It’s economics, stupid! Days of “baseload only” power over

The days of traditional, coal and gas-fired baseload electricity generation are over, a new Australian report has declared, as the economics of the National Electricity Market shift – ”fundamentally” – in favour of renewable energy with storage, or “flexible supply”.

The report, RepuTex’s Market Update for July 2017, paints a picture of the Australian energy market, where coal-fired facilities will continue to be retired – regardless of government policy and despite rising electricity prices.

“This is due to falling daytime power demand and changing economics of the grid, which now favours flexible supply,” the report says.

“Investments in ‘baseload’ sources of power, irrespective of the CET (proposed clean energy target), are therefore too inflexible to compete in Australia’s future electricity system,” RepuTex says.

In its place, the report adds, renewables – with storage – will continue to be the cheapest source of reliable energy supply for peaking and load-following generation. The more renewables that are added, the greater prices will fall.

“We do not envisage any appetite for HELE coal or other ‘baseload only’ facilities, such as nuclear, unless there is a major government distortion in the market.”

The findings drive another nail into the coffin of coal power in Australia, just days after US clean tech giant Tesla was tapped as the successful bidder to develop South Australia’s 100MW grid-connected battery storage system.

The SA battery plant, which will be built next to Neon’s Hornsdale wind farm in Jamestown, has been hailed by main, not least of all Tesla’s Elon Musk himself, as a world-leading example of the future of energy supply.

A future where centralised “baseload” power plants are phased out, and networks – as RepuTex puts it – are built around ‘firm power’ rules, whereby new generators must supply energy that can be dispatched to maintain system reliability.

Not long ago, this was a role that was largely allotted gas, as the least cost source of supply for load-following and peaking services.

But even gas cannot compete with renewables now, says RepuTex, with high gas prices changing the calculation to make wind ($80/MWh) and solar ($85/MWh) plus energy storage much more competitive in providing flexible generation.

“In this context, renewable energy remains attractive to the market given it is able to deliver energy reliability, with no emissions, at low cost prices,” the report says.

“This affirms that renewables are a ‘lay down misere’ to out-compete traditionally fossil-fuel sources in Australia for the foreseeable future.”