Some energy sources might be "cheaper" on paper, but what actually delivers the lowest cost per kilowatt-hour (kWh) in the real world? That’s the million-dollar question for Australian households and businesses trying to cut costs. Let’s break it down, bust a few myths, and look at the cheapest energy source per kWh — not just today, but as the market keeps shifting under our feet.
Globally, the cheapest energy per kWh is now solar and wind — especially utility-scale solar farms in sunny regions. As of late 2024, utility-scale solar costs as low as 1.5–3.0 cents USD per kWh (that’s around 2–5 cents AUD), outpacing coal, nuclear, and even gas.
But in real-world Aussie business bills? The cheapest energy isn't just about generation cost — it’s about access, reliability, and contract deals.
You’ve probably noticed two businesses next door to each other with wildly different energy bills. That’s not just usage — it’s driven by:
Tariff structures (time-of-use, flat, demand charges)
Retailer margins and hidden fees
Network location (NSW vs SA? Night and day)
Contract terms (fixed vs variable rates)
The real game-changer? How and where you buy your energy.
Let’s run through the main energy sources and see how they compare per kWh — both in generation cost and real-world cost to the consumer.
| Energy Source | Average Levelised Cost (LCOE) per kWh | Real-World Aussie Access Cost | Reliability | Environmental Impact |
|---|---|---|---|---|
| Utility-Scale Solar | $0.02 – $0.05 AUD | Low in sunny regions | Medium | Low (clean) |
| Wind (onshore) | $0.03 – $0.06 AUD | Variable by state | Medium-High | Low (clean) |
| Rooftop Solar (Home) | $0.00 – $0.10 AUD (after rebates) | Free once installed | High (day) | Very Low |
| Coal | $0.10 – $0.14 AUD | High, phasing out | High | Very High |
| Gas Peaker Plants | $0.14 – $0.22 AUD | Very High | High | High |
| Grid (Mixed Source) | $0.22 – $0.38 AUD | Varies by provider | High | Mixed |
Note: LCOE is the Levelised Cost of Energy — the average cost to build, run, and maintain a source over its lifetime.
Yes — especially when it comes to large-scale solar farms and rooftop systems. For households or businesses that install panels, the marginal cost per kWh becomes effectively zero after setup.
That said, there’s an anchoring bias here — we assume that since solar panels are expensive upfront, they must be expensive overall. But spread over 10–15 years? They're often cheaper than grid electricity by a mile.
Add in government rebates, Small-scale Technology Certificates (STCs), and feed-in tariffs, and the math gets even better.
Intermittency: No sun? No solar. No wind? No wind. Simple.
Storage costs: Batteries are still pricey, although falling fast.
Grid integration: In some areas, excess solar can’t be exported.
That’s why most energy strategies use a blend — solar + grid backup or solar + batteries.
Anyone who’s tried going off-grid entirely knows the reality: storage can double or triple your payback period — unless you’re in the bush or on a remote site.
For most Aussie businesses, you won’t build your own wind farm, but you can:
Use rooftop solar if space and funding allow.
Switch to cheaper business energy plans using renewable-sourced grid power.
Sign up for Power Purchase Agreements (PPAs) or green energy contracts.
The trick? Compare plans regularly and watch for hidden fees.
One Melbourne café slashed 20% off their bill simply by switching to a fixed-rate, solar-sourced retailer with no demand charges. It took them 15 minutes.
This is where framing effects kick in.
Retailers often pitch “lower base rates” — but only during off-peak times. The problem? Most businesses run during peak hours, where rates can double.
Smart metering helps you track this. Better yet, tools like a Free Business Energy Bill Comparison service can help you decode the fine print.
Don’t underestimate this. One retailer may advertise 25c/kWh — but with demand charges, your actual rate could hit 45c+.
Here’s where you need to watch for behavioural traps:
Exit fees if you change plans early
Bundled supply charges that spike at usage thresholds
Introductory discounts that vanish after 3 months
It’s the classic commitment bias — we stick with a provider too long simply because it feels familiar.
Let’s put some behavioural science to work. Try these nudges:
Defaults: Use a broker that defaults to the cheapest clean plan
Ease: Automate annual bill comparisons
Anchoring: Don’t let one bad year set your expectations
Loss aversion: Think of how much you’re losing by NOT switching
And when possible, leverage social proof — ask similar-sized businesses in your area what they’re paying.
It changes year to year, but here's the 2024–25 cheat sheet:
Tasmania (hydro-heavy): Generally cheapest for residential
South Australia: High solar penetration = midday dips in prices
Victoria/NSW: Competitive due to retailer variety
QLD: Often higher due to network costs
WA: Limited competition = fewer deals
Short answer: yes.
The International Energy Agency (IEA) forecasts solar and wind to drop another 15–20% in LCOE by 2030. Australia’s renewables roadmap supports this, aiming for 82% renewables in the grid by 2030.
Storage is the missing piece — but with investment in pumped hydro and better batteries, that gap is closing.
For now, combining rooftop solar, smarter plans, and tech-driven comparisons is your best bet.
A boutique winery in regional SA installed a 30kW rooftop solar system in 2023. They halved their bill in year one, paid off their system in three years thanks to a state grant, and now run daytime ops almost entirely off solar.
They still use grid power at night — but at off-peak rates.
The win? Predictability. And that’s gold in business.
What is the cheapest energy per kWh in Australia today?
Utility-scale solar is the cheapest generation source. For end users, the cheapest option is often rooftop solar or negotiated fixed-rate retail plans.
Is nuclear cheaper than solar or wind?
No. Nuclear is more expensive both to build and run. Its LCOE is significantly higher than solar and wind.
Can I get free electricity from solar?
Technically yes — after the panels are paid off. But you still might need grid access and pay supply charges.
In a market full of smoke and mirrors, the cheapest energy per kWh isn’t always about tech — it’s about smarter choices and behavioural nudges. Businesses that consistently review their plans, use rooftop solar, and compare deals regularly tend to come out on top.
To make those smarter choices, some start with a Free Business Energy Bill Comparison — and find they’re paying more than they should.
For a deep dive into how renewables are transforming global cost curves, this IEA report on renewables explains it well.