rss
23

Renewables now cheaper than coal and gas in Australia

Print Friendly

A new analysis from research firm Bloomberg New Energy Finance has concluded that electricity from unsubsidised renewable energy is already cheaper than electricity from new-build coal and gas-fired power stations in Australia.

The modeling from the BNEF team in Sydney found that new wind farms could supply electricity at a cost of $80/MWh –compared with $143/MWh for new build coal, and $116/MWh for new build gas-fired generation.

These figures include the cost of carbon emissions, but BNEF said even without a carbon price, wind energy remained 14 per cent cheaper than new coal and 18 per cent cheaper than new gas.

“The perception that fossil fuels are cheap and renewables are expensive is now out of date”, said Michael Liebreich, chief executive of Bloomberg New Energy Finance.

“The fact that wind power is now cheaper than coal and gas in a country with some of the world’s best fossil fuel resources shows that clean energy is a game changer which promises to turn the economics of power systems on its head,” he said.

But before people, such as the conservative parties, reach for the smelling salts and wonder why renewables need support mechanisms such as the renewable energy target, BNEF said this was because new build renewables had to compete with existing plant, and the large-scale RET was essential to enable the construction of new wind and solar farms.

The study also found that Australia’s largest banks and found that lenders are unlikely to finance new coal without a substantial risk premium due to the reputational damage of emissions-intensive investments – if they are to finance coal at all.

It also said new gas-fired generation is expensive as the massive expansion of Australia’s liquefied natural gas (LNG) export market forces local prices upwards. The carbon price adds further costs to new coal- and gas-fired plant and is forecast to increase substantially over the lifetime of a new facility.

BNEF’s analysts also conclude that by 2020, large-scale solar PV will also be cheaper than coal and gas, when carbon prices are factored in.

In fact, it could be sooner than that, as we reported yesterday, companies such as Ratch Australia, which owns coal, gas and wind projects, said the cost of new build solar PV was already  around $120-$150/MWh and falling. So much so that it is considering replacing its ageing coal-fired Collinsville power station with solar PV. The solar thermal industry predicts their technologies to fall to $120/MWh by 2020 at the latest.

The Bloomberg analysis said the Australian economy is likely to be powered extensively by renewable energy in future and that investment in new fossil-fuel power generation may be limited.

“It is very unlikely that new coal-fired power stations will be built in Australia. They are just too expensive now, compared to renewables”, said Kobad Bhavnagri, head of clean energy research for Bloomberg New Energy Finance in Australia.

“Even baseload gas may struggle to compete with renewables. Australia is unlikely to require new baseload capacity until after 2020, and by this time wind and large-scale PV should be significantly cheaper than burning expensive, export-priced gas.

“By 2020-30 we will be finding new and innovative ways to deal with the intermittency of wind and solar, so it is quite conceivable that we could leapfrog straight from coal to renewables to reduce emissions as carbon prices rise.” he added.

The analysis by BNEF is significant. Australia relies more on coal than nearly any other industrialised country, but it also has some of the world’s best renewables resources, which it has been slow to exploit. But is this likely to prompt a review of the Coalition’s energy policies – which are based on the premise that renewable energy is expensive and unreliable? Don’t bet on it.

renewables

 

RenewEconomy Free Daily Newsletter

Share this:

  • Nick Sharp

    Most interesting and encouraging. Let us hope that BNEF might soon report on electricity storage also; as they say on their web site “Energy storage is one of the biggest market opportunities in clean energy”.

    http://about.bnef.com/markets/energy-smart-technologies/energy-storage/

    And extremely important to converting interruptable supplies into a dependable product.

  • Paul Wittwer

    Great news and it amuses me to think of all the ones who will be choking on this article.

  • http://energyinachangingclimate.info Martin Nicholson

    Consultants to the clean energy industry such as Bloomberg New Energy Finance are hardly independent analysers of the markets they sell to. The BREE AETA report presents a very different picture. On-shore wind is $112/MWh but falling to $90 by 2020. New black coal with a carbon price is $107 and $84 without a carbon price – hardly more expensive than wind today.

    I know this site has criticised AETA for not telling it’s readers what they want to hear but we can hardly be critical of BREE’s independence.

    • Giles Parkinson

      I guess we will just have to rely on real world experience. The latest wind farm in South Australia – Snowtown 2, the largest in the state – is being built at a cost BELOW $80/MWh, according to those greenies down at Deutsche Bank. And I quote “According to a report from Deutsche Bank analysts, Snowtown 2 has a long-run marginal cost (LRMC) of around $77/MWh”. http://reneweconomy.com.au/2012/snowtown-project-shows-wind-costs-below-80mwh-17727.

      • http://ronaldbrak.blogspot.com.au/ Ronald Brak

        And of course point of use solar blows all grid provided electricity out of the water in terms of competitiveness in Australia. At current retail prices coal would have to produce electricity at a negative cost to compete with rooftop solar.

    • A.Lizard

      Seen the price estimates from that Harvard study on “clean coal”, aka coal with carbon sequestering? Prices double, and there is one dubious assumption in the study (that convenient carbon sinks will be available everywhere needed) that makes that projected cost profoundly optimistic.

      Even if your numbers are correct, they only work because so far, your industry has been permitted to create indirect costs to the rest of society in the form of externalities.

