Australia’s Energy Transition & De-industrialisation – Watts Up With That?

Richard Willoughby

Summary

This article has a close look at the progress of Australia’s electrical grid transition to weather dependent generating sources.  The analysis mostly focuses on South Australia and its leading role in this transition.  Rooftop solar has lagged grid scale wind in the transition but rooftops are rapidly gaining market share and are bound to make grid scale wind and solar obsolete before they recover their construction costs.

The high unit cost of grid sourced electricity is driving the de-industrialisation of the economy with many large consumers now gone and the remainder on government welfare that cannot continue indefinitely.

Rooftops are observed to have an unrivalled advantage over grid scale weather dependent sources by having captured demand.  Every rooftop solar installation reduces the opportunity for intermittent grid generation to earn income.

Introduction

Australia is making a pitch to host the United Nations Conference of Parties in 2026.  This will shine a light on Australia’s claim to be the global super power of “renewable energy”.  Fittingly, Adelaide is the proposed host city and is the State Capital of South Australia (SA).  SA is one of the regions connected to the so-called national grid that rightly claims to be the largest interconnected grid in the world.  SA is a relatively small component of the National Electricity Market (NEM) with a peak demand up to 4GW. 

For the year to mid October 2025, SA generated 72% of its electricity from weather dependent generators (WDGs); both wind and solar.  There are no hydroelectric generators in South Australia.

Rooftop Solar

Australia is unique amongst G20 nations in having the best solar resource combined with mostly mild winters and warm to hot summers.  This means sunlight is truly ubiquitous all year over the mainland States while the high population centres do not experience snowfall.  SA is well placed to make use of the solar resource as indicated in Chart 1, which is taken from OpenNem for a 24 hour period ending 10pm 15 October 2025 where the bright yellow bathtub shape is the rooftop solar component and the darker yellow is the utility scale solar.

Table 1 sets out details of the colour coding in Chart 1 and should be viewed together.

Some finer points of the chart that should be noticed is the dotted line that indicates zero on the scale.  SA is able to import and export to Victoria.  So when the internal generation exceeds the internal demand the export is shown as a negative value on the chart.  It is apparent that on this day, rooftop solar was supplying the entire internal demand of the State around midday.  Utility scale WDGs were able to produce some output by exporting.  The purple region above the dotted line indicates imported generation.

The bottom line of the table indicates all WDGs contributed 68.2% of the electrical energy for the day.  The internal generation Netted 47GWh; just under 2GW average generating power.  It is important to note the values for “Curtailment”.  Utility solar curtailed 2.5GWh while generating 3GWh.  Wind curtailed 0.9GWh while generating 9.9GWh.  On the day, the combined output of the utility WDGs was well under the generation from rooftop solar of 14.6GWh.

Tuesday 15 October 2025 was a good day for rooftop solar in SA with it supplying all the demand in the State at lunchtime.  On weekends now, rooftop solar is being exported on a sunny day and both utility scale WDGs fully curtailed between 11am and 2pm.  Through the peak of summer, air-conditioners will increase the demand and there may not be sufficient rooftop output yet to meet the midday demand.  Similarly, the reduced rooftop output in winter means other sources take a larger share of the demand.  So the winter generating curve still has some resemblance to the “duck curve” but early summer generation now looks like a gaping chasm on weekends and a bathtub on week days.

SA Electricity Generation Transition

Chart 2 expands the time frame for the SA Region to this century in quarterly periods.

At the beginning of the century, SA used gas and coal to generate electricity.  Coal ended in Q2 2016.  Wind first appeared in Q3 2007 and rooftops were measurable by Q3 2016 by their lunchtime impact.  Utility scale solar was producing by Q1 2018.  The peak quarterly wholesale generation of 3886GWh occurred in Q3 2010 and declined to 3231GWh in Q3 2025.  The last decade for just the WDGs is shown in Chart 3.

