Navigating Business Insolvency And The Australian Energy Woes.
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Article Summary.
Australia is confronting twin economic pressures: a surge in business insolvencies and volatile, elevated energy costs.
In the nine months to March 2024, over 7,700 companies entered external administration—a 36% increase from the previous year—with construction and hospitality sectors most affected.
Wholesale electricity prices jumped 88% in Q3 2024 compared to the previous year, compounding financial strain on small and medium-sized enterprises (SMEs). Rising corporate taxes, escalating energy tariffs, and regulatory compliance costs further burden businesses.
Simultaneously, Australia’s energy transition is accelerating, with renewables providing record generation shares.
However, variability in wind and solar output, transmission bottlenecks and extremely high projected costs, potentially over $1 trillion, for large-scale storage infrastructure raise critical challenges around reliability and affordability.
International experiences underline the importance of balancing clean energy ambitions with transitional uses of modern coal and gas technologies under a strict phase-out.
This article argues Australia’s transition must pragmatically balance emissions reduction goals with population growth and business competitiveness.
Key policy strategies include energy efficiency upgrades, business resilience planning, cost management of storage infrastructure, and targeted social protections. Without coordinated efforts, Australia risks intensified insolvencies, declining competitiveness, and erosion of public trust in the energy transition.
Top 5 Takeaways.
1. Business insolvencies surged in 2024–25, led by construction, hospitality, and SMEs.
2. Wholesale electricity prices rose sharply, accelerating cost pressures on businesses and households.
3. Renewables now provide record shares, but firming solutions and grid upgrades are critical for reliability.
4. Modern ultra-supercritical coal and combined cycle gas technologies offer transitional reliability benefits under strict phase-out policies.
5. Managing storage infrastructure costs and social protections is essential to sustain energy transition momentum and affordability.
Table of Contents.
- Introduction: The Dual Challenge
- Pressures Across the Economy
- Cost Burdens Crippling Businesses
- The Renewable Energy Paradox
- International Case Studies and Technology Mix
- Policy Arguments: Modernisation, Not Legacy
- Securing a Balanced Energy Mix
- Business Survival Strategies
- Large-Scale Storage Costs and Affordability Risks
- Grid Build Out, Digital Inertia, and Price Protections
- Domestic Gas Reservation and Energy Affordability
- Balancing Energy Transition with Population Growth
- Conclusion and Outlook
- Bibliography
1. Introduction: The Dual Challenge.
Business insolvencies have reached their highest absolute levels in over a decade. In the nine months to March 2024, 7,742 companies entered external administration, a 36% increase on the same period in 2023.
Construction and hospitality accounted for nearly half of these failures. While the insolvency rate as a share of registered companies is tracking toward 0.30–0.33% for 2024, broadly in line with long‑term averages, the absolute volume is comparable to the 2012–13 peak.
On the energy front, wholesale electricity prices averaged $119/MWh in Q3 2024 — 88% higher than Q3 2023, driven by elevated winter demand, network outages, and reduced hydro generation.
2. Pressures Across the Economy.
Small and medium‑sized enterprises (SMEs) in construction, hospitality, and manufacturing remain most exposed to insolvency risk, representing 27–30% of company failures in 2024.
Energy costs have compounded these pressures: electricity tariffs for small businesses have risen by as much as 52% and gas prices by 32% since early 2022⁹, eroding margins and accelerating closures.
Policy responses under discussion include targeted tax relief, streamlined approvals for energy infrastructure, and greater transparency in regulated sector cost drivers.
3. Cost Burdens Crippling Businesses.
Australia’s 30% corporate tax rate is the fourth‑highest in the OECD. When combined with state and federal levies, the effective tax burden for many firms is significantly higher.
Energy costs have also escalated: retail tariffs for small business customers rose 20–25% through 2023–24, while wholesale spot prices spiked during winter and into Q3 2024. Compliance costs from environmental and operational regulation add further strain, particularly for energy‑intensive industries.
4. The Renewable Energy Paradox.
In September 2024, wind and solar supplied a record 72.2% of total generation during certain intervals. Yet average capacity factors remain 25–40%, necessitating firming solutions and network upgrades.
Globally, solar module prices have fallen by over 90% since 2010, but the cost and pace of transmission and storage build‑out have led to overruns exceeding $10 billion for major projects.
Ultra‑supercritical (USC) coal plants, such as Germany’s RDK 8 at 47.5% net efficiency and combined cycle gas turbines (CCGT) can provide transitional reliability. However, their integration must be time‑bound within a phase‑out framework to mitigate carbon risk.
5. International Case Studies and Technology Mix.
- Japan operates 37 USC coal units.
