The Rise of Renewable Energy and What It Means for Future Electricity Prices

Australia is undergoing a once-in-a-generation shift in how electricity is produced, stored and consumed. Renewable energy — particularly solar and wind — is moving from the fringes to the heart of our power system. But how is this affecting electricity prices, and what does it mean for households?

The answer is complex, but also promising.

Australia’s renewable energy boom: what’s driving it?

Australia has some of the highest rates of solar uptake in the world. More than 3.5 million homes have rooftop solar installed, and large-scale renewable projects are accelerating, especially in regions like Queensland, Victoria and South Australia.

The key drivers behind this surge include:

Rapidly falling costs: Solar panels have dropped by over 80% in the past decade, and wind turbines have also become more cost-effective.

Government support: Federal and state schemes have encouraged rooftop and utility-scale renewables.

Consumer demand: Australians are increasingly conscious of sustainability and looking for ways to lower their electricity bills.

However, growth in renewables has ripple effects — not just on how energy is generated but also on electricity prices at every market level.

How renewables influence wholesale electricity prices

At the core of electricity pricing is the National Electricity Market (NEM), which operates like a stock exchange for energy. Electricity Prices in the NEM are determined every five minutes based on supply and demand.

Here’s where renewables start to shift the equation:

Solar and wind have near-zero marginal cost: Once the infrastructure is built, producing energy doesn’t require paying for fuel like coal or gas.

This lowers the wholesale price during periods of high renewable generation, particularly in the middle of the day when solar is at its peak.

In some states, daytime wholesale electricity prices have dropped into negative territory, meaning generators effectively pay to offload excess energy.

These price patterns flow through to retailers and customers, especially those on time-of-use or wholesale-linked plans.

But not all prices are falling yet.

Despite downward pressure on wholesale costs, retail electricity prices haven’t dropped as dramatically. Why?

Because your bill includes more than just the cost of generating electricity:

Network charges — The cost of maintaining poles, wires, and transmission systems still makes up a large part of your bill.

Environmental and market costs — Compliance with renewable energy targets, market operation fees, and other levies add to the total.

Retailer margin — Electricity retailers build in operating costs and profit margins, which vary widely.

Moreover, the transition to renewables requires substantial upfront investment. Building large-scale batteries, upgrading grid infrastructure to handle two-way energy flows, and ensuring reliability all involve costs that are factored into current electricity prices.

The role of battery storage in shaping future prices

Renewables are variable by nature — solar doesn’t shine at night, and wind is inconsistent. This has historically led to price volatility and reliability concerns.

Battery storage is emerging as the key to solving that problem:

Like those in South Australia and Victoria, grid-scale batteries can store excess solar and wind energy and release it when demand peaks.

Home batteries, such as the Tesla Powerwall, let households use more of their solar and reduce reliance on the grid during expensive evening periods.

Virtual Power Plants (VPPs) are gaining momentum, allowing households to pool stored energy and trade it in the market.

Over time, battery storage is expected to smooth out price spikes, reduce reliance on expensive gas-fired peaking plants, and make electricity prices more stable and predictable.

Regional price differences: a tale of two grids

Not all parts of Australia are benefiting from renewables equally, yet.

South Australia now gets over 70% of its energy from renewables, which has significantly driven down wholesale electricity prices.

Victoria and New South Wales are seeing more volatility, especially as ageing coal plants are retired and new transmission lines are still under construction.

Queensland is ramping up solar and battery projects, but high network costs and occasional coal outages still impact prices.

Western Australia operates outside the NEM, with more government control over prices.

In short, electricity prices vary depending on how far each state has progressed in the energy transition and how well their infrastructure can handle it.

What does all this mean for you?

The big-picture takeaway is this: renewables are pushing electricity prices down during the day, but we’re still in a transition phase. Price volatility, infrastructure upgrades and policy settings influence what ends up on your bill.

So what can you do in the meantime?

Shift energy use to daylight hours if you can — running the dishwasher or washing machine during the day could mean using cheaper (and greener) power.

Considering solar energy, consider a battery or join a virtual power plant to get more value from your excess energy.

Compare plans regularly to ensure your provider is passing on savings — some retailers offer time-of-use pricing that benefits from solar-driven price dips.

Look for transparent pricing — with no hidden fees, exit charges, or confusing conditions.

Final thoughts: Renewables are reshaping electricity prices — for the better

The rise of renewable energy is more than just good news for the environment. It’s changing the way electricity prices are set, and over time, that shift is likely to benefit households who are proactive, informed, and ready to adapt.

While the journey isn’t without its bumps, the long-term trend is clear: cleaner energy and smarter storage mean more stable, affordable Australian electricity prices.