Article by Colin Packham, courtesy of The Australian
10.12.2025
Mounting costs and delays to large-scale renewable projects are shrinking the economic case for outlaying thousands of kilometres of high voltage transmission lines.
The Australian Energy Market Operator on Wednesday predicted coal-fired power will remain in Australia’s grid until 2049, more than a decade later than earlier projections, and driven primarily by Queensland extending the life of its coal generators. It also revealed that some priority transmission projects are facing cost increases approaching 100 per cent — a burden ultimately recovered through taxes or customers.
The transmission build is essential if Australia is to meet net-zero targets. Transmission is the skeleton of the future grid, designed to move vast quantities of low-cost renewable electricity from remote generation zones into cities and industrial loads. In principle, that cost is offset by cheaper wholesale electricity as coal retires. But blowouts are tipping the scales away from a gold-plated build.
Tony Wood, energy program director at the Grattan Institute, said the wholesale price benefits still outweigh the rising cost of construction, just not as convincingly.
“We haven’t yet felt the impact of the transmission lines on bills but from 2030 we will. On the balance of things, the benefits still outweigh the cost but that gap is narrowing quickly,” said Mr Wood.
AEMO estimates around 6,000 kilometres of new high-voltage transmission lines must be built by 2050 to deliver net zero. Although households have already endured sharp electricity price rises, much of the cost of this transmission program has yet to be distributed. That pressure will intensify later this decade and into the 2030s.
Last week, the Australian Energy Market Commission warned electricity bills could jump as much as 13 per cent between 2030 and 2035 unless the rollout of renewable generation and transmission is accelerated. The timing is politically fraught for Labor, which has staked its climate credibility on delivering cheaper power while meeting international emissions obligations.
Farmers and residents in Victoria, NSW and Queensland argue that towers, easements and access tracks are slicing through productive land and reshaping towns. In some areas, opposition has grown so fierce that route changes and forced land access have become inevitable, adding delays and costs.
At the same time, an unexpected surge in household energy technology introduces a new dynamic. A generous federal subsidy has triggered booming demand for home batteries, building on Australia’s world-leading uptake of rooftop solar. The rapid rise of these distributed assets has prompted some officials to warn that the nation risks overbuilding large-scale transmission infrastructure.
If vast fleets of rooftop solar, batteries and smart devices can be orchestrated effectively, they could sharply reduce the need for large centralised renewable projects — the very projects many of the new transmission lines are intended to serve. AEMO acknowledges this shift, urging better orchestration.
The ISP also outlines a significant shift in the expected role of coal through the 2030s and 2040s. Instead of operating as around-the-clock baseload generators, AEMO expects coal units to become flexible assets that run only during peak periods or at times of low renewable output. Some units may even be cycled on and off daily — a radical departure from how the plants were designed to provide so-called baseload power.
Industry executives caution that such flexibility will come at a cost. Coal units were never engineered for frequent cycling, and doing so accelerates wear, increases maintenance and shortens operational life.
“You also have to understand that when you switch a coal power plant from its intended purpose, baseload power, to a flexible generator – will cause reliability issues and shorten its lifespan. Technically coal can run in the way envisaged by AEMO but it is not optimal,” one industry source said.
Using coal would also heighten Australia’s emissions. But it could be cheaper to use the fossil fuel as a backstop rather than gas.
Unlike coal, gas is tailor made to run sporadically but it is the most expensive form of electricity generation.
