Why Aussie electricity bills will continue to rise
The Australian Energy Market Operator’s (AEMO) July 2023 Transmission Cost Report, which was released alongside updates to the 2022 Integrated System Plan (ISP), stated that estimated costs for some major transmission projects had increased by up to 100% compared with 2022 ISP estimates.
AEMO also said that “we recognise that higher costs for network development would ultimately affect consumer bills”.
AEMO attributed the cost increases to:
- Global supply chain disruptions
- Higher steel, aluminium, and conductor prices
- Labour shortages
- Higher financing costs
- Contractor risk pricing
- Environmental and community engagement requirements
These factors combined to push some project estimates to double their earlier cost projections.
AEMO’s Draft 2025 Electricity Network Options Report, released in July 2025, showed that the cost of overhead transmission line projects had increased by 25% to 55% in real terms in 2025 compared with the 2023 update. Costs were also 10% to 35% higher (in real terms) for substation projects:
AEMO warned that these costs will inevitably be reflected in households’ electricity bills.
The table below summarises the cost blowouts on major renewable transmission projects:
As shown above, the EnergyConnect transmission project—a 900 km interconnector linking SA, NSW and Victoria—has blown out by at least $1.5 billion.
The project’s builder, Transgrid, is asking the Australian Energy Regulator (AER) to allow it to pass on $1.1 billion of that overrun to consumers through higher electricity bills.
If agreed by the AER, only a few hundred million dollars would be absorbed by Transgrid’s shareholders, which include major pension and sovereign wealth funds.
Consumers are already paying $2.28 billion for EnergyConnect under the original 2021 approval.
If approved by the AER, NSW households would pay $15–$20 a year to cover the full project cost.
The AER is reviewing Transgrid’s request and has 40 business days (extendable) to make a decision. It must assess whether the extra spending was efficient and prudent.
The decision is being watched closely by investors funding the 10,000 km of new transmission needed for Australia’s renewable transition.
Industry warns that if investors cannot recover overruns, they may pull back from future projects, thereby putting the energy transition at risk.
“How the Australian Energy Regulator responds to Transgrid’s cost recovery bid is being intently scrutinised by the many investors that are funding the rollout of critical power cable projects needed to underpin the country’s shift towards renewable energy”, noted Angela Macdonald-Smith, senior resources writer at The AFR.
“Industry experts have warned that any decision to block Transgrid’s investors from getting refunded on the extra build costs would deter risk-averse funds from backing the around 10,000 kilometres of new transmission lines needed by 2050 to connect remote wind and solar farms around the country and to reduce grid bottlenecks”.
The high cost of transmission projects highlights why Australian electricity bills are likely to rise, even if wholesale (generation) costs moderate once more renewable projects come online (a point that is debatable).
The cost of constructing each renewable transmission project increases the regulatory asset base and, ultimately, is passed on to retail power bills through higher network charges.
Indeed, the recent testimony from energy company bosses in the UK parliament highlighted the issue:
They argued that even if wholesale power costs fell by 50%, electricity bills would rise by around 20% over five years due to increased network and other costs associated with renewables.
When it comes to power, the total system cost matters, not the wholesale (generation) price. This includes government subsidies, which taxpayers bear.
