Australia’s nuclear debate to shape election, but immediate energy security hinges on gas

Energy policy is set to take center stage at Australia’s upcoming federal election, which will be held on or before 17 May 2025. The election will serve as a referendum on nuclear energy, aiming to address the country’s long-term energy needs while tackling rising energy prices and the high cost of living. However, grid instability, power shortfalls, a looming gas shortage and infrastructure bottlenecks have created a perfect storm that could derail the country’s more immediate energy transition as energy security issues come to light.

Australian voters will face a crucial decision: an 82% renewable energy target under the incumbent Labor government or the Liberal-National Party's (LNP) proposal to build 13 gigawatts (GW) of nuclear power by 2051 to replace coal generation. Rystad Energy’s research forecasts that achieving the 82% target will be challenging, with more realistic projections under Labor estimating a renewable share of around 65%: a shortfall of 17%, even under the most optimistic scenarios. If the LNP wins, the country’s renewable energy share is expected to be lower due to the party's focus on nuclear power, making the 82% target a distant goal and highlighting the underlying challenges affecting Australia's energy transition, regardless of which party emerges victorious.

As clean energy reliability becomes a priority ahead of the election, further research from Rystad Energy points to an urgent need for gas and liquefied natural gas (LNG) in Australia. By 2028, New South Wales (NSW), South Australia and Victoria (VIC) are projected to face capacity shortfalls due to the retirement of coal and gas plants like Yallourn West and Eraring. To mitigate this loss, gas generators and gas-peaking facilities—used during peak demand—will be essential. Batteries and pumped hydro are also expected to play a crucial role, with 3 GW projected to be energized by year-end, addressing grid instability in one of the world’s most unpredictable electricity markets. However, infrastructure bottlenecks and longer supply wait times may hinder the timely development of renewables and energy storage, significantly affecting energy security for Australians.

NSW, VIC and Tasmania (TAS) are already testing their gas supply security for winter with steeply declining production from legacy offshore Victorian fields increasing their reliance on Queensland. Compared to the crisis year of 2022, these states now have severely diminished buffer capacity, which could trigger another price surge if multiple supply and demand shocks occur. Even in our most optimistic scenario, LNG imports to Australia are looking like an inevitability,

If Labor wins the upcoming federal election, Rystad Energy estimates that Australia will add a record 7.2 GW to its grid annually of both renewable energy and gas, primarily in Queensland, Victoria and New South Wales—the highest annual increase in Australia’s history. Conversely, an LNP victory would likely lead to a reduction in solar and wind power deployment, but by how much is the key unknown.

Renewable energy adoption is accelerating at unprecedented rates, and Australia is at the forefront of a battery revolution. However, more action is urgently needed to prevent a power shortfall in the coming years. The continent’s dispatchable generation is nearing critical levels and decisions made today will be pivotal in avoiding blackouts. This challenge extends beyond Australia, as countries around the world are increasingly relying on gas to support their energy transitions. This global shift is driving a surge in demand for gas-powered generation, resulting in longer lead times for the delivery of critical heavy turbine equipment. The window of opportunity to mitigate these challenges is rapidly closing. If we do not act swiftly, we risk an inflationary bubble caused by soaring gas and power prices, resulting in a heightened cost of living for consumers.

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Momentum has been positive under Labor’s term for renewables investment with forecasts from Rystad Energy showing 2025 to be the highest year ever for new capacity energized. A majority of these new additions, primarily under the Labor Party’s ruling, will come from Australia’s fourth pumped hydro project, Kidston, as well as the 660-megawatt alternating current (MWAC) Kurri Kurri gas plant located in the Hunter region of New South Wales. The project from Snowy Hydro will be the largest gas plant to energize in the last 15 years, while Genex’s 250-MWAC Kidston pumped hydro project will be the first pumped hydro project to energize in 41 years.

Additionally, 2.9 GW of utility battery capacity is expected to energize in 2025, with potential for further additions due to the rapid construction and energization timelines for batteries compared to other technologies. These batteries will add an estimated 1.7 to 2.0 terawatt-hours (TWh) of annual demand to the grid. This will add stability to the Australian market by shifting daytime solar output to the evening peak. However, the retirement of aging coal plants, winter heating demand when solar output is low and extreme weather events still need to be addressed. Gas peaking plants could provide backup support, but gas prices, influenced by both domestic and international markets, will impact the cost structure of gas generation facilities. While volatility is expected to subside, these wildcards remain crucial in shaping the future.

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Contacts 
Gero Farruggio
Head of Australia
Phone: +61 02 8067 8468
gero.farruggio@rystadenergy.com

Kaushal Ramesh
Vice President, Gas & LNG Research 
Phone: +61 02 8067 8468
kaushal.ramesh@rystadenergy.com

Kartik Selvaraju
Media Relations Manager 
Phone: +65 8779 4619
kartik.selvaraju@rystadenergy.com 

About Rystad Energy 
Rystad Energy is a leading global independent research and energy intelligence company dedicated to helping clients navigate the future of energy. By providing high-quality data and thought leadership, our international team empowers businesses, governments and organizations to make well-informed decisions.

Our extensive portfolio of products and solutions covers all aspects of global energy fundamentals, spanning every corner of the oil and gas industry, renewables, clean technologies, supply chain and power markets. Headquartered in Oslo, Norway, with an expansive global network, our data, analysis, advisory and education services provide clients a competitive edge in the market. 

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