NSW electricity prices are rising as the costs of the renewable energy transition feed through to household and business bills, with the closure of coal-fired power stations tightening supply.
Business & Markets Desk is a contributing writer covering business and public affairs for The Sydney Times.
NSW electricity prices are rising as the costs of the renewable energy transition feed through to household and business bills, with the closure of coal-fired power stations tightening supply and increasing reliance on intermittent renewable generation. The Australian Energy Market Operator reported that wholesale electricity prices in NSW averaged $120 per megawatt-hour in the June quarter of 2026, up from $95 per megawatt-hour in the same quarter of 2025, reflecting a market that is adjusting to the loss of generation capacity as old coal-fired power stations close. The price increase is being passed through to household and business bills, with the Australian Energy Regulator reporting that average household electricity bills in NSW will rise by roughly 8 percent in 2026-27, following a 12 percent increase in 2025-26.
The renewable energy transition is creating structural pressures on electricity prices that will persist for several years, as the NSW Government and the Australian Government invest heavily in new renewable generation and transmission infrastructure to replace the capacity that is being lost as coal-fired power stations close. The NSW Electricity Infrastructure Roadmap, which was released in 2023, commits the state to generating 70 percent of its electricity from renewable sources by 2030, and to investing $32 billion in new generation, storage, and transmission infrastructure over the next five years. The investment is necessary to meet the state's net-zero emissions target by 2050, but it is adding to the cost of electricity in the short term as the costs of new infrastructure are recovered from consumers through higher network charges and renewable energy certificates.
The closure of coal-fired power stations is the primary driver of the structural tightening in electricity supply. The Liddell Power Station, which had a generating capacity of 2,000 megawatts, closed in April 2026 after more than 50 years of operation, removing a significant source of baseload generation from the NSW grid. The closure was brought forward by AGL Energy, which operates the station, as part of its strategy to transition to renewable energy and to meet its own net-zero emissions target. The closure was anticipated, but it has still created a gap in supply that is being filled by a combination of renewable generation, gas-fired peaking plants, and imports from other states via the interconnector network.
The AEMO's Integrated System Plan, which was updated in June 2026, forecasts that a further 4,000 megawatts of coal-fired generation will close in NSW by 2035, as the remaining stations reach the end of their operational life and become uneconomic to maintain. The plan projects that renewable generation, primarily wind and solar, will replace the lost coal capacity, supported by battery storage and pumped hydro to provide firming when the wind is not blowing or the sun is not shining. The transition is technically feasible, but it requires significant investment in transmission infrastructure to connect renewable generation in regional areas to the load centres in Sydney and Newcastle. The investment is underway, but it is running behind schedule due to planning delays and community opposition to new transmission lines.
Network charges, which pay for the transmission and distribution of electricity from generators to households and businesses, are a growing component of electricity bills and are contributing to the price increases that consumers are experiencing. The Australian Energy Regulator reported that network charges accounted for roughly 45 percent of the average household electricity bill in NSW in 2025-26, up from 38 percent in 2020-21, and that they are projected to rise to 50 percent by 2030. The increase reflects the need to invest in the electricity network to accommodate the two-way flow of electricity from rooftop solar and to strengthen the network against extreme weather events including bushfires and storms.
Renewable energy certificates, which are issued to generators of renewable electricity and are purchased by electricity retailers to meet their statutory obligations under the Renewable Energy Target, are another factor contributing to higher electricity prices. The certificates are traded in a market, and their price has risen sharply in recent years as the demand for renewable generation has increased and the supply of certificates from new renewable projects has not kept pace. The price of a renewable energy certificate rose from $45 in 2023 to $85 in 2026, adding roughly $100 per year to the average household electricity bill. The price is expected to remain elevated until new renewable projects come online and increase the supply of certificates.
The rising cost of electricity is a significant concern for energy-intensive businesses in NSW, including manufacturers, data centres, and mining companies, because electricity is a major input cost that affects their competitiveness. The Australian Industry Group reported in August 2026 that 72 percent of manufacturers in NSW consider electricity prices to be a significant or very significant cost pressure, and that 58 percent have reduced production or delayed expansion plans due to high energy costs. The pressure is particularly acute for small and medium-sized enterprises that do not have the ability to hedge their energy costs or to invest in on-site generation.
The NSW Government has introduced a range of measures to help businesses manage the impact of rising electricity prices, including the Energy Bill Relief Fund, which provides rebates of up to $500 per year for eligible small businesses, and the Industrial Energy Transformation Fund, which provides grants of up to $5 million for energy efficiency upgrades and on-site renewable generation. The measures are welcome, but they are not sufficient to offset the structural increase in electricity prices that is resulting from the renewable energy transition. Businesses need to invest in energy efficiency and on-site generation to reduce their exposure to volatile wholesale prices, and they need to engage with their energy retailers to secure competitive contract prices. Read more economic analysis at the Business & Markets hub
NSW Budget papers and energy data are available at the NSW Government Treasury. AEMO market data is published at AEMO.
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