Discount rates for energy infrastructure in Australia
Prepared for Australian Energy Market Operator for the 2026 Integrated System Plan
This report presents a technology-neutral discount rate and technology-specific weighted average cost of capital (WACC) estimates for energy assets. These estimates will inform AEMO’s 2025 Inputs, Assumptions, and Scenarios Report (IASR) and 2026 Integrated System Plan (ISP).
Problem – Need for accurate and forward-looking investment signals
AEMO requires reliable discount rates and cost of capital estimates to inform investment planning for the National Electricity Market (NEM), especially for projects without a final investment decision.
Challenge – Accounting for technological and scenario-based differences
Traditional estimates have not sufficiently differentiated between the financing costs of various energy technologies or projected how these costs may change under different future scenarios. This limits the ability to model realistic investment conditions. Estimates are presented in real pre-tax terms.
Solution – Enhanced WACC modelling for informed system planning
This report introduces separate technology-neutral discount rates and technology-specific WACC estimates in real pre-tax terms. By forecasting these rates across multiple ISP scenarios, AEMO can better assess and plan for future energy investments with improved accuracy and flexibility.
Technology neutral real pre-tax discount rate estimates
The experts behind the research
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Kristian KoldingHead of Consulting, OE Australia
Kristian leads Oxford Economics Australia's Consulting team, working with public and private sector leaders to help them prepare for the future by applying relevant economic theory and forecasts to inform effective policy and business strategy development.
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