- South Korea operates 22.
- Germany’s RDK 8 achieves 47.5% net efficiency.
- Italy and Spain have adopted CCGT and high‑efficiency, low‑emissions (HELE) technologies alongside renewables.
Comparative efficiencies:
- Subcritical coal: ~30%
- Modern USC coal: 45–47%
- CCGT gas: up to 60%+
- Wind/Solar: 25–40% (capacity factor)
6. Policy Arguments: Modernisation, Not Legacy.
Policy anchored in pre‑1970 subcritical coal technology is indefensible given its low efficiency and high emissions.
Modern USC and hybrid gas options offer higher efficiency and lower emissions, but must be deployed as transitional measures.
The pace of technological change in the automotive sector illustrates how rapidly efficiency and environmental standards can evolve, a trajectory the energy sector must match.
7. Securing a Balanced Energy Mix.
Efficiency upgrades could reduce grid demand growth by up to 15% by 2030. Modernising baseload power with time‑limited support can improve reliability, but outage‑related economic risks remain substantial, estimated at $1.5 billion per year.
8. Business Survival Strategies.
Firms adopting regular energy audits, plant upgrades, and smarter contracting have achieved 15–20% reductions in energy bills.
Industry groups advocate for policy parity — neutral incentives and transparent pricing, so all technologies compete on equal terms until mature, cost‑effective renewables dominate.
9. Large‑Scale Storage Costs and Affordability Risks.
As Australia accelerates toward an 80% renewable energy target, the challenge of maintaining reliable, 24/7 baseload supply has brought large‑scale energy storage into sharp focus.
Battery Energy Storage Systems (BESS) are central to this vision, providing the firming capacity needed to smooth variable wind and solar output and to meet demand during extended periods of low renewable generation.
Some industry commentators have projected that achieving the storage capacity required for an 80% renewable grid could entail capital costs exceeding $1 trillion over the coming decades.
These estimates are typically based on modelling that assumes multi‑day to multi‑week storage coverage, high penetration of distributed and utility‑scale batteries, and the need to replace most fossil‑fuelled firming capacity with zero‑emissions alternatives.
While such figures are at the upper end of the spectrum and depend heavily on assumptions about technology costs, deployment speed, and system design, they have gained traction in public debate.
The concern expressed by critics is twofold. First, Australia already carries a significant level of foreign debt, and large‑scale borrowing to finance storage infrastructure could increase sovereign risk or crowd out other public investment priorities.
Second, if the bulk of these costs are recovered through electricity market mechanisms, they will ultimately be passed on to consumers via higher network charges or retail tariffs.
For households already under financial stress, even modest increases in electricity bills can be significant.
Energy poverty, defined as the inability to afford adequate energy services, is already a reality for many low‑income Australians, particularly in regional and remote areas where energy costs are higher and efficiency upgrades are less accessible.
A sharp rise in retail prices linked to storage investment could exacerbate these inequalities, undermining public support for the energy transition.
Mitigating these risks will require a combination of strategies:
1. Cost trajectory management — Leveraging economies of scale, competitive procurement, and domestic manufacturing to drive down per‑MWh storage costs.
2. Technology diversity — Complementing BESS with pumped hydro, demand response, and emerging long‑duration storage technologies to reduce reliance on a single, potentially expensive solution.
3. Targeted social protections — Expanding energy bill relief, efficiency retrofits, and community energy programs for vulnerable households to shield them from cost pass‑throughs.
4. Financing innovation — Exploring public‑private partnerships, concessional finance, and staged investment to spread capital costs over time and reduce immediate bill impacts.
International experience suggests that early, transparent communication about cost implications, coupled with visible consumer benefits (e.g., improved reliability, reduced blackout risk), can help maintain public trust.
Equally, rigorous cost‑benefit analysis is essential to ensure that storage investments are optimised for actual system needs rather than theoretical maximums.
The scale of the storage challenge should not be underestimated, but nor should it be viewed in isolation. The long‑term economic cost of inadequate firming, in the form of outages, lost productivity and reduced investor confidence can also be substantial.
Balancing affordability, reliability, and decarbonisation will require careful sequencing of investments, realistic assessment of technology readiness, and policies that ensure the transition is both economically and socially sustainable.
Section 9: Bibliography:
1. CSIRO (2024) – GenCost 2023–24: Final Report – Australia’s national science agency’s annual assessment of current and projected costs for generation and storage technologies, including battery energy storage systems.
2. BloombergNEF (2023) – New Energy Outlook: Australia – Modelling of investment requirements for Australia’s net zero and hydrogen export scenarios, including large scale renewable and storage build out.
