As Australians get ready to head to the polls on Saturday 3 May 2025, the results of this federal election will determine more than just the path towards net zero, it could potentially alter Australia’s energy sector forever.
The Labour, Liberal, Greens and independent parties have all outlined vastly different energy and climate change policies in their 2025 election promises – so Utility took a deep dive into what the future energy sector would look like under each leadership.
Here, we outline the key policies put forward by the each party, the modelling used to inform them and discuss how they compare to the finding of recent industry reports – including the Australian Energy Market Operator’s (AEMO) 2024 Integrated System Plan (ISP), its 2025 Gas Statement of Opportunities (GSOO) report and CSIRO’s draft GenCost 2024–25 report.
We also highlight opinions and insights from key industry professionals, and share your thoughts on Australia’s energy future.
Setting net zero targets
Australia’s current decarbonisation goals are to achieve a 43 per cent reduction in 2005 emissions levels, and net zero emissions by 2025. These targets are aligned with Australia’s responsibility as a party to the Paris Agreement, and were legislated in 2022 under the Climate Change Act.
Under the terms of the agreement, a country must outline and communicate their post-2020 climate actions – Nationally Determined Contributions (NDCs) – with NDCs to be updated every five years and new targets to represent a progression beyond the previous NDC.
Australia is required to submit its updated NDC in 2025.
Both the Labor and Liberal parties have confirmed that if elected, Australia would remain a party to the Paris Agreement.
If the Labor party retains power, it would continue with the steps outlined in its Net Zero Plan and would announce a 2035 interim emissions reduction target as part of its 2025 NDC.
Although these targets were due to be submitted in February 2025, the current Federal Government said that this announcement has been delayed as the 2035 target cannot be set without advice from the Climate Change Authority, which has advised that it is not in a position to provide this advice until after the election.
The Australian Liberal Party has said that while it would keep Australia in the Paris Agreement and is committed to reaching net zero emissions by 2050, if elected it plans to scrap the current 2030 emissions target.
However, the argument has been put forward that abandoning this target could in itself threaten Australia’s place in the Paris Agreement, as the agreement does not allow targets to be weakened1.
The Liberal Party argues the 2030 target cannot possibly be reached, whereas Labor said the 43 per cent target is still on track.
The current Federal Government said that 2024 emissions projections show that Australia can reach 42.7 per cent below 2005 levels by 2030. But that outcome rests on some key actions taking place, including the electricity grid successfully reaching 82 per cent renewables by 2030.
Liberal Party Leader, Peter Dutton, has said that, if elected, the party would still set a 2035 emissions reduction target on the basis that this is a legal obligation. But the party has indicated that it is likely to be less ambitious than that under contemplation by the Labor government or the levels recommended by the Climate Change Authority.
The Australian Greens said that the only 2035 target consistent with the science is net zero emissions.
Power generation
Decarbonising the electricity sector is the first step in the Federal Government’s plan to hit the 2030 emission target, and in the last four years the industry has been powering ahead on a record number of renewable energy projects to deliver the Federal Government’s target of 82 per cent renewable energy by 2030.
According to the latest AEMO Quarterly Dynamics report, renewables currently account for 46 per cent of overall generation in the National Electricity Market (NEM) and 46.6 per cent of the Wholesale Electricity Market (WEM) – and there are further projects already under construction or in the planning stages.
If re-elected, the Australian Labour Party aims to reach net zero before 2050 by continuing to follow the optimal development path (ODP) outlined in AEMO’s 2024 ISP.
The key findings from the 2024 ISP include:
- Ownership of coal-fired generators has become less financially viable. Approximately 90 per cent of Australia’s coal-fired power stations will retire by 2034–35, with all coal generators leaving the grid entirely by 2037–38.
- The lowest cost replacement for this generation is renewables, connected with transmission and distribution, firmed with storage and backed up by gas-powered generation.
