The best way to bring down household power prices is by adopting renewable energy, faster, says the International Energy Agency (IEA).
The finding was included in the global organisation’s 2025 World Energy Outlook, which said that while a massive oversupply of LNG in the coming years may mean cheaper power for countries in south-east Asia in particular, moving to renewables was proven.
It says that even factoring in higher upfront costs, switching to more efficient appliances such as heat pumps and electric vehicles, and shutting down fossil fuel generation faster more than compensates for the higher ultimate energy spend.
“It leads to a clear decline in total household energy bills in advanced economies and to bills that are broadly in line with today’s in real terms in China and other emerging market and developing economies,” the IEA says.
It also blew a hole through claims that wind- and solar- dependent energy sources are less reliable than fossil fuel generators.
“The factors influencing electricity price stability are also shifting. Reduced dependence on fossil fuels can provide insulation from market price shocks,” the IEA says.
“Analysis of seasonal patterns over the past 30 years shows that, while weather-related effects vary by region and can be significant, their impacts on electricity costs and prices are generally much smaller than the volatility related to fossil fuel price fluctuations.
“Systems are increasingly able to manage these shifts through demand response, battery storage, interconnection and sector coupling.
“These findings suggest that while rising deployment of weather-dependent renewables bring new challenges, well-designed systems with enough flexibility can mitigate volatility and maintain price stability even where renewables become dominant.”
South Australia and Western Australia are two states that have repeatedly proved grids do not collapse when renewables reign.
For 2.5 hours on Tuesday, rooftop solar alone met almost all of South Australia’s solar needs, peaking at 96.9 per cent at 2pm, according to Open Electricity.
On the same day, at 10.30am, Western Australians were meeting 70 per cent of their energy needs with the same technology.
Making the switch to renewables faster is also the way to reduce energy poverty fastest, says Climate Analytics CEO Bill Hare.
“Backing renewables is a win-win for people’s wallets and the climate. In fact, all the different futures mapped out by the IEA have renewables growing faster than any other energy source,” Hare said in a statement.
“Renewables are now unstoppable: solar power and batteries are now so cheap that continuing to invest in fossil fuels is a needless climate and economic risk.”
Falling prices
The price of installing wind and solar technologies has been falling for years, with the IEA pointing to solar and battery prices dropping by 80 per cent between 2014 and 2024.
Even wind turbine prices fell 2 per cent last year.
“As a result, the levelised cost of electricity from solar PV is now among the lowest of any power technology in history,” the IEA said.
Some of those prices are unsustainable, as Renew Economy has reported, but the IEA’s report suggests efforts to stabilise prices are not working and there is more downward pressure yet to come.
Also falling, however, are the price of LNG and oil as demand for the latter falls and as huge volumes of the former flood markets. But with the IEA suggesting new efficient turbines will cost double in 2030 what they are now, they may still struggle to compete with renewables.
Playing catchup on grids
Countries are playing catchup on building out grids and this is one of the biggest pressures on electricity prices, as Australia is experiencing.
It’s a cost that only gets higher for countries that are trying to avoid transitioning to renewable energy, the IEA says.
Not only are higher global temperatures, caused by climate change, putting pressure on grids through higher peak demand but those temperatures also reduce generators’ capacity.
The IEA says extreme heat combined with generators unable to operate under those conditions mean a grid needs to invest in having at least 6 per cent extra capacity to meet demand on those peak days.
Even so, major grid upgrades are needed around the world anyway.
The IEA says annual investment in electricity generation rose from $US 600 billion in 2024 to $US1 trillion in 2025, mostly led by spending on solar.
In contrast, investment in grids has risen to just $US400 billion in 2024.
“Ten years ago, for every dollar spent on generation, around $US0.60 was spent on transmission and distribution networks. The comparable figure today is around $US0.40,” the IEA says.
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