Australia exports energy. Why is power so expensive?

Australia exports about three times the energy it consumes, yet households and businesses continue to face electricity and gas prices that have eroded one of the nation’s traditional economic advantages, according to new research that argues Australia’s greatest energy challenge is no longer production but conversion.

The thirteenth report in The Balance Sheet research series examines Australia’s energy economy from extraction to exports, following the flow of energy through export terminals, electricity networks, gas markets, government revenue, household bills and industrial productivity.

Its central finding frames the paper.

“Australia has built an energy economy that excels at generating national wealth and struggles to convert that abundance into cheap power at home.”

The audit finds Australia produces roughly 21,500 petajoules of energy each year while consuming fewer than 6,000. It is the world’s fourth-largest energy exporter, earned $385 billion from resources and energy exports in 2024-25 and is the largest exporter of metallurgical coal, the third-largest exporter of liquefied natural gas and the world’s largest producer of lithium.

Yet the same country imports 80 to 90 per cent of its liquid fuels, operates just two oil refineries and remains the only member of the International Energy Agency that does not meet the treaty obligation to hold 90 days of fuel stocks.

When fire damaged the Geelong refinery in April, Australia held only 37 days of petrol and 30 days of diesel. The Federal Government responded in the May Budget with a $14.8 billion fuel security package, including plans for a permanent government-owned fuel reserve.

The report argues Australia’s export story is also changing.

Iron ore remains Australia’s largest export at $117 billion, but gold has overtaken LNG to become the second-largest export, while coal and LNG are projected to decline steadily over the next decade. Official forecasts suggest LNG export earnings will fall to around $41 billion by 2030-31 and thermal coal to about $23 billion, with critical minerals replacing only part of that lost revenue.

Electricity, however, is where the report sees the country’s biggest transition.

Renewables supplied 39.5 per cent of Australia’s electricity generation in 2025, compared with 17 per cent just eight years earlier, while the December quarter marked the first time renewables and storage together supplied more than half of electricity across the National Electricity Market

Renewables supplied 39.5 per cent of Australia’s electricity generation in 2025, compared with 17 per cent just eight years earlier, while the December quarter marked the first time renewables and storage together supplied more than half of electricity across the National Electricity Market.

Grid-scale battery capacity doubled in a year to more than nine gigawatts, wholesale electricity prices roughly halved to about $74 per megawatt-hour and regulated household electricity prices fell in most regions from July for the first time in several years.

Against those gains, the report notes Australia’s ageing coal fleet averaged 38 years old, around one-quarter of coal capacity was unavailable during summer and the market operator’s own constrained-delivery scenario falls short of the national target for renewable generation by 2030.

One of the paper’s most striking findings is where household electricity bills actually go.

For every $100 paid before GST, about $40 funds poles, wires and transmission infrastructure, $36 pays for electricity generation, $14 covers retail costs and margins, and roughly $8 funds environmental schemes.

“The item the argument obsesses over is the smallest,” the report says, “the one it ignores is the largest.”

It argues the sharp rise in electricity prices between 2007 and 2013 was driven primarily by network investment rather than renewable energy, leaving Australia, once among the OECD’s cheapest electricity markets, now sitting around the developed-world average.

Gas tells a different story.

Western Australia, which has reserved part of its gas production for domestic users since 2006, has historically paid between $4 and $8 a gigajoule.

On the east coast, domestic gas prices rose from about $3 to $4 before LNG exports began in 2015 to around $13 to $15 under recent contracts. Only in late 2025 did the Commonwealth introduce a domestic reservation policy requiring 20 per cent of future east coast gas production to remain in Australia from 2027.

The report links that period to the closure of several gas-intensive manufacturers, including Gibson Island and Qenos, while noting employment estimates rely on advocacy research that is identified as such.

Data centres currently consume about 2 per cent of electricity across the National Electricity Market and are projected to reach about 6 per cent by 2030

For households, the report argues energy affordability has become increasingly unequal.

About one in three Australian homes now has rooftop solar, the highest uptake in the world, while renters remain largely excluded from those savings and continue paying full retail prices across a shrinking customer base that still funds much of the electricity network.

Mining and energy remain among the country’s biggest taxpayers, contributing $48.5 billion in company tax during 2023-24, more than every other sector combined, while BHP alone paid $8.1 billion.

But the report argues the bigger economic question is no longer taxation but productivity.

It concludes Australia has lost the cheap-energy advantage that once underpinned its manufacturing sector. Every major energy infrastructure project has exceeded its original budget, all four aluminium smelters now operate with public support, and Reserve Bank Governor Michele Bullock has observed Australians are “poorer because of shocks to oil and energy prices”.

Artificial intelligence forms the final chapter.

Data centres currently consume about 2 per cent of electricity across the National Electricity Market and are projected to reach about 6 per cent by 2030. The report argues the productivity gains examined in the previous The Balance Sheetlabour market study will depend heavily on whether Australia’s electricity system can accommodate that growing demand.

The report concludes that both sides of Australia’s energy debate are partly correct.

It finds the country remains one of the world’s great energy exporters, electricity reliability has remained strong and wholesale prices have begun falling as renewable generation expands. At the same time, it argues households continue to pay developed-world electricity prices despite Australia’s abundant natural resources, policy instability has delayed investment and the industries built on cheap energy increasingly rely on public support.

“The conversion is the whole game,” the report concludes. Unless Australia succeeds in turning its energy abundance into affordable power and stronger productivity, it says, the nation will continue “holding the world’s richest energy endowment in one hand and the OECD’s most argued-about power bill in the other.”