Energy Bills Are Heading Down, So It's Time To Constrain Electricity Emissions

Australian household energy bills are set to halve by 2050, leaving 'policy room' for the federal government to cut emissions in the electricity sector without hurting households, a new Grattan Institute report finds.

Modelling for the report, Bills down, emissions down: A practical path to net-zero electricity, shows that cutting greenhouse-gas emissions from electricity in line with the net-zero 2050 national target results in average household energy bills of about $3,000 in 2050 - down from an average of about $5,800 today.

These savings come about because most households in 2050 will have solar panels on their roof, a battery in the shed, an electric car in the garage, and all-electric appliances in the home.

The report calls on the federal government to consider activating the Safeguard Mechanism to reduce emissions in the electricity sector, to complement policies to reduce emissions in the industrial and transport sectors.

'How we use energy is changing, and the politics of carbon pricing should change too,' says report lead author and Grattan Institute Energy and Climate Change Program Director, Alison Reeve.

'For too long, federal governments of both political colours have avoided pricing carbon because they fear higher electricity prices.

'Our report shows that the source of that fear is becoming outdated. The benefits of the energy transition can outweigh the costs - so our political leaders can and should take decisive action now to cut future emissions to help tackle climate change.

'Carbon pricing can play a constructive role in the electricity sector in coming decades, just as it does already in the industrial, mining, and transport sectors.'

The report recommends a three-pronged strategy to accelerate the push to net zero while keeping the lights on and household costs down:

Continue reforms to make planning approvals for transmission faster and easier, and build social licence in host communities.

• Use next year's planned review of the Safeguard Mechanism to explore how it can help the electricity sector get to net zero at lower cost.
• Maintain and extend programs to ensure that the benefits of electrification are available to all households, particularly those on low incomes and in rental and multi-unit properties.
• Continue reforms to make planning approvals for transmission faster and easier, and build social licence in host communities.

The following table shows state-by-state bill savings.

Total energy bills are on the way down across Australia

Notes: 'Energy bills' refers to total household spend on energy, across petrol, gas, and electricity, under Grattan Institute's policy scenario. WA forecast not available because WA demand forecasts extend only to 2034.

Source: Modelling for Grattan's Bills down, emissions down report.