A letter to the Minister for Climate Change and Energy
Dear Minister,
I am writing to urge a critical re-evaluation of the Australian Government’s 82 per cent renewable target for 2030 (part of your Powering Australia plan) and its long-term trajectory toward a near-100 per cent intermittent grid. While the ambition for a low-carbon future is shared, the 2026 global energy landscape provides a stark warning: the “free fuel” nature of wind and solar does not translate to lower consumer bills. In fact, as penetration increases, system-wide costs are already accelerating.
Data from the U.S. Concerned Household Electricity Consumers Council (CHECC), updated to reflect 2026 market realities, reveal three structural failures in the ‘high intermittent’ model that Australia must avoid.
- The “storage paradox” and the Gross Domestic Product (GDP) gap
The updated analysis of California’s grid – a peer economy to Australia’s – shows while battery costs have crashed to roughly US$110/kWh in 2026, the storage required for a 100 per cent renewable grid remains economically impossible.
- To bridge seasonal gaps (storing summer surplus for winter doldrums), California still requires an estimated 25,000 GWh of storage.
- Even at 2026 prices, this implies a capital outlay of over US$3 trillion.
- While wind and solar alone now cost roughly US$45/MWh, the “System Levelized Cost of Energy (LCOE)” (which includes the necessary long-duration storage and massive grid/transmission expansion) pushes the total cost of delivered power toward $400–$500/MWh – a roughly fivefold increase over current Australian baseload costs.
- Lessons from the “German experiment” (2018–2026)
Germany provides the most damning empirical evidence. Despite reaching 58 per cent renewable generation in 2025, German households pay 38.4 Euro cents/kWh – some of the highest rates in the world.
- The hidden cost: The savings from renewables have been entirely consumed by a 16 per cent surge in grid fees and the necessity of subsidising a 10 GW ‘safety net’ of gas plants to prevent blackouts during Dunkelflaute (dark doldrums).
- Industrial flight: This price structure has triggered a decoupling of energy policy from industrial reality, with German manufacturing output struggling as energy-intensive industries move to jurisdictions with firm baseload power.
- The new demand reality: The artificial intelligence (AI) surge
The original 2017 IHS Markit diversity study warned of grid fragility; however, the current AI data centre boom has exacerbated this risk. Global demand is rising at 17 per cent annually, and intermittent sources cannot meet the 24/7, high-density load required by modern digital infrastructure. Consequently, major global tech firms are now bypassing intermittent-heavy grids to invest directly in nuclear (Small Modular Reactors (SMEs)) and geothermal, recognising that a “renewables + gas” mix is neither stable nor cost-effective for a modern economy.
- The global disparity: Cost without climate impact
Perhaps the most concerning aspect of this policy is the lack of proportionality between the domestic sacrifice required and the global environmental outcome. Australia accounts for approximately 1.1 per cent of global greenhouse gas emissions.
In 2025, China’s total CO2 emissions stabilised at approximately 15.1 billion tonnes. To put this in perspective, Australia’s total annual emissions (~400 million tonnes) represent just 2.6 per cent of China’s annual output.
Every nine days, China emits more CO2 than Australia does in an entire year. Even if Australia were to achieve a ‘perfect’ zero-emissions grid tomorrow – at the cost of its industrial base – China’s natural emission fluctuations in a single month would completely negate our contribution.
And while Australia shutters its reliable baseload plants, China and India continue to expand. As of early 2026, if all under-construction and permitted plants are completed, coal capacity will increase by 28 per cent in China and 23 per cent in India.
Finally, Australia is often criticised for its high per-capita emissions, but this reflects a small population supporting a massive, energy-intensive resource sector that serves the world.
While Australian citizens are asked to endure ruinous electricity price increases and a potential tripling of system capital costs, under the guise of “climate leadership”, global emissions continue to be dictated by the industrial expansion of major emitters in the developing world.
Forcing Australians into energy poverty through 100 per cent intermittent mandates – when such a move will make no measurable difference to the global climate – is an abdication of economic responsibility. It imposes a massive, unilateral penalty on Australian families for a purely symbolic global gesture.
We are sacrificing our national competitiveness for a rounding error in the global carbon budget. The “82 per cent renewable target” is a high-cost solution to a 1 per cent problem.
- Addressing the “false economy” of intermittency
I anticipate that proponents of the current policy will argue that the falling cost of solar panels and the declining reliability of Australia’s aging coal fleet necessitate a ‘renewables-only’ approach. However, these arguments fail to withstand economic scrutiny.
While critics rightly point to the rising failure rates of aging coal plants, replacing them with weather-dependent, intermittent sources simply trades one form of instability for another. The solution to “unreliable” coal is not “variable” wind, but firm, 24/7 baseload that can maintain grid frequency without the astronomical cost of seasonal storage.
Wind and solar have ‘zero fuel cost,’ but the massive transmission expansion required to connect remote Renewable Energy Zones has effectively replaced fuel costs with record-high grid fees. In 2026, these network charges make up nearly 50 per cent of an Australian bill, proving that ‘free’ energy is an expensive luxury if it cannot be delivered efficiently.
And while it’s often claimed that Australia must “lead” because China is doing the same, this is a selective reading of the data. While China leads in renewable installations, it also commissioned 78 GW of new coal capacity in 2025. China is pursuing a dual track strategy for energy security; Australia is the only major nation attempting a ‘High-Wire Act’ without a safety net of firm baseload power.
Finally, suggestions that AI data centres can provide ‘demand response’ to balance the grid are technically flawed. Modern digital infrastructure requires 99.999 per cent uptime. You cannot run a global neural network on intermittent power, which is why global tech leaders are now bypassing renewable-heavy grids to sign direct power purchase agreements with nuclear providers.
Recommendations
To protect Australian households from ‘energy poverty’ and restore industrial competitiveness, the Government must pivot from a “Renewables-only” focus to a “System-diversity” model:
- Inclusion of nuclear: Follow the lead of the U.S. and EU by integrating Small Modular Reactors (SMRs) to provide zero-emission, 24/7 ‘firming’ that batteries cannot match at scale.
- Focus on System LCOE: Direct the CSIRO and AEMO to report on the total system cost – including transmission and seasonal storage – rather than just the generation cost.
- Long-duration storage diversification: Move beyond lithium-ion for the grid, prioritising technologies that offer lower costs for multi-day storage.
Australia stands at a crossroads. We can follow the high-cost path of Germany and elsewhere, or we can embrace a diverse, reliable, and truly affordable lower-emissions grid.
Sincerely,
Your country, Australia.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
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