Modelling Shows Australia’s Net Zero Energy Transition Could Cost $5 Trillion

Wind turbines can be seen in Albany, Western Australia, on Aug. 4, 2023. Susan Mortimer/The Epoch Times

New modelling has shown that it will cost Australia around $5 trillion (US$3.32 trillion) to achieve a net zero energy transition for the domestic market alone.

University of Melbourne Professor Michael Brear, who is also director of the Melbourne Energy Institute, outlined the total costs of the renewable energy transition for different scenarios in his submission (pdf) to the Select Committee on Energy Planning and Regulation in Australia.

Specifically, he estimated that the cost of transitioning the domestic market without efforts to reduce emissions—a “no abatement target”—was $4.3 trillion in 2020 dollars and could go up to over $5 trillion if net-zero targets were included.

“The additional cost for the domestic decarbonisation task is between $500 and $800 billion, going from no abatement target to net zero,” Brear told the Committee at a recent inquiry hearing.

According to the submission, these additional costs come from investments in capital-intensive assets across all sectors, including renewables, transmission and distribution networks, energy storage, and natural gas-fired generation, as well as different end-use appliances and electric vehicles.

The professor also pointed out that the additional cost would be more substantial for decarbonising the export market.

While it would cost around $2.6 trillion to transition the export energy market with no abatement target, the total investment would soar to between $4.1 and $6.1 trillion for net zero scenarios.

In addition, Brear acknowledged that there were limitations in his modelling.

“The most significant caveat is that the export NPV [net present value] assumes that we maintain current levels of energy exports on an energy basis and replace those with clean equivalents. That’s, of course, a big assumption,” he said.

Nationals Senator Questions the Massive Cost of the Energy Transition

Following Brear’s analysis, Nationals Senator Matt Canavan raised concerns about the significant cost of the energy transition.

Canavan pointed out that the additional $500-$800 billion needed to decarbonise the domestic market would result in an extra cost of $20,000-$30,000 per Australian.

“Your evidence and your modelling [show] there is a cost to the Australian public to meet a net zero target,” he said.

“We’ve been told by the so-called self-appointed experts that this was net zero is going to be a costless exercise.

“We certainly weren’t told that it would be a cost of the order of $20,000-$30,000 per Australian.”

Moreover, the senator was concerned that the total cost of transitioning the export energy market would make Australia poorer as a country.

“The capital costs of those programs are $2.1-$4 trillion. It amounts to $80,000-$150,000 per Australian,” he said.

“That’s over 26 million people. That’s a lot.”

Export Partners Would Pay the Bill: Energy Expert

In response, Brear said he had not calculated the cost per capita, but noted that the cost of transitioning the export market should be paid for by long-term contracts with export partners, not by Australians.

Canavan then asked Brear if this meant other countries had to pay more to buy Australian energy.

He cited an analysis by the professor in 2023, which indicated that decarbonising the export system would cost five times more than the reference case.

“Does this mean that the customers of our energy would have to pay five times the cost for that energy relative to not achieving net zero?” Canavan asked.

Brear said the cost might be higher than that, noting he needed to do further analysis to confirm the figures.

The National Senator then expressed his scepticism about whether other countries would accept paying higher prices for Australian energy.

“I have a little bit of cynicism with my experience, especially in North Asia, of their willingness to pay potentially more than five times the cost of energy,” he said.

Brear said the scale of Australia’s export energy system would ultimately depend on who was willing to pay for the country’s energy.