- The NEM will need to almost triple its generating capacity, as variable renewable generation typically operates at less than full capacity and businesses and households will need more electricity as they switch from fuel and gas.
- By 2034–35, the NEM is forecast to need approximately 83GW of utility-scale wind and solar, and 127GW by 2049–50 to meet consumer demand.
- Approximately 10,000km of transmission will be needed by 2050 to connect these new renewable energy resources.
- A combined total of 75GW of storage and firming technology is needed to support renewable generation.
- Under the ODP, delivering all utility-scale generation, storage, firming and transmission infrastructure would cost $122 billion2. Of that figure, the transmission projects make up $16 billion or 13 per cent.
- All of the transmission projects in the ODP are needed at some time, and because they deliver benefits that would repay their investment costs, would avoid a further $18.5 billion in additional costs to consumers.
The current Federal Government’s approach is detailed in its Powering Australia plan, which included expanding the Capacity Investment Scheme (CIS) to deliver a total of 32GW of new, renewable capacity by 2030; establishing a new National Energy Transformation Partnership; and modernising Australia’s energy grid to support this renewable generation via the Rewiring the Nation program.
If the Australian Labor Party were to retain power, it would also continue to prioritise the establishment of a multi-billion-dollar offshore wind industry. In August 2022, the Federal Government declared six priority areas for offshore development over a collective 30,000km2 of Commonwealth Waters, off the shores of Victoria, New South Wales, Tasmania, South Australia and Western Australia.
If the Liberal Party is elected, it promises to take a very different path toward net zero.
An alternative proposal
Nuclear power is the centrepiece of the Liberal Party’s approach, which it said would ensure retiring coal plants are replaced with reliable, zero-emissions nuclear energy, supported by renewables, gas and storage. Under this plan, the Liberal Party said it would deliver up to 14GW of nuclear energy, arguing nuclear power is vital to provide a solid, stable source of energy not reliant on the weather.
It said it intends to build seven nuclear power plants across Australia, and has earmarked sites of current or former coal-fired power plants, including:
- Liddell Power Station, New South Wales
- Mount Piper Power Station, New South Wales
- Loy Yang Power Stations, Victoria
- Tarong Power Station, Queensland
- Callide Power Station, Queensland
- Northern Power Station, South Australia (SMR only)
- Muja Power Station, Western Australia (SMR only)
These zero-emission plants would be owned by the Federal Government, and the Liberal Party said that they would be developed and operated in partnership with experienced nuclear companies.
The program would consist of two phases: starting with two establishment projects in the mid-2030s followed by a buildout of projects though to 2050.
The Liberal Party has indicated that these first two would be conventional large-scale reactors, such as the AP1000 or APR1400, that are already in use elsewhere around the world, but it also wants to pursue yet-to-be-developed small modular reactors (SMR).
It said that the first two projects would deliver electricity by 2035 if using SMR technology, or 2037 if leveraging large-scale reactors.
This approach would mean extending the life of coal-fired power plants to cover gaps before the nuclear power plants start operating.
Nuclear is technically not considered renewable, as it relies on a uranium, a finite resource, and produces radioactive waste – however, nuclear power plants do not produce any carbon emissions.
Nuclear technology has also been banned in Australia since 1998, and enacting this plan would require that law to be changed.
The cost of net zero
To support its plan, the Liberal Party commissioned an analysis from modelling firm Frontier Economics.
This analysis looks at two scenarios outlined in AEMO’s 2024 ISP – Step Change (the ODP, which is currently being followed by the Federal Government) and Progressive Change (which depicts a more gradual and constrained transition due to economic limitations) – and models alternative versions of these scenarios if nuclear were to be included.
Under the nuclear alternative Step Change Scenario, the total installed capacity in the NEM would be 159,000MW, compared to the 203,000MW outlined in the ISP. The report said that less capacity would be needed under the alternative scenario as having nuclear as a base load allows the NEM to meet demand with less overall capacity.
