The policies may not yet be in place, and the resistance from the incumbents will be fierce, but according to global analysts Bloomberg New Energy Finance, the future is clear: wind and solar will replace coal and gas fired generation, and a lot quicker than many think.
By 2040, BNEF predicts, one third of all capacity which will be located “behind the meter” – which means via rooftop solar on households and businesses (38GW), and mostly tied to battery storage (15GW).
Over the same period, some 27GW of large scale solar plants and 19GW of large scale wind farms will be added to the system. Combined with small scale solar PV and hydro, this will provide two thirds of Australia’s power capacity and 59 per cent of generation by 2040.
These new solar and wind farms will replace 16GW of coal fired generation that has been retired either because of old age, or because they are not flexible enough to compete in a high renewables market. Only 12GW will remain in the market by 2040, with nearly of that with “life extensions”.
“This is a fundamental change,” says BNEF’s chief analyst in Australia, Kobad Bhavnagri. “Australia’s power sector is expected to fundamentally change over the next 25 years as an influx of end-user PV and energy storage is driven into the system.”
He estimates that $A116 billion will be invested to achieve this near 60 per cent renewable energy capacity, and 89 per cent of that money will be spent on renewables themselves.
The biggest change though is through the customer, who will invest in rooftop solar and batter storage because of the “superior economics” of these technologies, which he says will be able to supply consumers with electricity at a lower cost than the grid.
The economics of even existing coal fired generator will be challenged because they are not flexible enough. In effect, many will fall the way of the Northern power station, the last coal generator in South Australia which was closed because of falling wholesale power prices and the impact of wind energy.
Indeed, this graph above shows the changing nature of the grid, with solar carving out large amount of supply during the day. This accords with predictions for market operators that rooftop solar alone will account for all daytime demand on some days, as soon as 2025 in states such as South Australia and West Australia.
Bhavnagri says gas-fired generation, because of its better flexibility, will play an important role at times of low renewable output, but its overall generation share will remain small.
Instead, demand response technologies (6GW) and other flexible technologies (7GW) such as large-scale storage could also contribute, potentially limiting the need for more gas.