New CIS paper: Australia has lost its low-cost energy edge   

Australia has squandered the low-cost electricity advantage that once drew global heavy industry to its shores, a new Centre for Independent Studies research paper outlines.   

In Future No Longer Made in Australia: How We Lost Our Low-Cost Electricity Advantage, Zoe Hilton and Michael Stutchbury trace how Australia offered some of the cheapest and most reliable electricity in the world from the 1960s through to the early 2000s.  

Powered by abundant coal, strengthened by gas and hydro, and supported by stable policy settings, the country became a magnet for industries such as aluminium, copper, zinc, manganese and lead smelting.   

But the authors warn that this historic advantage has now evaporated. Since the mid-2000s, Australian electricity prices have risen far faster than those of comparable economies.  

Residential price data stretching back to the 1970s shows Australia shifting from around 30% below the consumption-weighted OECD average to around 30% above it.   

Industrial users have not fared much better, with BHP’s chief executive recently noting that Australian electricity costs are “two to three times higher” than those faced by key competitors.  

The consequences have been stark. Smelters that once anchored local economies are now closing, shrinking, or surviving only through increasingly large government bailouts.   

Tomago, Boyne, Bell Bay and Whyalla have all required substantial intervention — typically through below-market electricity deals, subsidies, or government-led renewable energy ‘investments’ that disguise the real cost to taxpayers and consumers.   

The report highlights that Australia’s governments and energy market bodies have contributed to the policy fog by failing to maintain consistent, transparent electricity price datasets, making it harder to compare Australia’s competitiveness over time against other countries.  

The authors argue that intermittent wind and solar power, backed by substantial taxpayer subsidies, has failed to replicate the low-cost reliability once supplied by coal and gas.   

As heavy industry becomes unviable, Australia risks losing not only the smelters themselves but the broader manufacturing and processing ecosystem they support.  

“Australia’s cheap energy advantage once offset our high labour costs and helped us value-add to our abundant natural resources,” the authors write. “Today, that advantage has disappeared. The renewable energy honeymoon is over, and the costs are continuing to rise.”  

The paper concludes that only a significant expansion of large-scale, dispatchable, low-fuel-cost generation can restore Australia’s competitiveness. Without this, the government’s ambition for a ‘Future Made in Australia’ will remain out of reach. 

Zoe Hilton is a Senior Policy Analyst in the CIS energy program. Michael Stutchbury is Executive Director of CIS.