3. RenewEconomy (2022) – The Staggering Numbers Behind Australia’s 82% Renewables Target – Analysis of the scale, infrastructure, and supply chain challenges in meeting high renewable penetration targets.
4. Australian Bureau of Statistics – Australian National Accounts: Finance and Wealth – Official data on Australia’s foreign debt and national balance sheet.
5. Australian Energy Regulator – Annual Retail Markets Report – Trends in retail electricity and gas prices, including affordability impacts on households.
6. Australian Council of Social Service (ACOSS) – Energy Affordability and Energy Poverty Reports – Research on the effects of rising energy costs on low income and vulnerable households.
10.0 Grid Build‑Out, Digital Inertia, and Price Protections.
The transition to a high‑renewables grid requires not only new generation but also a substantial expansion and modernisation of Australia’s transmission and distribution networks.
Under the Australian Energy Market Operator’s (AEMO) Integrated System Plan (ISP), Renewable Energy Zones (REZs), new interconnectors, and upgraded substations are essential to connect geographically dispersed wind and solar resources to demand centres.
Investment to date has already been significant. In Western Australia, the state regulator recently approved $9 billion in network spending over five years — $1 billion more than requested to accommodate renewable integration and reliability upgrades.
Nationally, regulated network service providers have secured multi‑billion‑dollar allowances for priority projects, with costs recovered through network charges on consumer bills.
Projected costs for the full build‑out are substantial. AEMO’s 2024 ISP “Step Change” pathway anticipates tens of billions in additional transmission investment by 2050.
Independent analyses place the likely range at $50–80 billion over the next two decades, depending on the pace of renewable deployment, REZ rollout, and interconnector approvals.
While renewables remain the lowest‑cost new generation option on a levelised basis, the capital intensity of the supporting grid infrastructure is a major driver of total system cost.
A parallel challenge is the provision of system strength and inertia. As synchronous coal and gas units retire, the grid loses the natural rotational inertia that stabilises frequency. Digital inertia, also called synthetic inertia, is delivered by inverter‑based resources such as batteries and advanced control systems.
Deploying this capability involves costs for grid‑forming inverters, high‑speed measurement devices, control software, and integration into ancillary service markets. Pilot projects, such as the Victorian Big Battery’s grid‑forming trials, demonstrate technical feasibility but also highlight the premium associated with enabling these capabilities at scale.
Retail price protections exist but have limits. In NSW, SA, and south‑east Queensland, the Australian Energy Regulator (AER) sets a Default Market Offer (DMO) that caps standing‑offer tariffs, providing a safety net against excessive retail pricing.
Transmission and distribution businesses are regulated monopolies, with spending plans scrutinised by the AER to ensure only “efficient” costs are passed through. However, once approved, these costs are ultimately recovered from consumers.
Tariff reform, demand‑side participation, and targeted bill relief for vulnerable households can help moderate impacts, but cannot fully insulate consumers from the capital recovery required for the grid transformation.
Balancing the scale of required investment with affordability will be critical to maintaining public support for the energy transition. Transparent cost‑benefit analysis, staged investment, and diversification of firming technologies can help ensure the grid build‑out delivers both reliability and value.
Bibliography – Section 10.0:
- Australian Energy Market Operator (2024) – Integrated System Plan (ISP) – The national roadmap for generation, storage, and network investments to 2050, including cost–benefit analysis of major transmission projects.
- CSIRO (2023) – Building the Future Grid: Reshaping Australia’s Largest Machine – Research roadmap on grid stability, inverter design, and control technologies for a high‑renewables power system.
- Australian Energy Market Commission (2024) – Efficient Provision of Inertia: Directions Paper – Examination of operational procurement of inertia, including potential for an inertia spot market and cost‑efficiency considerations.
- Australian Energy Regulator – Default Market Offer (DMO) Determinations – Annual determinations setting maximum standing‑offer electricity prices in NSW, SA, and south‑east QLD.
- Australian Energy Regulator – Regulatory Proposals and Determinations for Transmission and Distribution Businesses – Approvals and cost allowances for network investments, including REZ connections and interconnectors.
- Energy Consumers Australia – Electricity Retail Tariff Trends and Affordability Reports – Analysis of retail price drivers, tariff reform, and consumer protections.
11.0 Domestic Gas Reservation and Energy Affordability.
Alongside electricity, the cost of natural gas has become a critical competitiveness issue for Australian industry.
On the east coast, wholesale contract offers in 2024–25 have averaged around $10–12 per gigajoule (GJ), with winter demand spikes pushing spot prices above $14/GJ. These levels remain well above the $3–4/GJ range that was typical before Queensland’s LNG export plants began shipping gas a decade ago.