Chart 3 includes 2^nd order polynomial trend lines that give some indication where each source is heading.  There is 792MW of installed utility scale solar that has levelled off around 250GWh for quarterly volume corresponding to capacity factor of 14.4%.  Wind generation is showing a reduced rate of climb and is unlikely to sustain above 1800GWh over a year; corresponding to a capacity factor of 29.7% for the 2763MW of installed capacity.  Rooftops have an accelerating trend and Q4 2025 may be the first time they overtake utility scale wind for the quarter on total energy sourced.

Wholesale Market Price & Revenue

Chart 4 provides the quarterly average wholesale price in SA for utility scale wind and solar.

The price for utility scale wind and solar track each other reasonably well.  The trend is reasonably flat apart from peaks caused by technical issues and the slump during the Covid shutdown.  Since 2023, there is a clear annual price cycle.  The utility solar price collapsed in Q3 2024 as rooftops removed demand.  Grid wind prices were somewhat higher but still exhibit the annual cycle caused by the increasing impact of rooftop solar.

Chart 5 combines the generator output and market price to give the quarterly wholesale revenue for the SA utility WDGs.

Apart from the Q2 2022 period when the SA-Vic interconnector failed, the quarterly revenue peaked in Q1 2019 at AUD146M for wind generators and AUD22M for utility solar.  In 2024, annual wholesale revenue for utility solar was AUD42M and for wind AUD413M.

SA Retail Electricity Price

Given the growth in utility scale generation in SA and the stabilising of the wholesale price in the region, it would be expected that retail price would be reflecting these trends.  Chart 6 using data from “Vinnies” shows a different story:

Over the past decade, as WDGs have grown to dominate the electricity market share in SA, the retail price of electricity has continued on an upward trend.  July 2025 price averaged 52c/kWh, including the service charge, based on annual consumption of for a 6000kWh.

There are a number of reasons for this retail price trend. 

• The SA region has invested in synchronous condensers to add inertia and voltage stability to the grid that add to transmission costs.
• The grid has expanded to cater for numerous geographical sources of generation.
• The distribution system had to be upgraded to cater for high reverse energy flows.  This continues.
• So-called “renewable energy” attracts a premium termed large scale generating certificates (LGCs).  LGC price has fallen this year down to AUD11/MWh but were AUD83/MWh in 2016 with a gradual downward trend.  The retailers are required to pay for LGCs from WDGs so the cost is in addition to the wholesale price. The higher the proportion of “renewable energy” the higher the subsidy.
• The cost of stability services from battery and gas generators that remain connected is not included in the wholesale price but is in the retail price.
• The market manager has rapidly rising costs due to the complex nature of managing such a complex market that needs to be in balance every second of every day with increasing exposure to common weather events.  Weather fronts are major risks to grid stability.
• The volume in the wholesale market is declining so higher costs being applied to declining volume creates a double hit for unit prices.
• There are still essential generators burning gas in SA and lignite fuelled generation imported from Victoria.  There has been no reduction in the peak demand but they have much reduced volume to recover their high standby costs so charge high unit price when they can to stay profitable.

Consumers become Prosumers

SA is a very good example of de-industrialisation in the making.  Manufacturing of Mitsubishi motor vehicles ended in SA in 2008.  Manufacture of Holden motor vehicles ended in 2016.  The Port Pirie lead smelter and Whyalla iron blast furnace are both on government welfare because the high cost of electricity makes them uneconomic. 

Faced with high prices for grid sourced electricity, 50% of SA households and many businesses are now making their own.  This means the remaining consumers bear the already high, yet increasing, cost of the grid and are also on government welfare to help with the burden.

Aldi Australia makes a claim that their stores are run on 100% “renewable” energy.  Image 1 is an example of one of their stores showing the rooftop solar array.

Their stores certainly have large solar arrays but they are connected to the grid and there are no battery installations of a size needed to run the stores for a day or so without grid connection.  So they may produce 100% of their energy on average but are still reliant on fossil fuels for essential electricity.

Aldi is also marketing household rooftop systems now.  They offer a 6.6kW solar array and 20kWh LFP battery combination for AUD9,000 installed including government rebate.  Such a system installed anywhere on mainland Australia on a north facing, pitched roof would supply 15kWh/day for 350 days per year.  That amounts to 105,000kWh at a unit cost of 8.5c/kWh over a 20 year life.  The panels would require cleaning of lichen and leaf litter every year or so but otherwise maintenance free.

