Your power bills are going up, according to one energy boss. Here’s why

"You came here for truths and straight talk, so, here's a doozy."

Standing on stage at the National Press Club — being beamed live into offices and lounge rooms across the country — one of Australia's top energy bosses was preparing to say what few in the industry will acknowledge publicly.

Jeff Dimery — CEO of Alinta Energy — looked up from his notes on the lectern and delivered the promised doozy to the audience.

"We need to be honest about that."

Honesty – and transparency – are features that have arguably been missing from an often ideologically driven and contorted debate about energy policy in this country.

Clean energy 'half-truth'

Australia's in the midst of a complex and challenging clean energy transition that is so large in scale, it's been likened to the biggest peacetime challenge the country's faced.

By 2050, coal – the backbone of the power grid that's producing about 60 per cent of our electricity today – is set to be phased out altogether and replaced by renewables.

The federal government has set ambitious targets to achieve that goal. Within six years, it wants 82 per cent of Australia's power to come from sources like wind, solar and hydro, up from 32 per cent now — requiring a tripling of clean energy generation by 2030.

Few would question the necessity of this transition, as climate records continue to tumble for all the wrong reasons.

But Australians have been promised that cleaner energy would equal cheaper energy, and yet, power bills have only risen since Russia's invasion of Ukraine triggered a global price shock.

Prices have, thankfully, stabilised but on the broader point, Dimery says Australians have been fed what he calls a half-truth.

Yes, renewables are the "lowest cost, new form of generation".

But building the wind and solar farms at the scale required to replace coal, together with the batteries needed to store the power, and the new network of transmission lines to distribute that power to consumers will involve tens of billions of dollars' worth of investment.

The Australian Energy Market Operator's own figures suggest the transition will cost around $383 billion between now and 2050.

When asked who pays, Dimery replied: "it all comes from consumers, whether through the bill directly or through the tax base."

This is not an argument against the transition, Dimery says: replacing coal with coal would cost even more. 

Alinta Energy is a retailer and a generator which has a foot in both the old and the new. It owns the Loy Yang B coal-fired power station in Victoria and is investing heavily in wind farms and batteries.

Dimery used his speech to call for an honest conversation about the energy transition, saying Australians, right now, were not prepared for the reality of paying more.

Transmission costs to drive power bill increase

To understand why, Dimery explained how a power bill is calculated.

Wholesale energy prices (the cost of generating electricity from coal, gas, wind or solar) make up about 32 per cent of a power bill and after two years of steep increases, households should expect "some relief" this year. 

Network costs (the poles and wires) account for about 45 per cent of a power bill and it's these costs that are on their way up.

That's because another 10,000 kilometres of high-voltage transmission lines are being built across the country, between now and 2050, as part of the federal government's $20 billion Rewiring the Nation plan.

Renewable energy has zero fuel costs so once the infrastructure has been built, in theory, power prices should moderate. It's just not clear when.  

Until then, apart from using taxpayers' money to subsidise power bills for vulnerable Australians, and encouraging voters to invest in solar panels, batteries, EVs and more energy-efficient appliances, the government is somewhat constrained.

This is politically problematic when affordability has become the top concern for Australians.

A recent CSIRO survey of 6,700 people found a majority of respondents want a "moderately" paced transition towards renewables but are unwilling to accept higher bills to pay for it.

A RedBridge poll of 2,000 people, published in the Australian Financial Review, found most respondents prioritised lowering their power bills over faster emissions reduction.

After a decade of internecine wars over carbon taxes, emissions trading schemes and national energy guarantees, both major parties have now committed to achieving net zero emissions by the middle of the century.

What's up for debate now is the pathway.

Most of Australia's coal-fired power stations are on track to retire within the next 15 years and on any given day, they're producing about 60 per cent of Australia's electricity.

Wind and solar farms are not being built fast enough to replace that capacity and there are signs some states, unions and heavy industry are growing nervous about keeping the lights on.

Victoria last year signed an undisclosed deal to avoid an unplanned closure of the state's Yallourn and Loy Yang A coal-fired power stations and New South Wales is in talks with the operator of Eraring about extending its life beyond its slated 2025 closure.

Against this backdrop, and amid growing concerns in regional areas about the massive expansion of renewable and transmission projects, the Coalition is going nuclear.

Concerns in regional Australia drive nuclear push 

Peter Dutton is putting the finishing touches on his party's plan but has previously pushed small modular reactors – an evolving technology that's yet to be developed or commercially proven in the West – and large-scale nuclear reactors on the site of retiring coal-fired power stations.

On the face of it, it could present as an appealing alternative for voters in regional Australia who don't want transmission lines crossing through their properties and wind and solar farms "industrialising" their communities.

Nuclear power plants have a smaller footprint and, in theory, wouldn't require a whole new network of poles and wires to be built.

But at the heart of the policy will be a promise to all voters that nuclear energy will deliver reliable, clean and cheaper power.

More than 30 countries – including the United States and United Kingdom – are using nuclear power to help decarbonise their grids. It supplies about 10 per cent of the world's electricity.

That share could increase given dozens of countries signed a pledge at last year's COP28 conference in Dubai to triple the world's nuclear generation capacity by 2050.

But if Dutton is trying to convince Australians to back his plan on the basis of affordability, he's asking voters to take a big bet on the future.

According to the International Atomic Energy Agency, it would take at least 10 to 15 years to develop a nuclear reactor from scratch and the up-front capital costs, according to the CSIRO, would be far higher than wind and solar farms.

That's before you overcome obstacles including the "fear-factor", driven by high-profile disasters on Fukushima and Chernobyl, the decades-old debate over where to safely store nuclear waste in Australia and the fact that the technology is currently banned by both federal and state laws.

'Unicorns in the garden'

Sentiments appear to be shifting, though, with polling suggesting about half of Australians back the idea of nuclear energy. Support is highest among younger Australians.

As nuclear engineer Edward Obbard from the University of New South Wales puts it: "The greatest threat to their future is climate change and they're willing to consider all good solutions to that."

Energy experts like the Grattan Institute's Tony Wood and former Chief Scientist Alan Finkel reckon we shouldn't rule out nuclear as a Plan B in the future if technology continues to evolve and the economics stack up.

But until it's even legal in Australia, energy bosses like Jeff Dimery liken the pursuit of nuclear to "looking for unicorns in the garden".

Whichever path Australia takes, at the bottom of the garden, we'll all have to pay.

And that's the doozy.