Origin Energy & AGL: Are Utility Stocks a Sell After Solar Sharer Policy?

As of early November 2025, Origin Energy (ASX: ORG) fell 3.8% to $8.42, while AGL Energy (ASX: AGL) dropped 3.8% to $10.15, after the federal government unveiled its “Solar Sharer” programme mandating three hours of free electricity daily from July 2026. The policy directly targets the profit margins, supporting both companies’ 6%+ dividend yields. For income investors who’ve relied on Australian utility stocks as defensive holdings, the question is whether these dividends can survive or if it’s time to find safer income plays.

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What the Solar Sharer Programme Means for Energy Retailer Margins

From July 2026, the federal government’s Solar Sharer programme will require energy retailers to provide three hours of free electricity daily to eligible households in New South Wales, Queensland, and South Australia. The policy targets midday hours when solar generation is abundant and wholesale prices are lowest. While the mechanics may sound technical, the impact is clear. Retailers like Origin Energy and AGL Energy earn profits by buying electricity at wholesale rates and selling it at a markup. Mandating free supply during solar hours removes that markup, directly reducing revenue and squeezing margins.

– For Origin Energy (ASX: ORG), which reported $1.82 billion in EBITDA for FY24, analysts estimate a 5–10% margin hit, equating to $90–180 million in lost annual retail earnings. With a payout ratio near 75%, Origin may face tough choices between cutting dividends or scaling back renewable investments.

– AGL Energy (ASX: AGL), with a larger customer base of 4.2 million accounts (vs Origin’s 2.8 million), is even more exposed. Around 60% of AGL’s earnings come from electricity and gas retail. If margins fall 7–8%, AGL could lose $150–200 million in earnings, placing its 65 cents per share dividend under pressure.

The broader concern for ASX electricity stocks is precedent. If Solar Sharer proves politically successful, further regulatory moves targeting retailer profitability may follow, undermining the defensive appeal of Australian energy stocks for income-focused investors.

AGL vs Origin: Who’s Better Positioned for the Free Power Era?

AGL Energy appears slightly better prepared. The company already operates a “Three for Free” plan in Victoria and South Australia, giving AGL operational experience managing customer behaviour and cost structures under a similar model. This head start could help AGL adapt more smoothly to the Solar Sharer mandate.
Origin Energy, by contrast, doesn’t currently offer a comparable free electricity product. While Origin has significant upstream gas assets and renewable generation providing earnings diversification beyond retail, it will need to restructure retail operations more substantially, likely meaning higher implementation costs and a steeper near-term margin impact.

From a valuation perspective, both look superficially attractive:

– Origin Energy: 6.0% dividend yield (estimated 54 cents per share), trading at approximately 11x forward earnings
– AGL Energy: 5.2% dividend yield (48 cents per share), trading at approximately 10x forward earnings

However, dividend sustainability now faces scrutiny. Should I buy Origin Energy or AGL now? For most investors, the answer is no, wait for clarity on the financial impact before committing capital.

Should Income Investors Hold or Sell Australian Utility Stocks?

The decision to hold or sell ASX utility stocks like Origin Energy and AGL Energy ultimately depends on your income needs and risk tolerance. If you currently own Origin Energy or AGL shares for dividend income, holding remains defensible, but only if you’re prepared for potential 10–12% dividend reductions and reduced earnings visibility through 2026.
Both companies still have strong underlying businesses. Origin Energy’s integrated model, which includes upstream gas and renewable generation, offers some insulation from retail margin pressure. Meanwhile, AGL Energy’s scale and operational experience with free electricity plans may help it adapt more efficiently than smaller competitors

Bottom Line

However, the regulatory risk is real. Three hours of free electricity represents roughly 12-15% of average daily household consumption. Even during low-margin midday hours, analysts estimate the combined revenue impact could reach $250–350 million annually across both retailers. At current payout ratios, this means either cutting dividends or sacrificing capital investment needed for the energy transition.

Here’s a simple framework for investors:

– Hold if you can tolerate short-term dividend cuts and believe the long-term benefits of the energy transition will outweigh near-term pressure.

– Sell if you require a stable income or prefer more predictable yields. ASX bank stocks, for example, currently offer 5–6% dividends with lower regulatory risk.

For now, Origin Energy and AGL Energy warrant cautious holds for existing shareholders who understand the risks. New investors should wait for upcoming earnings results and management commentary to assess how the Solar Sharer programme will affect future profitability and dividend policy.