REGULATION

AER tightens the tripwire with proposed energy price rises

The Australian Energy Regulator has warned outages at coal-fired power plants and rising network costs will stoke further bill shock, with energy price rises forecast for NSW, South-East Queensland and South Australia.

Releasing the draft determination for the Default Market Offer (DMO) for electricity prices in 2025-26, known as DMO 7, the regulator said there had been cost pressures across nearly every component of the cost stack.

The cost increases have resulted in draft DMO 7 prices for residential customers increasing by up to 8.9%. Small business customers could see rises between 4.2% and 8.2%.

The so-called price cap, set annually, is intended to protect consumers from unjustifiably high prices while allowing retailers to make a “reasonable profit” supplying electricity. For the DMO 7, the regulator proposed maintaining the retail margins at 6% for residential customers and 11% for small businesses.

Expert view

The AER said it had not not applied a separate competition allowance, after considering "the current economic environment".

Expert view

Separately, the Essential Services Commission released its draft decision on the 2025-26 Victorian Default Offer. A proposed price change amounts to less than 1% for VIC’s residential customers on a default offer and an increase by an average of 3% for small businesses.

According to Australia’s leading generators and retailers, the cost of the investment in infrastructure for the renewable energy transition are factored into the network aspect of the decision and, along with inflation, is one of the drivers of the increase in network costs.

POLICY

It's a gas as energy ministers prepare to meet

Federal officials will report back to the nation’s energy ministers on Friday on the development of new powers for AEMO to address east coast gas supply gaps.

"Victoria's focus is on working with the Commonwealth and other states to expand powers for AEMO to address national gas supply issues. These powers will be used if the market fails to secure the necessary supply and give confidence to families and businesses along the east coast,” Victoria’s Energy Minister Lily D'Ambrosio told The Energy.

Coinciding with the ministerial catchup, a coalition of community advocacy organisations released an open letter calling for the federal government to erase more than $300 million of household energy debt. The biggest gentailers are accused of “charging their customers more for power, even though it was costing them less to generate it”.

CAPITAL

Sizing up the decarbonisation prize

The first post from the COP30 President-Designate André Corrêa do Lago went hard on the climate crisis and included a nod to tripling renewable energy and phasing out fossil fuels. He also reminded the world of the Financial Stability Board's warning that climate shocks can threaten global financial stability.

Climate-savvy investors, including pension funds, are advocating for a solid energy transition and improved decarbonisation to avoid long-term financial degradation and instability.

“What’s climate got to do with investment? Well, heaps actually,” Investor Group on Climate Change (IGCC) Senior Advocacy Manager Michael Bones said.

“Members at IGCC have a legal duty to protect and grow the retirement savings and investments of 15 million Australians. So that means dealing with risk. Climate change is a systemic risk,” Bones said. “Under a higher warming scenario, it’s going to be harder and harder to generate returns,” he said, citing a recent Climate Risk Assessment of the top 30 super funds by Ortec Finance.

“But it isn’t all doom and gloom. Australia is spectacularly well-placed, in the words of Rod Sims, the chair of the Superpower Institute, to take advantage of this shift towards clean energy and the clean energy economy. “Australians need to understand the size of the prize if we get this right,” Bones said.

The investor group will soon release its annual report on the state of climate investment, which gauges how institutional investors are aligning their portfolios with net zero and investing in climate solutions.

“They want to invest in things like renewable energy, batteries, critical minerals, mining and much more, because they see it as the best way to get long-term returns for their members,” IGCC Chief Executive Rebecca Mikula-Wright said.

Why it matters

• Australia is uniquely placed to benefit from the global shift to clean energy and net-zero emissions.
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• 213,000 clean energy jobs by 2033 on Treasury forecasts and $333 billion in green industry exports by 2050 according to Beyond Zero Emissions.
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• But there is a risk of 40% lower returns by 2040 under high warming, limited or delayed action to achieve net zero.

CATCH UP

Capital

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Mining giant Rio Tinto (ASX:RIO) signed a 20-year deal with renewable energy developer Edify Energy to buy 90 per cent of the power and battery storage capacity generated by the Smoky Creek & Guthrie’s Gap Solar Power Stations. Rio Tinto Australian chief Kellie Parker said: “For the first time, we have integrated crucial battery storage in our efforts to make the Boyne aluminium smelter globally cost-competitive, as traditional energy sources become more expensive. We continue to investigate further renewable energy investments to repower our Gladstone aluminium operations.” Construction on the project will begin late 2025 with a planned completion in 2028.

Vast Renewables (Nasdaq: VSTE) said it had secured $180 million in conditional funding from the Australian Renewable Energy Agency for constructing its proposed concentrated solar thermal plant in Port Augusta. To lock in the funding it must now secure the reminder of the money needed to finalise the build - at a total cost that could run to $390 million.

A UK capacity market auction to cover any shortfall in energy in the 2028/29 winter netted a near-record £60 per kilowatt (A$123.58), with gas the main beneficiary.

Projects

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The federal Australian Renewable Energy Agency is planning a technology platform to counter the “information asymmetry” between landholders and renewable energy developers. The plan was flagged by senior investment analyst James Sinclair at a Climate Week event, and comes as wind power begins to dominate headlines in the lead up to the federal election, with a lack of quality consultation eroding social licence. Climate 200 founder Simon Holmes a Court said in a pre-election address to the National Press Club the industry had been “quite arrogant” and “just assumed that everyone would move aside because they were saving the world”.

Federal Resources Minister Madeleine King said there was “no uncertainty” on the expansion of the North West Shelf or the ongoing LNG trade with Japan, The West reported from the Energy Exchange Australia conference in Perth. Read her opening speech here.

Policy

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Victoria’s Department of Energy, Environment and Climate Action is preparing its second Climate Change Strategy, including renewable energy and transport infrastructure needs. Victoria’s Minister for Energy Lily D’Ambrosio also opened applications for the Community Electrification Engagement Program with local community groups eligible for grants of up to $110,000 to help locals switch from gas to electric.

A Senate hearing before the US Committee on Energy and Natural Resources is discussing a plan to classify copper as a “critical mineral” in the US, and require reports on critical mineral and rare earth element resources around the world. The hearing comes as the Trump administration considers whether to levy tariffs on copper, an essential component in the renewable energy supply chain.

The Superpower Institute welcomed the “bold” commitment by the re-elected Cook government to make Western Australia a renewable energy powerhouse and leader in future industries. “The green iron and steel opportunity for Australia is enormous. Our analysis shows it could generate up to $400 billion in export income,” Chair Rod Sims said. “WA has long been a global energy leader, supplying the world with fossil fuel gas. Now it can also lead the way in providing zero carbon commodities like green iron,” Sims said. “Our shared ambition is to see new green iron investments and production in the next few years.”

Regulation

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The Australian Energy Markets Commission kicked off consultation on a review of the wholesale demand response mechanism. It wants to know whether recent rule changes on flexible trading and price-responsive resources have created market conditions that complement or potentially overlap with the WDRM's objectives. Submissions are due April 24.

Technology

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A group of US tech giants joined with banks to pledge support for a plan to triple global nuclear capacity by 2050. Lucia Tian, head of clean energy & decarbonisation technologies at Google, said the tech giant would “continue to work alongside our partners to accelerate the commercialisation of advanced nuclear technologies that can provide the around-the-clock clean energy necessary to meet growing electricity demand around the world”.