For energy‑intensive manufacturers, food processors, and other gas‑reliant sectors, this sustained structural price shift has materially increased operating costs.
11.1 Western Australia’s Model.
Western Australia introduced a domestic gas reservation policy in 2006, requiring LNG exporters to reserve about 15% of production for local use.
This measure, embedded before large export projects were approved, has helped keep WA wholesale prices in the $5–7/GJ range.
Long‑term supply contracts to WA industry continue to lock in stability and insulate domestic consumers from global LNG price swings.
By contrast, no equivalent system exists for the east coast domestic market in NSW, Victoria, or Queensland, where gas pricing is now heavily influenced by international LNG benchmarks.
11.2 Calls for an East Coast Reservation.
Growing industrial and consumer concern has prompted stronger calls for an east coast gas reservation mechanism.
In mid‑2025 the federal government launched a review into mandating that a set share of production estimates of 50–100 petajoules (PJ) annually are under consideration, must be reserved for domestic use.
To put this in perspective, east coast domestic demand is roughly 450–500 PJ per year, meaning a 50–100 PJ reservation would only cover 10–20% of total needs. The federal opposition has pledged to introduce such a policy if elected, claiming it could reduce wholesale prices towards $10/GJ.
However, some energy economists caution that because long‑term export contracts are already in place, the short‑term impact would be marginal.
11.3 Structural Supply Challenges.
The longer‑term challenge is supply. The Australian Energy Market Operator (AEMO) and the ACCC both warn of potential shortfalls in the late 2020s as legacy fields in the Gippsland Basin and elsewhere decline.
Projects such as the Narrabri Gas Project (~70 PJ/year potential) in NSW and the Beetaloo Basin (possible >200 PJ/year at scale) in the Northern Territory could materially boost supply if approvals and commercial viability align. Without timely investment, AEMO projections suggest the east coast may even resort to importing LNG, which would mean domestic consumers paying import‑parity prices potentially above $15–20/GJ.
11.4 Impacts on Industry and Households.
High gas prices directly affect industrial competitiveness, particularly for manufacturers and food processors with limited fuel‑switching options.
Some are already signalling output reductions or considering offshore relocation. For households, especially in colder southern states such as Victoria and Tasmania — sustained high gas prices deepen cost‑of‑living pressures, adding to broader affordability concerns.
11.5 Policy Pathways.
Addressing these challenges will require a multi‑pronged approach:
1. Clear policy direction on domestic reservation, adapted to east coast market realities.
2. Streamlined approvals for credible new supply projects, balancing energy security with environmental and social impacts.
3. Demand‑side efficiency initiatives to help households and businesses reduce reliance on gas where possible.
4. Targeted consumer protection and transition support for vulnerable groups.
Without coordinated action, the east coast risks both higher prices and greater supply insecurity — undermining national goals of affordable, reliable, and sustainable energy.
Section 11 Bibliography.
1. ACCC, Gas Inquiry July 2025 Interim Report. Australian Competition and Consumer Commission.
2. AEMO, Gas Statement of Opportunities 2025. Australian Energy Market Operator.
3. Grattan Institute, Getting Off the Gas? Future Challenges for Energy Affordability. 2024.
4. WA Government, Domestic Gas Policy Overview, Department of Jobs, Tourism, Science and Innovation.
5. Australian Parliament, Senate Select Committee on Energy Pricing Hearings, 2024–25.
12. Balancing Energy Transition with Population Growth.
Balancing environmental ambitions with demographic realities is a central challenge in Australia’s energy transition.
The nation’s population is expanding at an average annual rate of around 1.7%, adding roughly 445,000 people each year, predominantly through net overseas migration. This sustained growth intensifies demand for housing, transport, water, and critically, energy. It complicates efforts to reduce emissions while maintaining economic growth and social stability.
These demographic pressures mean that energy policy cannot be developed in isolation. As the Australian Energy Regulator’s State of the Energy Market 2025 notes, shifts in demand patterns are already reshaping both electricity and gas markets. The challenge is to deliver reliable, affordable, and low‑emissions energy to a growing population without undermining industrial competitiveness or household affordability.
A useful parallel can be drawn from China, which, despite being one of the world’s largest emitters, has pursued a pragmatic energy strategy.
This combines record‑breaking renewable deployment — achieving its 2030 wind and solar capacity target six years early, with continued investment in high‑efficiency coal and gas technologies to maintain baseload reliability.
While China’s scale, governance, and industrial structure differ from Australia’s, its approach illustrates how transitional thermal capacity can coexist with aggressive decarbonisation targets.