      How long would the transition to renewables take if carbon taxes accurately reflected those externalities? (e.g. public health costs, cost of extreme weather events…)

  • neal

    not from where I stand … my home natural gas prices are going throw the roof … yet we export to china a nice cheap price the same natural gas …

    We have NO wind farms within 500kms of the capital City .. Perth gets ZERO power from wind … ZERO from tidal … and unless you can afford solar panels ZERO from solar … Our power is all coal and natural gas … Where these folks get their information from is beyond me …

    Just because they report something like this doesn’t make it true …

    • http://www.garbologie.com Adam

      There are wind farms supplying Perth – there’s one at Cervantes which is less than 500 km from the capital city: http://en.wikipedia.org/wiki/Emu_Downs_Wind_Farm

      The following site lists the wind farms in WA: http://ramblingsdc.net/Australia/WindWA.html

      There are also a fair few rooftop solar panels, and a wave energy (is this what you mean by tidal) project going in near Garden Island: http://www.carnegiewave.com/index.php?url=/projects/perthproject

      So “all coal and natural gas” is not quite correct

    • Mike

      And just because you don’t know what you’re talking about doesn’t make the article false.

      Sounds like you’re in a bad spot. Start calling local government people to demand incentives for renewables… show them this article and others. Take responsibility.

    • Tom

      You realise that power is transmitted over great distances right? That said WA doesn’t have an awful lot of wind.
      Also this report is comparing NEW fossil plants with NEW wind. Old fossil plants are cheaper because they were cheaper to build, easier to finance, and got great contracts for coal. These positives have eroded over time hence the increasing competition from renewables.

  • http://www.mutilatethemortgage.com Mortgage Mutilator @ Mutilate The Mortgage

    It’s very positive to see such a big mainstream push for renewable’s here in Australia (even if the different reports don’t agree). This has just been posted on The Age too.

    Although we have very little use of renewable’s currently media reports are where everything always starts from. Media reports it, people get excited/learn about it, they then push for it / talk about it more / call for action on the matter (ie build more of it) and in turn the politicians have to respond by doing as they say (or lose their votes). It might take a year or two but hopefully it’s sooner rather than later.

    There’s lots of people out there who still think climate change is a bunch of crap, when prices of renewable’s drop far below fossil fuels… it won’t really matter any more!

    • Macka

      An apostrophe does not make a plural; the word you are after is ‘renewables’.

  • joe

    Cannot believe people will still rely on computer models!
    New study finds wind farms last only 50% of claimed lifetime
    A peer-reviewed study finds from actual performance data of wind farms in the UK and Denmark that the life of wind turbines is only about 50% of that claimed by the wind industry. The report finds the performance “of wind farms declines substantially as they get older, probably due to wear and tear” and that “This decline in performance means that it is rarely economic to operate wind farms for more than 12 to 15 years. After this period they must be replaced with new machines, a finding that has profound consequences for investors and government alike.”http://www.ref.org.uk/attachments/article/280/ref.hughes.19.12.12.pdf

  • James Ray

    The statement “the large-scale RET was essential to enable the construction of new wind and solar farms.” is misleading as new solar farms are too expensive for the large-scale RET to make them viable. Market ‘pull’ instruments such as feed-in tariffs are needed to increase accelerate the deployment of large-scale solar power and other renewable energy technologies at the demonstration stage. The RET review in December 2012 recommended that the large-scale target (LRET) remain as legislated with a target of 41 000 GWh by 2020 , which shows that the policy is an important one (Climate Spectator, 2012). Furthermore, the RET is driving the investment in renewable energy technologies (Business Spectator, 2013). However, FiTs are the principal drivers of renewable electricity in Europe and Chine, not carbon pricing or renewable portfolio standards with tradeable certificates. Additionally, a national gross FiT scheme needs to supersede the less effective net FiTs that exist in most Australian states, with different FiT sub-schemes for different technologies and regions. Several combinations of ‘complementary’ measures could work for renewable energy technologies such as “different targets for different renewable energy technologies, or FITs with different tariffs paid for different technologies, or a combination of RPS and FITs. In addition we may need tax concessions for large renewable energy power stations.” (Diesendorf 2009:112)

  • Chris Harries

    A possibly perverse outcome from the boast that renewables are cheaper than fosssil fuel generation is an obvious political argument that incentives are no longer appropriate, and indeed that it was a correct move for the federal government to withdraw solar rebates and such, not to mention moves to withdraw the renewable energy rebates that stem from the mandated target – all in the interest of not perversely intruding on the competitive energy market.

    Source by source, renewables may deliver cheaper energy but there is an awful long way for them to go to make a big dent in national primary energy output, so incentives could perhaps still be argued on a ‘catch up’ basis.

    Is it possible to argue for incentivisation of renewables whilst at the same time making a case that it is already able to beat the pants of the others? And if the low-cost claim is true, why is investment in gas generators totally outstripping that of wind? Do the utilities believe in the claim but just choose gas because they like gas better?

    • Chris Fraser

      I haven’t done any sums but it appears their belief in gas is fairly solid. Even if renewable were to become predominant, some may argue (without certainty) that gas turbines could become good load followers due to ramp up times. Though I think this belief could be upset by battery technology. In both cases it appears renewable would replace coal as the old baseload.

  • Tom

    Bogus study. They went with units of installed capacity without accounting for capacity factor.

    What makes wind so expensive is its low capacity factor.

    • Giles Parkinson

      That’s not true tom. They’ve gone for energy produced, the normal measurement. You would know that most wind farms have been operating at a higher capacity factor than most gas-fired generation, and in the last 6 months some have been running at a capacity factor which is barely below Australia’s black coal generators.

      • Concerned

        “last 6 months some have been running at a capacity factor which is barely below Australia’s black coal generators.”
        Gas I can understand,as it used for a totally different purpose.
        However,on my reading of AEMO stats and others,I must have missed something.Long term capcity seems to run at about 33%.

  • jayden

    boob

  • jayden

    i love jayden

  • jayden

    jayden is gay

  • Guest

    jayden is top grade muslim