Under this scenario, nuclear would make up 29 per cent of total generation in 2051, wind would make up 43 per cent, solar 17 per cent and the remaining 11 per cent would be covered by storage and firming, such as gas and pumped hydro.
Under the alternative Progressive Change scenario, nuclear would represent 38 per cent of total generation capacity in 2051, wind would have a 32 per cent share, solar would remain at 17 per cent, with hydro and large-scale storage representing the remaining 13 per cent.
The report outlines the total capacity required under the alternative Progressive Change scenario to be 99,000MW – compared to the 133,000MW projected by AEMO.
Offshore wind is not included either of these alternative scenarios, and Mr Dutton has expressed an intent to cancel three of the current Federal Government’s proposed offshore wind projects if elected, namely the Illawara, Southern Ocean, and Hunter declared areas, citing community opposition as a primary driver.
The Frontier Economics report models the cost of each scenario in 2024 dollar terms, and does not adjust the costs for future inflation. It also assumes the cost of nuclear generation will be $10,000 per kilowatt of capacity, that capital costs improve one per cent per year and incorporates a variable cost of $30 per megawatt-hour. In the alternative scenarios, nuclear is included in its modelling from 2036 onwards.
According to this report, the total economic cost of each scenario would be:
- AEMO’s Step Change – $594 billion
- Nuclear alternative Step Change – $446 billion
- AEMO Progressive Change – $437 billion
- Nuclear Alternative Progressive Change – $331 billion
This nuclear policy is strongly opposed by both the Australian Labour and Greens parties. The Australian Labor Party has released its own conflicting statement of the costs, claiming that the cost of delivering these nuclear power stations would be $116–600 billion. This figure is based on a report from the Smart Energy Council that was shared six months before the release of the Frontier Economics modelling, and assumes:
- There would only be 11GW of nuclear, as opposed to 14GW
- SMRs would make up 1GW of capacity (these plants were not part of the Frontier economics modelling)
- That SMRs would be three-times the cost of conventional nuclear
- That a ‘first of a kind’ premium averages around 25 per cent over all plants, with a 100 per cent premium average in the first plant
The Smart Energy Council’s analysis is based on the 2024 ISP as well as CSIRO’s 2024–25 GenCost report, which states that “Nuclear power does not currently provide the most cost competitive solution for low emission electricity in Australia”.
The GenCost report compares the levelised cost of electricity (LCOE) over the lifespan of different technologies built in 2030, and cites solar PV combined with wind and firming as being the most cost-effective with an LCOE of $67–137/MWh. In comparison, the report estimates that large-scale nuclear would cost between $150–245/MWh and SMR nuclear would be between $285–485/MWh.
According to the report, while nuclear technologies have a long operational life, this factor provides no unique cost advantage over shorter-lived technologies.
The GenCost report also calculates that any Australian nuclear project would be at least 15 years away before first generation – which is at odds with the Liberal Party’s 2035–37 timeline.
The CSIRO said that this long development lead time means nuclear won’t be able to make a significant contribution to achieving net zero emissions by 2050.
Why the conflicting numbers?
A report released by independent think tank Climate Energy Finance (CEF), said that the analysis by Frontier Economics amortises the costs of nuclear over 50 years, but the costs outlined in the report are only for a 25-year period, meaning the additional costs are outside the figures covered in the report.
The Frontier Economics report also assumes that less transmission will be required under the nuclear pathway, and that overall energy demand will be much lower.
However, the capital costs of each parties proposed plan aren’t the only difference – there’s also a disparity between the amount of carbon emissions Australia would produce over the next 25 years.
Both plans would see Australia reach net zero emissions by 2050 but according to the Climate Change Authority, Australia’s overall emissions between 2025–50 would be greater under the Liberal Party’s proposed nuclear plan.
In an independent report, the authority compared both the Frontier and AEMO modelling to determine the cumulative emissions in the NEM over the 2025–50 period.
