Three hours of free electricity a day: Australia's solution to high energy prices
The government wants to shift consumption towards peak solar energy, but experts and employers doubt its effectiveness.
SydneyOne of the promises that has haunted Australian Prime Minister Anthony Albanese since he won the 2022 election is to lower energy costs. During that election, which returned Labor to power after a decade, Albanese promised that bills would fall by AU$275 (about €160) by 2025. Three years later, and despite efforts from the right, Labor renewed its majority last May without any change. According to Energy Consumers Australia, the cost of electricity and gas remains a concern for 79% of households. Now the government is proposing legislation to introduce three hours of free energy between 11 a.m. and 2 p.m., starting this July. "The Solar Sharer Offer is about ensuring that we make the most of solar energy, including ensuring that the benefits of cheap solar energy reach consumers who don't have solar panels," said Energy Minister Chris Bowen, in a country with four million residential solar installations.
Presented at the end of 2025, the proposal from the Department for Climate Change, Energy, Environment and Water comes after the Treasury decided to end subsidies of up to $300 a year (about €180) on all energy bills. However, not all households will be able to participate in the Sharer Solar Offer, as initially only customers with a smart meter in South Australia, Southeast Queensland, and New South Wales (where Sydney is located) will be eligible.
"The three hours of free energy will apply if you're on a regulated tariff, and at the moment that's only 10% of consumers. The rest are part of distributor offers, and some already offer similar products," says Alison Reeves, Director of Energy and Climate Change at Grattan. For Reeves, the success of the measure will depend on the government's ability to control prices at other times of the day: "If you tell a bakery that it has to give away bread between 3 and 6, at 11 it will be more expensive, right? They'll want to maintain their profits," he emphasizes.
Since Minister Bowen announced the measure in November, distribution companies have taken action. The Australian Energy Council (AEC), the trade association that includes Energy Australia, Origin, and AGL (the Big Three In a highly concentrated market), they say they are not against the measure, but criticize the government's haste in implementing a regulation they describe as "complex." "The main problem is that during those three hours, distributors will still have to pay the cost of the network," says Carl Kitchen, spokesperson for the AEC, "so this will either mean a loss of profits or will lead to price increases at other times."
Since November, the AEC has been in contact with the Department of Energy to try to influence the new regulation. In a letter to Electra Pappas, head of the Department's branch for the electricity market, Jo de Silva of the AEC asserted that the proposal "risked creating losses in profits" and that regulations should remain "based on principles, rather than prescriptive."
Furthermore, the AEC suggests that the measure could benefit wealthier consumers who can install batteries and use them to store energy, although a search by the Grattan Institute shows that neither solar panels nor batteries installed to date are found in the neighborhoods or postal codes with the highest average energy consumption.
After announcing the measure in November, Bowen has begun to outline the regulations with principles such as including a possible limit on the energy that can be consumed during free hours, as suggested by the AEC. The industry association argues that profit margins are "very low," although according to a 2024 study by the Australian Competition & Consumer Commission, distributors achieved margins in 2023-2024 similar to the pre-pandemic period after five years of narrower margins.
The Department of Energy argues that Solar Share is a good way to take advantage of the high generation of renewables during the day, when it reaches levels of 70% or more. According to their forecasts, households could reduce their bills by between $400 and $1,000 (approximately €230 to €580) if they shift 10% to 20% of their daily consumption to the peak hours of the day. However, one of the drawbacks is that, according to data from the Australian Energy Market Commission, less than half of the homes in the affected areas have a smart meter.
For Reeves, one of the biggest trade-offs of the proposed regulation is seeing if people are able to change their energy consumption. However, he acknowledges that there is "evidence" that consumption increases when energy is free and warns that, if this happens on a large scale, there could be a capacity problem on the grid.
The price of energy
Besides being a headache for Albanese, the price of energy has ignited a debate in which increasingly more voices on the right suggest continuing to burn coal while fueling opposition to renewables in parts of society. From the Grattan Institute, Alison Reeves indicates that factors such as the war between Russia and Ukraine have driven up coal and gas prices, and Australia—despite being an exporter—has paid the price. In the case of gas, companies export at very attractive prices, while the local market is exposed to volatility when it needs to generate energy. "Part of the solution is to reduce exposure to international markets, which means increasing the presence of renewables in the grid," she explains. But Reeves points out that there are actions to lower bills, such as improving thermal insulation or fully electrifying homes, without neglecting the implementation of renewables, which, currently, are the most economical way to generate energy in Australia: "Most households spend half as much."
