends: \u201cWhere results differ, GenCost advises that the ISP should be given greater weight.\u201d<\/p>\n

3. Fossil fuel price doesn\u2019t vary with how much fuel each scenario burns; correcting this largely eliminates the electricity cost advantage<\/p>\n

NoProgressToNetZero has 19% gas generation in 2050, burning roughly six times more gas than StrongNetZero, and is the only scenario to use meaningful quantities of coal \u2013 yet all five scenarios use the same gas and coal prices drawn from a blend of AEMO scenarios.<\/p>\n

CSIRO identifies fossil fuel price assumptions as a live problem, stating: \u201cThere is an inconsistency in fossil assumptions for the NoProgressToNetZero emission intensity scenario. \u2026 <\/p>\n

\u201cThe NoProgressToNetZero emission intensity scenario might be more consistent with increasing demand for fossil fuels which could mean increasing fossil fuel prices. With this context, the competitiveness of fossil fuels in this scenario should be interpreted with some caution. Projections of fossil fuel prices for a non-decarbonising world are not readily available.\u201d\u00a0<\/p>\n

We recalculated fossil fuel prices using the Australian Energy Market Operator (AEMO)\u2019s Slower Growth scenario, the highest-priced of AEMO\u2019s three scenarios, and thematically closest to NoProgressToNetZero\u2019s sustained fossil-fuel reliance, weighting state-based prices by where CSIRO\u2019s model actually builds gas and coal capacity. <\/p>\n

This gives a 2050 gas price of $16.2 per gigajoule (GJ) (vs. CSIRO\u2019s original $13.4\/GJ) and a coal price of $4.1\/GJ (vs. $3.7\/GJ). We re-ran CSIRO\u2019s published model with these gas and coal prices, finding an electricity system cost of $128.5\/MWh for NoProgressToNetZero \u2013 just $2.3\/MWh below WeakNetZero ($130.8\/MWh), down from a prior $6.6\/MWh gap.<\/p>\n

Using CSIRO\u2019s published high-band prices instead of the average ($17.4\/GJ for gas, $4.4\/GJ for coal, both drawn from the highs in the Slower Growth scenario), the gap narrows further, to just $0.6\/MWh \u2013 making the difference between NoProgressToNetZero and WeakNetZero negligible, using nothing beyond CSIRO\u2019s own figures.<\/p>\n

AEMO\u2019s Slower Growth<\/a> scenario appears as the closest match to CSIRO\u2019s NoProgressToNetZero due to the sustained global fossil fuel reliance. However, coal and gas prices could plausibly be even higher still, though this is uncertain. <\/p>\n

No scenario published by AEMO or by advisory firm ACIL Allen actually models Australia\u2019s electricity sector plateauing in terms of emissions reductions after 2030, or coal prices for new coal generators. Gas prices are also shaped by capacity, utilisation and broader market dynamics that could cut either way.<\/p>\n

Either way, a cost advantage this small \u2013 and this sensitive to uncertain gas and coal price assumptions that do not vary in line with different scenario settings, should not be read as a settled result.<\/p>\n

4. Coal\u2019s financing cost is assumed equal to every other technology; testing a higher, more realistic financing cost removes it from the solution<\/p>\n

GenCost applies a single 7% discount rate to every technology, with no technology-specific risk premium anywhere. In practice, financiers routinely apply a higher cost of capital to new fossil fuel assets (in particular higher-emissions ones like coal) given policy, stranded asset, and long-term demand risks.\u00a0<\/p>\n

AEMO\u2019s commissioned research puts coal\u2019s weighted average cost of capital (WACC) at 12.0% (its central estimate, with a 10.0-15.0% range), the highest of any technology assessed. <\/p>\n

Oxford Economics<\/a> cautioned that the estimate should be treated with low confidence, as \u201cmarket participants do not see these assets as viable\u2026 many could not foresee a project that they would pursue regardless of the WACC\u201d. At 7% WACC, black coal\u2019s 2050 levelised cost of electricity (LCOE) is $107\u2013$182\/MWh; at 12%, $154\u2013$268\/MWh.<\/p>\n

We re-ran CSIRO\u2019s published model across the lower Oxford Economics WACC range (testing both 10% and 12%), while keeping fuel prices at CSIRO\u2019s original figures, and coal was removed from NoProgressToNetZero\u2019s solution at both WACC levels tested. <\/p>\n

This raised NoProgressToNetZero\u2019s system cost slightly, to $125.5\/MWh, still $5.3\/MWh cheaper than WeakNetZero ($130.8\/MWh). <\/p>\n

A higher coal WACC alone, without also correcting fuel prices, didn\u2019t overturn NoProgressToNetZero\u2019s overall electricity cost advantage, but it did show that the scenario\u2019s specific 11% coal share is not itself a robust part of the NoProgressToNetZero solution once a realistic financing cost is applied.<\/p>\n

5. Fossil fuel supply is assumed unlimited, while renewables are modelled using the worst weather year available<\/p>\n

The CSIRO modelling assumes there is no limit to the physical quantity of gas or coal available to generators. It does not model constraints on gas pipeline infrastructure, fuel reserves or extraction rates. <\/p>\n

