The Australian Energy Regulator released its latest default market offer determinations, and surprise surprise, electricity prices are going up again. For customers on default offers in NSW, SEQ, and South Australia, the increases range from 4-8% depending on your distributor and tariff type.

For a typical household using 5,000 kWh per year, that’s an extra $80-150 per year. On top of the increases from 2023, 2024, and 2025. At some point you have to wonder when the “temporary” cost pressures will become permanent.

Spoiler: they already have.

What’s driving the increases

The usual suspects, with some new additions:

Network costs. The poles and wires that carry electricity to your house need constant maintenance, plus massive investment in new infrastructure to handle the energy transition. Network charges make up about 40-50% of your bill, and they’re climbing because the grid is being fundamentally rebuilt for renewables.

Wholesale prices. After spiking in 2022-2023, wholesale prices moderated but haven’t returned to pre-crisis levels. Gas prices remain elevated, and gas-fired generators set the marginal price during evening peaks. Until batteries replace gas peakers at scale, this dynamic persists.

Policy costs. Environmental programs, retailer compliance costs, metering charges, and various government levies add up. They’re a relatively small share of the total bill, but they grow each year.

Retailer margins. Let’s not pretend retailers are operating at cost. Competition keeps margins somewhat in check, but the big three (AGL, Origin, EnergyAustralia) aren’t charities. Switching retailers can save you $200-400 per year, which tells you something about the margin built into default offers.

Why solar is the best hedge

Every conversation about electricity prices should end with “…which is why solar makes even more sense.” Here’s why:

Once you install solar, a significant portion of your electricity consumption becomes fixed-cost. You paid for the panels upfront. The ongoing cost is essentially zero. Whether grid electricity costs 30 cents or 50 cents per kWh, your solar generation costs the same: nothing.

This is the concept of hedging, and it’s exactly what large corporations do when they sign long-term power purchase agreements. You’re doing the same thing at a household scale.

A 6.6kW system in Sydney generating 25 kWh/day and self-consuming 40% of that saves you about 10 kWh/day in avoided grid purchases. At today’s average rate of 35 cents/kWh, that’s $3.50/day or $1,277/year.

If prices rise 6% per year (which has been the average over the past decade), that same solar generation will save you $1,354 next year, $1,435 the year after, and so on. By year 10, you’re saving over $2,000 per year. The value of your solar system increases as electricity prices increase.

Try finding another household investment that gets more valuable every year automatically.

What about batteries?

Batteries add another layer of protection. Without a battery, you’re still buying grid power in the evening. With a battery, you store your daytime solar and use it at night, reducing or eliminating your peak-rate purchases.

As electricity prices rise, battery payback periods shorten. A battery that might take 8 years to pay back at today’s prices could pay back in 6 years if prices rise 20% over that period. The investment case gets stronger with every price increase.

What you should actually do

If you don’t have solar, get quotes now. Every quarter you delay is another quarter of paying inflated grid prices when you could be generating your own power.

If you have solar but are still buying heavily at peak rates, investigate time-of-use tariffs and shift your consumption to solar hours. Or start getting battery quotes.

If you have solar and a battery, review your energy plan. Many people set and forget their electricity retailer, but the competitive market means there are often better deals available. Use comparison sites or services like Energy Made Easy to check.

And regardless of your solar situation, switch off the default market offer. It’s almost always the most expensive option. The AER’s reference prices are ceilings, not recommendations. Switching to a competitive market offer takes 10 minutes and can save hundreds per year.

Electricity prices are going up. You can complain about it, or you can install panels and watch the grid price increases become someone else’s problem.