Overview of Why power bills are falling despite the Iran war
ABC News Daily examines why Australian power bills are now set to fall, even amid renewed geopolitical tension from the Iran war. Energy reporter Dan Mercer explains that the key reasons are a faster-than-expected rollout of renewables, especially batteries, lower gas pressure in the domestic market, and regulatory cuts to default electricity prices. The episode also looks at why this relief may be temporary, given ongoing grid upgrades and the costs of the energy transition.
Key Takeaways
- Power bills surged over the past five years by roughly 40% or about $600 for a typical household.
- Much of the earlier spike was tied to the Russia-Ukraine war, which sent global gas and electricity prices sharply higher.
- This time, the Iran war has not caused the same jump in Australian power prices.
- Batteries are now playing a major role in smoothing out supply and reducing the need for expensive gas generation at peak times.
- The Australian Energy Regulator (AER) has cut default electricity prices in most regions, which should reduce bills further.
- Despite the good news, long-term energy costs may still rise because of grid upgrades and the ongoing transition away from fossil fuels.
Why Prices Are Falling Now
1. Batteries are changing the market
Mercer says battery storage has expanded far faster than many expected:
- Four years ago, Australia had almost no large-scale batteries in major grids.
- Now, battery capacity is significant enough in Western Australia to meet about 40% of peak demand.
- Batteries store excess midday solar energy and release it in the evening when demand and prices usually spike.
This has reduced the system’s reliance on expensive gas-fired power during peak hours.
2. Gas prices are staying subdued
A major difference from the 2022 crisis is that Australian gas prices have remained relatively contained.
Reasons include:
- Less dependence on gas for power generation
- The pressure of a possible domestic gas reservation policy
- Exporters being cautious in the local market to avoid political backlash
The Albanese government has proposed a scheme requiring exporters to set aside 20% of export volumes for domestic supply.
3. Regulated default prices are being cut
The AER’s latest decision lowers default market offers in most jurisdictions:
- Southeast Queensland: down as much as 10.7%
- New South Wales: down up to 5%
- South Australia: up 1.4%
- NSW small businesses: down 20.9%
These are ceiling prices, and while only around 1 in 10 households are on them, they influence the broader market.
What This Means for Households and Small Businesses
- Households could save a couple of hundred dollars a year.
- Small businesses may see much larger reductions.
- Savings won’t automatically appear for everyone, because energy retailers do not pass on lower wholesale prices as directly as mortgage lenders might pass on rate cuts.
- Consumers still need to shop around and actively compare offers to secure the best deal.
The Role of Renewables and Batteries
Flattening the peak
Chris Bowen’s idea of batteries “flattening the peak” refers to:
- Using stored solar power in the evening
- Reducing the need for high-cost gas generation
- Making wholesale prices less volatile
Changing daytime prices too
Batteries also absorb excess solar power during the day, which means:
- Fewer negative electricity prices
- Slightly higher daytime prices
- A more balanced, less chaotic market overall
Mercer argues this is good for consumers because it creates greater stability, even if prices don’t keep falling forever.
Free Daytime Power: The “Solar Sharer” Scheme
The episode also explains the federal government’s upcoming solar sharer program:
- Retailers must offer three hours of free power during the day
- Customers must opt in
- In NSW and Southeast Queensland, free electricity will be available from 11am to 2pm
- In South Australia, it will run from 12pm to 3pm
The idea is to extend the benefits of solar to people who don’t have rooftop panels, such as:
- Renters
- Apartment dwellers
- Households that can’t afford solar installation
A practical tip: appliances like washing machines and dishwashers may be worth running during those free hours.
What Happens Next
Mercer warns that the current relief does not mean a return to the era of very cheap coal-powered electricity.
Reasons bills may rise again
- The energy transition is inherently volatile
- New renewables can push prices down, but closures of coal plants can tighten supply again
- Poles and wires costs are expected to rise substantially as the grid is upgraded
- Electrifying more of daily life will require major infrastructure investment
Bottom Line
Australia’s power bills are falling now because renewables, batteries, and policy intervention are easing market pressure, while gas prices remain more stable than during the Ukraine war shock. But the episode makes clear that this is a transition, not a permanent drop—future prices will likely remain volatile as the grid is rebuilt around cleaner energy.