Environmental Energy Charges
The True Cost to Customers
Let me be upfront: politics has never been my passion.
There’s way too much spin, and if I watch Question Time, I’m left shaking my head in amazement that people in power behave this way. Ok, not all of them, but indeed too many for my liking.
But energy? That’s my thing. So, while heated debates are ongoing regarding who has the best energy policy, it has got me thinking more about how policy affects our energy bills.
Yes, your bill includes government-mandated renewable energy charges, which you have been paying since 2011. And yes, once you break it down by usage, tax brackets, and required revenue, the cost is, frankly, a little horrifying.
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When you spend your days elbow-deep in electricity bills deciphering charges, eventually you can’t help but look under the political hood, especially when an election is around the corner. So, whether you’re a curious customer, a small business owner, or someone just trying to make sense of their power bill, I’ve put together this no-nonsense (and occasionally eye-widening) breakdown.
Knowledge is power; the more you understand how these charges work, the better you can question them. Of course, always do your own research, but here’s my take on the numbers.
Disclaimer:
I‘ve reviewed tens of thousands of energy bills, commercial contracts, and tenders to provide you with this data-driven analysis and Chat GPT has assisted in researching.
Understanding Environmental Charges
Australian electricity users—households and businesses—are helping fund the country’s shift to renewable energy through mandatory environmental charges. These costs are embedded in electricity bills and support national schemes like the Large-scale Renewable Energy Target (LRET) and Small-scale Renewable Energy Scheme (SRES). In 2025, New South Wales introduced additional environmental levies, further increasing the state’s energy bills.
Understanding how these charges work, how much they cost, and what they mean for your bottom line is essential for transparency and budgeting. I have broken the analysis into three usage categories for perspective.
This is from our own power bill.
Just two of us work from home, the cat and the pool. We have an 8kW solar system, and I admit we aren’t stingy with the air conditioning.
Such as, a small independent grocer, medium-sized office building, small daycare, or café/restaurant.
Let’s think of this one in two parts: either one larger office building, a small manufacturer, pub, or club, OR a business with multiple meters or locations, such as an aged care organisation or not-for-profit community services.
Timeline of Renewable Energy Charges on Electricity Bills
This is a timeline of when LGC and STC charges (from the LRET and SRES schemes) began appearing on Australian electricity bills. It is designed to help customers understand the history and purpose of these charges.
2001
Renewable Energy (Electricity) Act introduced
Scheme – Original RET
Impact on Customers
Introduced mandatory renewable energy targets
2011
RET split into LRET and SRES
Scheme – LRET & SRES
Impact on Customers
Created separate schemes for large- and small-scale systems
2011
LGC and STC costs start appearing on bills
Scheme – LGC & STC
Impact on Customers
Retailers begin passing costs to customers
2015-2025
LGC and STC prices fluctuate with market demand
Scheme – Ongoing
Impact on Customers
Visible increase in environmental charges on bills
2025
NSW Environmental Levies introduced
Scheme – State-Based
Impact on Customers
Added new environmental costs on top of federal schemes
2030
Scheduled end of LRET and SRES
Scheme – Phase-out
Impact on Customers
Expected cessation of certificate schemes
The charges
They are broken down into three components, with NSW paying an extra state-based charge.
1. Large-scale Renewable Energy Certificates (LGC’s)
Part of the LRET is to fund wind farms, solar farms, and other major renewable projects and it ends in 2030—the charge: 1.0 – 1.5 cents per kWh.
Annual costs to customers:
- Residential: $50 – $90
- Small Business: $2,500 – $3,750
- Large Business: $10,000 – $15,000
2. Small-scale Technology Certificates (STC’s)
The SRES funds rooftop solar and other small-scale systems and is set to end in 2030. The charge: 1.2 – 1.6 cents per kWh
Annual costs to customers:
- Residential: $60 – $96
- Small Business: $3,000 – $4,000
- Large Business: $12,000 – $16,000
Together, the Combined Impact (LGC + STC)
The total charge: 2.2 – 3.1 cents per kWh.
Annual costs to customers:
- Residential: $110 – $186
- Small Business: $5,500 – $7,750
- Large Business: $22,000 – $31,000
3. Additional (NSW only) Environmental Charges (2025 Onward)
To fund renewable energy zones and grid upgrades. Charge: 0.5 – 1.0 cents per kWh
Annual costs to customers:
- Residential: $25 – $60
- Small Business: $1,250 – $2,500
- Large Business: $5,000 – $10,000
Together, the Combined Cost Impact (LGC + STC) + (NSW)
The total charge: 2.2 – 3.1 cents per kWh.
| Customer Type | Annual Usage (kWh) | Est.Cost pa | Combined Est.costs in NSW |
|---|---|---|---|
| Residential Household | 8,000 | $110-$186 | $135-$246 |
| Small Business (e.g. Independent Grocer) | 250,000 | $5,500-$7,750 | $6,750-$10,000 |
| Large Business (e.g. NFP Aged Care) | 1,000,000 | $22,000 – $31,000 | $27,000 - $41,000 |
Residential Cost Pre-Tax
Depending on an individual’s marginal tax rate, a person must earn pre-tax income to pay the environmental charges of between $135 and $246
| Tax Bracket | Gross Income | Gross Income (NSW) |
|---|---|---|
| 19% | $167 to $304 | $198 to $378 |
| 32.5% | $200 to $364 | $237 to $453 |
| 37% | $214 to $390 | $254 to $486 |
| 45% | $245 to $447 | $291 to $556 |
Small Business Revenue Required
Depending on the profit margin, revenue will vary.
