GenCost began as a straightforward research exercise: a way to track how electricity generation and storage technologies were changing, and what those shifts meant for Australia’s future energy system. When the first CSIRO-led cost projections were released in 2017, the work was grounded in stable global conditions and predictable technological trends.
Paul Graham is CSIRO’s Chief Energy Economist and GenCost lead, and he remembers those early days clearly.
“It was a reasonably simple exercise back then, because the global environment was relatively stable and we could focus almost entirely on how technologies were improving., Mr Graham recalled.
Costs for wind, solar PV and batteries were falling year after year, and the challenge was simply to forecast how far and how fast they would continue to drop. At the time, GenCost was primarily concerned with understanding the inherent characteristics of technologies: how manufacturing scale, learning rates and deployment would shape future costs.
But the world changed.
Over the past five years, GenCost has navigated an extraordinary run of global shocks: the pandemic and the inflationary crisis that followed, the Ukraine war, the Iran war, and the sudden surge in global demand for gas turbines driven by data centres. “We’ve had one crisis after another,” Mr Graham says. “It’s been one of the most unstable periods for a long time.”
The project that once focused primarily on technological progress suddenly found itself grappling with the growing influence of geopolitics, disrupted supply chains, global markets, and competing visions for Australia’s energy future.
The early years: when technological change was predictable
In the late 2010s, wind, solar PV and batteries were in the midst of a decade-long cost decline, driven by manufacturing scale, learning rates, and rapid global deployment. The question wasn’t whether costs would fall – it was how quickly.
Solar and batteries, in particular, defied conventional expectations.
“They didn’t behave like other technologies,” Mr Graham reflects. “Their costs continued to fall at an astonishing rate even as their market share climbed.”
Their modularity – from rooftop systems to utility-scale solar farms and batteries – made them uniquely adaptable. And China’s manufacturing dominance kept prices low even as global demand surged.
These technologies continued delivering cost reductions well beyond the point where mature technologies would normally begin to plateau.
During this period, GenCost could focus largely on the inherent characteristics of different technologies: learning curves, manufacturing efficiencies and deployment trends. Global conditions were stable enough that these factors remained the primary drivers of future costs.
In hindsight, it was the calm before the storm.
The era of instability: five years of global shocks
From 2021 onwards, the energy sector entered a period of volatility unlike anything seen in decades. A succession of black swan events reshaped the global energy market. The pandemic triggered a global inflationary event; the Ukraine war sent gas prices soaring; the Iran war created further supply chain uncertainty; and the rapid rise of data centres created a new, urgent source of electricity demand that few had anticipated.
Yet these rare, high-impact events did not affect every technology equally.
“We’ve got this two‑track world now,” Mr Graham explains. “One set of technologies is getting more expensive each year, and another set is still getting cheaper.”
Solar PV and batteries largely continued their cost decline, supported by China’s resilient manufacturing base and expanding production capacity. Wind, gas turbines and many conventional technologies, by contrast, became increasingly exposed to inflation, supply chain disruption and manufacturing constraints, pushing up costs and extending delivery times.
The contrast became increasingly apparent in global deployment. While solar PV and batteries continued to expand rapidly, wind’s growth slowed markedly as higher costs and supply chain pressures took hold.
The data centre boom added a new twist.
“In boom areas, like the United States, data centres have gone up really quickly – and they need a lot of energy,” Mr Graham says. The fastest way to build new dedicated generation capacity in the US is with gas turbines, and global order books filled almost overnight.
“Nobody was prepared for the manufacturing capacity you would need to service this new source of demand,” he says. As a result, gas turbine prices climbed sharply – and are expected to remain elevated for the foreseeable future. The surge in demand has also raised doubts about whether Australia will be able to secure new gas turbines while the United States continues to dominate global orders.
For GenCost, these developments changed far more than a handful of cost assumptions: they fundamentally changed how the project approached forecasting. Early editions could focus on the inherent qualities of technologies themselves, but increasingly, the team also had to consider how unpredictable global events might influence technology costs.
“We can be scientific about inherent qualities,” Mr Graham says, “but world events are more difficult to predict.”