For Australia, a similarly nuanced pathway could involve:
1. Accelerating renewable deployment while integrating time‑limited use of cleaner coal and gas plants for firming during periods of variable generation and peak demand.
2. Targeted investment in transmission, storage, and energy efficiency programs to enhance renewable feasibility and contain costs.
3. Aligning energy infrastructure with population growth corridors, ensuring that Renewable Energy Zones (REZs), urban expansion, and industrial hubs are planned in tandem. This integration can reduce environmental impacts, optimise capital expenditure, and improve system resilience.
Urban planning will be pivotal. Coordinating energy infrastructure with housing, transport, and industrial development can help manage both costs and emissions. The National Urban Policy emphasises that infrastructure design underpins social, economic, and environmental outcomes, and that clean energy transformation must be embedded in city and regional planning.
In short, Australia’s energy transition must be strategic, regionally tailored, and demographically aware. Drawing lessons from China’s blend of ambitious targets and pragmatic reliability measures can help avoid extremes, mitigate risks, and ensure the transition strengthens — rather than strains — the nation’s economic and social fabric.
Bibliography – Section 12.0:
1. Australian Government – National Urban Policy – Framework for integrating infrastructure, housing, and sustainability in urban growth planning.
2. Australian Energy Regulator (2025) – State of the Energy Market 2025 – Analysis of electricity and gas market trends, demand shifts, and transition challenges.
3. Australian Government Department of Climate Change, Energy, the Environment and Water (2025) – Australian Energy Statistics: Update Report 2025 – National energy supply, demand, and emissions data.
4. Australian Bureau of Statistics (2023) – Population Projections, Australia, 2022 (base) – 2071 – Official projections for population growth and migration.
5. International Energy Agency (2025) – World Energy Investment 2025: China – Analysis of China’s renewable expansion, grid investment, and continued coal/gas role.
6. U.S. Energy Information Administration (2025) – China Country Analysis Brief – Data on China’s energy mix, generation efficiency, and capacity trends.
13. Conclusion And Outlook.
Australia is navigating a complex and critical moment where economic pressures, energy affordability, and environmental ambitions intersect with steady population growth and evolving industrial demands.
The country faces rising insolvency rates in vulnerable sectors and persistent volatility in wholesale electricity and gas prices. These challenges underscore the urgency of a well-considered energy transition that supports both the nation’s economic resilience and social wellbeing.
The surge in renewable energy generation demonstrates Australia’s vast potential, yet significant structural issues remain, variability, grid constraints and the immense capital costs of storage and transmission infrastructure represent real risks to affordability and reliability.
Estimates of multi-trillion-dollar investments in storage capacity highlight the scale of this transition’s financial burden, which must be carefully managed to protect consumers and maintain public trust.
Importantly, Australia’s relatively rapid population growth, adding over 400,000 people annually, adds pressure on energy demand, infrastructure, and environmental management.
This demographic reality calls for a pragmatic and regionally sensitive approach, balancing ambitious decarbonisation goals with reliable, cost-effective energy supply and continued industrial competitiveness.
Lessons from China’s energy strategy illustrate the value of such balance, combining rapid renewable expansion with transitional use of cleaner coal and gas technologies, underpinned by strong pollution controls and regional planning.
Australia’s future depends on similarly nuanced policy frameworks that integrate population growth, infrastructure investment, affordability, and emissions reduction.
Looking ahead, insolvency risks and energy cost pressures will likely persist into the mid-2020s, while the energy transition’s financial and technical demands will shape national debates well beyond.
Transparent, strategic investment accompanied by inclusive social protections and flexible technology portfolios will be vital. With sound governance and clear policy direction, Australia can forge a resilient, sustainable energy future that harmonises environmental ideals with its unique growth and economic realities.
14. Article Sections 1 to 8 Bibliography.
1. Australian Securities and Investments Commission (2025) – Insolvency Statistics
2. Reserve Bank of Australia (2025) – Financial Stability Review
3. Australian Bureau of Statistics (2025) – Business Entries and Exits
4. Australian Energy Market Operator (2024) – Quarterly Energy Dynamics Q3
5. Australian Energy Market Operator – Electricity and Gas Forecasting Data Dashboard
6. Australian Energy Market Operator (2021) – NSW Roadmap Development Pathway Modelling
7. Deloitte Access Economics – Economic Assessment of System Restart Ancillary Services in the NEM
8. OECD (2024) – Corporate Tax Statistics
9. Australian Industry Group – Energy Efficiency and Management Trends
10. Australian Energy Market Commission (2024) – Price Trends Report
11. Export Finance Australia (2023) – Regulatory Impact Analysis