Griffith University<\/a> researchers have found that Australian electricity market modellers \u201cimplicitly, and universally, assume the east Australian gas market is endlessly flexible and capable of meeting any level of demand from the GT [gas turbine] fleet\u201d, and that heavy reliance on gas turbines \u201cmay routinely breach the outer operational boundaries of Australia\u2019s existing gas network\u201d.\u00a0<\/p>\n

Further, major gas reserves in southern Australia are close to depletion, triggering warnings of gas supply shortfalls<\/a> for some states in recent years. The CSIRO modelling does not explore this dynamic \u2013 it has no constraint linking the volume of gas it selects back to reserve or infrastructure limits. <\/p>\n

It also does not consider 2050 coal availability, which is uncertain given most thermal coal mines<\/a> seeking extensions or expansions in Australia are export oriented rather than domestic focused.\u00a0<\/p>\n

Renewables face the opposite treatment: CSIRO anchors its renewables profiles to a single historical weather year, 2011, \u201cthe single most costly weather year\u201d among the 15 years of AEMO data available.\u00a0<\/p>\n

This embeds asymmetry into the model: wind and solar resources are assumed to be available as per the worst case weather year, while gas and coal resources are assumed to be available however the model requires.\u00a0<\/p>\n

6. Fossil fuel price volatility is smoothed out entirely<\/p>\n

CSIRO\u2019s modelling did not consider disruptive events and price shocks, using smooth coal and gas price trajectories developed by ACIL Allen for AEMO. This means events like the 2022 Ukraine gas supply shock \u2013 cited elsewhere in GenCost as a driver of historical electricity price volatility \u2013 are not reflected as a risk in the 2050 costings. <\/p>\n

A fossil fuel-heavy scenario like NoProgressToNetZero carries far more exposure to this kind of volatility than the renewables heavy scenarios, a risk differential the modelling does not capture. <\/p>\n

CSIRO notes this protection renewables provides saying<\/a> \u201crenewable energy supported by storage is helping to protect Australia against global energy shocks and continues to provide the lowest cost pathway for Australia\u2019s electricity system to achieve net zero emissions\u201d.<\/p>\n

7. Wholesale market dynamics are excluded\u00a0<\/p>\n

CSIRO explored system cost, but not wholesale electricity market dynamics and prices. Gas typically sets the price at high levels when it is the marginal price-setter, so more gas in the system could mean higher realised wholesale prices than a simple cost comparison implies.\u00a0<\/p>\n

As CSIRO notes: \u201cGenCost calculates the breakeven cost of electricity needed for investors to recover their capital, fuel and operating costs, including a reasonable return on investment. This is an indicator of the electricity price needed to encourage new investment, but it does not control the electricity price. <\/p>\n

\u201cElectricity prices are controlled by the balance of supply and demand. If supply is tight relative to demand, then prices go up. If supply is significantly more than demand, then prices go down. Changes in fossil fuel prices are another source of volatility. Price increases in recent years are a combination of lack of supply and fuel price volatility.\u201d<\/p>\n

\u2013\u2013\u2013<\/p>\n

In conclusion, GenCost\u2019s results cannot be read as showing a lower electricity decarbonisation target is the lower cost pathway for Australia\u2019s economy overall. <\/p>\n

NoProgressToNetZero\u2019s modelled 5% electricity cost advantage rests on a number of simplifications and assumptions that may not eventuate, and according to CSIRO\u2019s analysis, following this pathway would lead to higher emission reduction costs in the broader economy.<\/p>\n

Data sources and calculation notes<\/p>\n

Gas price $16.2\/GJ: ACIL Allen\u2019s<\/a> latest regional gas powered generation price forecasts for AEMO, Slower Growth scenario, published November 2025. Regional prices are weighted by the share of NoProgressToNetZero\u2019s modelled gas generation built in each state sourced from CSIRO\u2019s GenCost 2025-26 Final Appendix Tables<\/a>.<\/p>\n

Coal price $4.1: AEMO\u2019s Draft 2026 ISP Input, Assumptions and Scenarios Workbook<\/a> based on ACIL Allen November 2024 forecasts for AEMO \u2013 these are the only available forecast for coal prices based on existing generators, as AEMO does not model new-build coal separately. Regional prices from the Slower Growth scenario have been weighted by the share of NoProgressToNetZero\u2019s modelled coal generation built in each state (sourced from CSIRO\u2019s GenCost 2025-26 Final Appendix Tables<\/a>).<\/p>\n

Upper-bound prices ($17.4\/GJ gas, $4.4\/GJ coal): CSIRO\u2019s published high-band figures (sourced from Apx Table B.9 in Gencost 2025-26 Final Appendix Tables<\/a> and Parameter Data 2050<\/a>), used as inputs to CSIRO\u2019s 2050 SLCOE modelling in place of the average band prices.\u00a0<\/p>\n

Johanna Bowyer is the\u00a0lead analyst for Australian electricity at IEEFA.\u00a0<\/p>\n

IEEFA thanks Dr Dylan McConnell from UNSW for re-running CSIRO\u2019s published model using updated assumptions drawing on IEEFA analysis.\u00a0<\/p>\n

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