Discussion

Australia’s electrical grid is in transition one rooftop and household battery at a time.  It is most apparent in SA but the rest of the country is catching up.  Chart 7 shows the trend in generating sources across the entire NEM:

It is clear that the fossil fuelled generators are in decline and WDGs are on the increase.  Not quite so apparent is that the wholesale market demand peaked in Q3 2008 at 54.9TWh.  It was down to 52.6TWh in Q3 2025.  So the whole NEM suffers the same price vortex as SA with steeply rising costs distributed across reducing demand.

Australia no longer manufactures motor vehicles.  All of Australia’s remaining smelters are on government welfare. 

Despite the increasing grid cost of electricity, the average household cost for electricity has not increased in the past 10 years.  This is because four million households have invested in rooftop solar and get most of their energy at no ongoing cost.  The Federal Government battery rebate from July 1^st 2025 has spurred Australian households to install almost 1GWh of household batteries in the first 3 months.  September 2025 recorded the highest monthly installation of rooftop solar capacity so far.

Conclusions

Grid scale WDGs are now stranded assets.  That is clearly evident for utility scale solar in SA that competes directly with rooftop solar.  On most weekends now there is zero opportunity for utility scale solar to generate revenue.  On Saturday 11 October the SA wholesale price was negative from 2am to 6pm – the entire generating window for utility scale solar.  Wind has more opportunity to earn revenue but that is also being eroded.  In 2024, the $800M invested in SA utility scale solar produced revenue of $43M in the wholesale market.  In 2024, the $5bn invested in SA wind produced $413M revenue in the wholesale market.  This is insufficient revenue to justify the capital expenditure.

The two potential positives on the horizon for the grid scale WDGs are Snowy 2 and the higher capacity interconnector to NSW but they only delay the inevitable demise of non-essential grid generators.

Rooftop solar has a number of distinct advantages:

• There is no requirement for land acquisition.
• There is no requirement for Environmental approval.
• There is no requirement for FirstPeople’s approval.
• No new transmission or distribution assets are required.
• Most importantly – rooftop investors have captive demand.

Australian households are voting with their money and the various governments’ offers of other people’s money to make their own electricity.  They are removing their demand from the grid.  Household batteries improve internal utilisation of solar energy and further reduce the opportunity for utility scale WDGs to generate revenue.  The grid has upward spiralling costs with falling wholesale demand thereby accelerating its economic demise.  All the remaining large electricity consumers are on welfare and their closure is imminent.  Each departure reduces the opportunity for grid scale WDGs to earn.

This was predicted a decade ago and should now be clearly evident to any observer.  The existing grid developed through economy of scale.  The solar panels on a roof are the same as those used in any utility solar plant.  The basic cells used in a household batteries are the same cell used in grid scale batteries.  Wind in Australia goes missing for a couple of weeks each year, usually in June, so would require enormous storage to make it an on-demand source of energy. 

It will not be easy to rebuild Australia’s industrial base but Australia has the lowest cost fuel in the world and only the climate scam is in the way of making good decisions regarding energy.

Over the next decade, rooftops will force the demise of grid scale WDGs.  They are not renewable or sustainable.  They are stranded assets with no future.

The cost of grid electricity could be reduced immediately by requiring all bidding generators to be dispatchable and removing the mandated retail theft.  That means the existing coal plants would run at 100% capacity so their unit price could come down dramatically while still being profitable and the margin between retail and wholesale price would reduce. 

In the long run, rooftop solar and low cost battery storage may be an economic option for suburban Australia.  The suburban grid could still have economic value by bleeding in energy when the batteries are getting low while sharing output from neighbourhood solar and battery assets.

The Author

Richard Willoughby is a retired electrical engineer having worked in the Australian mining and mineral processing industry for 30 years with roles in large scale operations, corporate R&D and mine development.  During this period, Richard represented Australia’s large electricity consumers on the first systems development group for the National grid.  A further ten years was spent in the global insurance industry as an engineering risk consultant where he developed an enduring interest in natural catastrophes and changing climate.

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