Key points
- GenCost is one of several analysis documents that contribute to future low emission electricity planning in Australia.
- Since 2018, the GenCost report has shown onshore wind and solar, supported by other technologies, are the cheapest forms of newly built electricity generation.
- Gas with carbon capture and storage (CCS) and onshore wind follow as the next lowest cost options.
This explainer was updated on 17 December 2025 with the release of the Draft 2025-26 GenCost Report.
Electricity generation accounts for about a third of Australia's greenhouse gas emissions and presents our nearest-term opportunity to cut emissions in line with 2030, 2035 and 2050 targets.
Decarbonisation is needed across all sectors, but transitioning electricity first allows other industries, such as transport and manufacturing, to use renewable electricity as they transition.
That's why understanding the costs of different generation technologies – renewables, nuclear or gas – is central to guiding Australia's electricity transition.
The GenCost report is a key cost analysis document that contributes to this planning. It is developed in consultation with industry and stakeholders to ensure the data meets user needs.
Over time, GenCost has become a trusted and widely referenced source – though its findings are sometimes selectively interpreted in public debate. GenCost is policy and technology neutral, and complex. Let's explain GenCost's use of industry standard modelling on costs, which attracts public interest.
What is the GenCost report?
GenCost is a collaboration between CSIRO, Australia's national science agency, and the Australian Energy Market Operator (AEMO) to update the costs of electricity generation, energy storage and hydrogen production. GenCost reports are developed over an annual cycle and includes opportunities for government, industry, the private sector, and economic specialists to ask questions and provide input. Each year more than 100 different organisations do.
GenCost was first published in 2018 to create a common data set that could be used across the energy sector to enable standardised electricity system modelling. GenCost responds to the question: what will it cost to build different electricity generation technologies now and in the future?
New cost projections are released to government and industry via a draft consultation report in December each year. The capital costs of technologies are updated each year with input from an engineering firm. The final report, released mid-year, reflects the feedback and input received.
As well as referencing a range of relevant national and international energy reports, stakeholder consultation and input is a critical part of the process to analyse and update GenCost’s data and projections.
How GenCost calculates costs
GenCost provides three sets of data for current and projected costs:
- Capital costs: the upfront cost of building a generation or storage asset.
- Levelised cost of electricity (LCOE): the average cost to build and operate an individual generator technology over its lifetime, expressed per unit of electricity.
- System levelised cost of electricity (SLOE): the average cost of electricity when a portfolio of generation and storage assets are deployed to meet total electricity demand.
GenCost's current and projected capital costs for electricity generation and storage technology are a necessary and highly impactful input into electricity market modelling studies, such as those conducted by AEMO. Governments, regulators, and private industry use capital cost data for a range of planning and forecasting purposes, such as evaluating new investments and consideration of alternative policies.
LCOE on the other hand, is a simple, widely used metric that provides a quick way of comparing the competitiveness of alternative sources of electricity generation.
SLOE considers the broader impacts of integrating multiple energy sources into the grid using a system modelling approach.
SLCOE is the best measure for projecting future average generation costs, while LCOE is helpful for comparing the costs of individual technologies, even those that may not end up in the lowest-cost mix.
What can levelised cost of electricity (LCOE) tell us?
LCOE is useful starting point for comparing the average generation cost of different technologies such as solar, wind, coal or gas – either now or in the future.
It works like calculating the average cost of making any product. You add up the costs to build and run the technology over its lifetime, then divide by how much electricity it's expected to produce. This gives a standard cost per unit of electricity, making it easier to compare options.
A lower LCOE suggests a technology is more cost-competitive, but it doesn’t tell the whole story. Investors still need to assess local factors like site conditions, market rules, and integration with the wider grid.
Because LCOE shows the break-even price needed to justify new investment, it can also indicate the electricity price required to bring new capacity of that technology online.
What can system levelised cost of electricity (SLOE) tell us?
SLCOE adds up all the costs of running an electricity system – investment in generation, storage and transmission, connection costs, fuel, and ongoing operations – then divides that by total electricity demand.
Unlike LCOE, which looks at individual technologies, SLCOE captures the full cost of integrating everything needed to deliver reliable power.
SLCOE is an indicator of the average future cost of generating electricity. But it's not the whole story – market factors like supply and demand, fuel price swings, and competition also influence generation prices.
That's why actual prices can end up higher or lower than the system cost. For context, generation costs make up about 35% of your retail electricity bill.
Are renewables still the cheapest low-emission energy option?
Yes. Since GenCost began in 2018, it has consistently found renewables to be the lowest-cost source of new low-emission electricity.
Our modelling shows the least cost system combines onshore wind, solar PV, storage, and either gas or hydrogen. These costs include additional transmission and system security measures.
As emissions targets tighten towards 2050, the role of gas declines, with zero-emission hydrogen gradually taking its place. Adding other low-emission technologies, such as nuclear, offshore wind, or coal and gas with carbon capture and storage (CCS) only increases average generation costs.
What is AEMO's Integrated System Plan (ISP)?
AEMO's Integrated System Plan, uses GenCost's capital cost data, along with other inputs, to model the least-cost pathway to reliably supply electricity while supporting Australia's net zero transition.
The ISP examines the best mix of:
- Generation technologies
- Storage options
- Transmission infrastructure.
AEMO's modelling consistently shows that variable renewables will provide the bulk of Australia's future electricity, supported by a mix of storage, transmission and flexible generation to ensure reliability.
The bottom line
GenCost provides independent, up-to-date cost data for electricity generation, storage and hydrogen technologies, and is a key input for energy planners, investors and policymakers as Australia’s electricity system evolves.
The report doesn't advocate for specific technologies or policies. Instead, it offers a transparent, evidence-based view of current and projected costs, tested through consultation with over 100 stakeholders each year. That's what makes GenCost a trusted reference point across industry and government.
While costs and technologies will continue to shift, renewables remain the lowest-cost new-build option, and the report recognises the ongoing need for a mix of technologies to ensure reliability and support emissions reduction goals. GenCost will continue to track these developments, delivering updated insights each year to help inform Australia's energy transition.