Australia’s turning point: from crisis to resilience
The global shocks were felt acutely in Australia. The Ukraine war pushed gas prices to unprecedented levels, placing extraordinary pressure on the National Electricity Market (NEM). At one point, conditions became so unstable that market operators were forced to suspend normal mechanisms and manually manage the system.
Gas generators, facing extreme fuel prices, often chose not to operate because selling gas elsewhere was more profitable than generating electricity.
Electricity prices spiked to $189/MWh in 2022 – the highest levels in decades.
But the system did not collapse. Instead, Australia began to absorb and adapt to the shock in ways that would prove structurally significant. In just a few years, the nation deployed 6–8 gigawatts of batteries, transforming the dynamics of the evening peak.
“We’ve basically been saved by solar and batteries,” Mr Graham says.
Batteries began competing directly with gas, setting prices instead of following them. In the last year generation prices fell rapidly, dropping to levels not seen since before the Ukraine war – around $60–$80/MWh.
The Iran conflict created another wave of volatility in global gas markets, but its effect on Australia’s electricity system was far more muted.
“We’ve got lower demand for gas at a time when there’s a constriction on oil and gas,” Mr Graham explains. “Transport is outside the scope of GenCost, but in terms of the electricity system Australia has barely noticed the Iran war.”
Retail prices are now also beginning to respond. The Default Market Offer has fallen by around 10 per cent, reflecting the gradual flow-through of lower wholesale prices driven by increased battery deployment.
Australia’s electricity system is therefore becoming progressively less sensitive to global fossil fuel price movements. Increasingly, it is shaped by domestically driven technology deployment, particularly solar PV and batteries.
Looking ahead: what might the next decade hold?
This year’s GenCost findings reinforce the long-term trajectory. Futures markets indicate generation prices are likely to fall further to 2030, settling around $80–$90/MWh. Solar, wind and batteries remain the lowest-cost technologies capable of supporting Australia’s net-zero goals.
Coal, while cost‑comparable in some modelling, does not meet net-zero requirements and has not been a growth technology for nearly two decades.
Gas is expected to continue to play a small but important role in the electricity system – accounting for roughly 3-7 per cent of generation – but its future is increasingly shaped by global demand pressures and rising turbine costs.
Meanwhile, a third group of technologies – including nuclear, carbon capture and storage, solar thermal, offshore wind, ocean energy and fuel cells – remains much harder to assess.
Without commercial deployment at grid scale in Australia, their costs remain difficult to pin down with confidence. These technologies continue to face significant first-of-a-kind technical, social and cost hurdles, meaning reliable Australian cost estimates may not emerge until projects are built.
Offshore wind is the notable exception. With developments planned in Victoria, it is expected to provide a much stronger evidence base through the 2030s as projects move from planning into operation.
Australia’s energy transition is now firmly underway, shaped by years of sustained investment in onshore wind, solar PV and batteries and reinforced by global manufacturing trends.
As Mr Graham puts it, “We’re a long way down the path now to low emission electricity– more than halfway – and that’s partly because of the choices we’ve made here and partly because of what’s happened in China’s manufacturing system.”
What eight years of GenCost have taught us
Eight years on, GenCost has evolved from a project focused on relatively predictable technological learning curves into one that must account for a world shaped by volatility and disruption.
Despite that shift, one underlying pattern has remained remarkably consistent: solar PV and batteries have continued to deliver cost reductions, and helped Australia build an energy system that is increasingly resilient to global shocks.
Looking back, GenCost has performed strongly in forecasting the technologies whose costs continued to be driven primarily by technological learning and manufacturing scale, such as solar PV and batteries.
Where forecasts diverged most significantly was in technologies exposed to global disruptions. Rising inflation, supply chain constraints and geopolitical events pushed costs higher than early modelling could reasonably have anticipated – not because the technologies themselves had fundamentally changed, but because the world around them had.
The GenCost project will continue to provide transparent, scientific projections for Australia’s energy future, now with a deeper appreciation of how global events, manufacturing systems and emerging technologies interact. The past decade has shown us that while technological progress can often be modelled with confidence, the world around those technologies remains far harder to predict: a lesson that will shape GenCost’s work in the years ahead.