This report said that the extension of coal-fired generators and slowing the integration of renewable energy into the grid means that the nuclear pathway would produce and additional one billion tonnes of emissions in the NEM.
Pumping the gas
If elected, the Liberal Party plans to increase the amount of gas produced in Australia that is kept onshore, through its National Gas Plan, which it said would reduce the wholesale price of gas on Australia’s east coast from $14/GJ to $10/GJ by increasing supply. It also argues that lowering the price of gas would lower the price of electricity.
It plans to do this by introducing an East Coast Gas Reservation that will require an additional 50–100PJ of gas to be committed to the domestic market in the first 12 months of operation. The additional gas will be shared across the three large east coast gas exporters.
The Liberal Party has also pledged to support new gas projects and include gas in the CIS.
The National Gas Plan would also seek to halve timelines for offshore gas project approvals, reinstate the $300 million Strategic Basin Plan and establish $1 billion Critical Gas Infrastructure Fund to accelerate fossil fuel investment.
On the other hand, if the Australia Labor Party were to retain power, it would continue with its current gas policies, including the Australian Domestic Gas Security Mechanism – which is designed to prevent gas supply shortfall in the by requiring liquefied natural gas (LNG) projects to limit their exports or find new gas sources if there is not enough supply to meet domestic demand – and the Future Gas Strategy – which provides a roadmap for the role gas will play in support the transition to net zero.
Industry response
ENA has called for federal energy commitments
Energy Networks Australia (ENA) has unveiled its six top priorities to ensure a reliable, affordable and low-emissions energy future in a new paper Powering our Future: Six Commonwealth election commitments for a stronger Australia.
Key among the recommendations is an urgent call for the removal of capital gains tax (CGT) on compensation payments to landholders hosting essential transmission infrastructure.
ENA CEO, Dom van den Berg, said these projects are once-in-a-century, nation-building projects, but the one-size-fits-all CGT wasn’t designed with this in mind.
“The fair solution would be applying an exemption to CGT for landowners who receive compensation for land and easements,” Ms van den Berg said.
Read more here.
AEC said election promises won’t lower power prices
In a new analysis, Australian Energy Council Chief Executive, Louisa Kinnear, said that energy industry needs policy certainty that endures election cycles to ensure the right investments can be made at the right time – as ageing thermal assets like coal-fired generation are retired over the next decade.
Ms Kinnear said that the industry is in the middle of an era-defining energy transition that requires enduring, sustainable long-term reforms to stimulate energy investment, maintain reliability and ensure least-cost outcomes for consumers.
“Now is not the time to hit the pause button or significantly pivot on the way forward,” she said.
“There is sufficient understanding across the energy industry about the critical factors that will deliver a low-cost transition. Now we just need to ensure consistent, enduring and coordinated policy is developed to support this path.
“We all want sustained lower power prices in the future, but it will take governments thinking longer-term to achieve this.”
Read more here.
Origin CEO said well-designed policy is key to a successful energy transition
Origin Energy CEO, Frank Calabria, has shared his policy pitch for the incoming Federal Government – which he said would give investors confidence to act and drive a successful transition to renewable energy.
“The electricity market in Australia is changing rapidly and the design of the NEM must change with it,” Mr Calabria said.
“The cost of establishing a robust, long-term framework is far less than what would be incurred through additional, ad-hoc interventions. Improving investor confidence and certainty will ensure the investment burden to deliver the energy transition is carried predominantly by the private sector, not Australian taxpayers.
“Getting the framework right today means setting us up for a more secure, sustainable energy future for all Australians.”
Read more here.
Want to share your thoughts on Australia’s energy future? Get in touch at katherine.livingston@primecreative.com.au
Disclaimer: this article is intended to reflect the opinions and modelling used on all sides of the election debate, its goal is to inform and is not an indication of any views held by Utility or its staff.
