Modelling by the Grattan Institute shows Australian household energy bills are set to halve by 2050, leaving policy room for the federal government to cut emissions in the electricity sector without hurting households.
The report, titled Bills down, Emissions down: A practical path to net-zero electricity by Alison Reeve, Tony Wood, Dominic Jones, and Ben Jefferson, says cutting greenhouse gas emissions from electricity in line with the net-zero 2050 national target would result in average household energy bills of about $3,000 in 2050—down from an average of about $5,800 today.
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These savings come about because most households in 2050 will have solar panels on their roof, a battery in the shed, an electric car in the garage, and all-electric appliances in the home.
The authors say the federal government should consider activating the Safeguard Mechanism to reduce emissions in the electricity sector, to complement policies to reduce emissions in the industrial and transport sectors.
“How we use energy is changing, and the politics of carbon pricing should change too,” the report says.
“Carbon pricing can play a constructive role in the electricity sector in coming decades, just as it does already in the industrial, mining, and transport sectors.”
The report recommends a three-pronged approach to drive net zero targets while keeping the lights on and electricity costs down:
- Use next year’s planned review of the Safeguard Mechanism to explore how it can help the electricity sector get to net zero at lower cost.
- Maintain and extend programs to ensure that the benefits of electrification are available to all households, particularly those on low incomes and in rental and multi-unit properties.
- Continue reforms to make planning approvals for transmission faster and easier, and build social licence in host communities.
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“The Safeguard Mechanism is already constraining emissions in the industrial and transport sector, so it would be a natural choice to use it in the electricity sector. It may require some modifications, but no wholesale redesign,” the report reads.
“It also has a good chance of maintaining bipartisan support, because it was introduced by the former Coalition government and has been reformed to reduce emissions by the incumbent Labor government. And it would make upcoming essential reforms to the National Electricity Market more effective.”