| Profit Margin | Revenue | Revenue (NSW) |
|---|---|---|
| 5% | $110,000 to $155,000 | $135,000 to $200,000 |
| 15% | $36,667 to $51,667 | $27,000 to $66,667 |
| 25% | $22,000 to $31,000 | $27,000 to $40,000 |
Large Business Revenue Required
Depending on the profit margin, revenue will vary.
| Profit Margin | Revenue | Revenue (NSW) |
|---|---|---|
| 5% | $440,000 to $620,000 | $540,000 to $820,000 |
| 15% | $146,000 to $206,667 | $180,000 to $273,333 |
| 25% | $88,000 to $124,000 | $108,000 to $164,000 |
Electricity Price Trends (2021–2025)
- Wholesale energy market volatility has increased pricing unpredictability.
- Grid upgrades, renewables investment, and regulatory costs are passed onto consumers.
- Environmental schemes add further upward pressure on prices.
Subjective Pros and Cons of Renewable Energy Charges
- Drives renewable energy adoption and emissions reduction.
- Supports national sustainability goals.
- Funds solar and grid infrastructure at both household and national levels.
- Can enhance a business’s ESG profile.
- Schemes have a defined end date (2030), offering planning certainty.
- Possible cost stability if charges are locked in via retail contracts.
- Mandatory charges — no opt-out, regardless of personal benefit.
- Lack of transparency: Consumers are often unaware of what they’re paying for.
- Benefits are unevenly distributed (e.g., regional vs. metro solar uptake).
- Smaller users rarely receive direct communication or guidance.
- Risk of “greenwashing” by some retailers using compliance as marketing.
Why This Matters
Electricity costs have surged over the past decade, including government-mandated charges for renewable energy. While these schemes have environmental merits, they impose real financial burdens on families and businesses.
Many consumers don’t realise:
- These costs are unavoidable.
- They’re not listed on all bills.
- They reduce disposable income, or erode profit margins in the case of businesses as you will learn from this report.
Conclusion
Australia’s renewable energy targets are part of government policy aimed at supporting the transition to cleaner energy sources.
These initiatives are funded through mandatory schemes that add real costs to electricity bills — costs that are often not clearly explained, yet are paid by all consumers, regardless of their views or circumstances.
Staying informed means staying in control.
Whether you support the direction of these policies or question their impact, understanding what you’re paying for is the first step toward making smarter decisions for your household, your business, and your bottom line.
Small Business Cost Example (250,000 kWh/year)
Let’s look at a revised small business example using 250,000 kWh per year — typical for a regional supermarket or a medium-sized hospitality business.
- Annual Usage: 250,000 kWh
- Estimated Environmental Charges: $7,750 (based on 3.1 cents per kWh)
- Assumed Profit Margin: 10%
- Revenue Required to Cover Charges: $77,500
Even a medium-sized business must generate significant additional revenue just to break even on unavoidable environmental charges. This demonstrates why understanding your electricity cost components is critical to long-term business profitability.
Sources
https://en.wikipedia.org/wiki/Mandatory_renewable_energy_target
Political Parties’ Renewable Energy Policies in alphabetical order
- Maintain and enhance existing schemes.
- Aims for 82% renewable electricity generation by 2030.
- Committed to $2.3 billion in household battery storage support.
- Providing energy bill relief: an additional $150 off bills in 2025, on top of $300 in 2024/25.
- Reform or replace existing schemes.
- Supports a balanced mix of renewables, gas, and nuclear power.
- Critical of current schemes, citing higher energy costs.
- Plans to introduce nuclear power in seven locations.
- Expand and accelerate renewable initiatives.
- Targeting 100% renewable energy by 2030.
- Propose a publicly owned renewable energy provider.
- Advocate for phasing out fossil fuel subsidies and infrastructure.
- Reduce or eliminate renewable energy charges.
- Support coal and gas for lower energy prices.
- Oppose large-scale renewable policies and subsidies.
- Abolish subsidies and introduce renewable energy royalties.
- End all renewable subsidies, citing market distortion.
- Propose a 10% royalty on renewable wholesale sales to fund cleanup.
- Plan to withdraw from net-zero targets and the Paris Agreement.
- Support baseload energy (coal, nuclear, gas, hydro).
Understanding the Acronyms: RET, LRET, SRES, LGCs, STCs, and LRECs
Australia’s renewable energy policies involve a web of schemes and acronyms. Here’s a simplified guide to help you understand what you’re paying for on your energy bill:
RET – Renewable Energy Target
The overarching national policy that requires a certain percentage of Australia’s electricity to come from renewable sources. It is split into two parts: LRET (large-scale) and SRES (small-scale).
LRET – Large-scale Renewable Energy Target
Supports utility-scale renewable energy projects like wind farms and solar farms. Creates LGCs. Ends in 2030.
SRES – Small-scale Renewable Energy Scheme
Supports residential and small-business systems like rooftop solar panels. Creates STCs. Also ends in 2030.
LGC – Large-scale Generation Certificate
Issued to large renewable energy generators for every MWh of electricity they produce. Retailers buy these to meet their LRET obligation.
STC – Small-scale Technology Certificate
Issued upfront based on the estimated generation of eligible small-scale systems. These are sold to energy retailers.
LREC – Large-scale Renewable Energy Certificate
Just another name often used for LGCs. Not a separate scheme or certificate.