It’s no secret that solar PV is now the cheapest form of new-build utility-scale power generation around, but according to global research group Bloomberg New Energy Finance, we’re not far from the point when it will also be cheaper that incumbent fossil fuel generators.
Kobad Bhavnagri, BNEF’s head of research in Australia, said that prices like 2.69 US cents/kWh had ensured that solar PV was now the cheapest source of new generation in the world, and even in Australia which he said had “finally become an efficient utility-scale PV market.”
But the problem for big solar remained that “new plant still have to compete with old,” which at the moment, puts incumbent coal ahead of the game – in Australia and many other parts of the world.
But not for long. Bhavnagri says that the cost reductions of solar PV are now becoming “so significant” that BNEF can foresee a time when new solar will become cheaper than operating, existing coal.
“So, new solar is right now hands down easily cheaper than building a new coal-fired power station, and will shortly be cheaper than building a new gas-fired power station,” he said.
“However… renewables and new plant have to compete with the old. And the economics of the old, and the fact that they only have to compete on their operating costs, has blocked out competition from the new.
“However, by 2032, solar will get so cheap that it will become cheaper to build a new large-scale solar farm than it will be to burn coal. And that is a tipping point for the energy system.”
Bhavnagri says that between now and 2040, “and really for the foreseeable future,” the vast majority of Australia’s new generation capacity will be renewable.
“By our calculations, about 39 per cent of our power supply will come from renewable sources by 2030, and over 50 per cent by the year 2040,” Bhavnagri said, in spite of Australia’s recent history of climate and renewables policy uncertainty, and thanks to major policy levers like the RET and ARENA.
“The work of ARENA, largely, has really helped to build experience… and expertise to build solar at competitive rates, and that will materialise in the dominance of solar …in the remaining capacity of the renewable energy target,” he said.
Bavnagri says the amount of capacity that is forecast to come on-stream by 2020 – BNEF says about 9GW of renewables, the majority of which will be solar – will “easily compensate for the loss of Hazelwood and, therefore, put downward pressure on electricity prices.”
“The new renewables that is, thanks to the Renewable Energy Target, coming on-stream is going to save the day,” in terms of Australia’s sky-rocketing electricity prices, Bhavnagri said.
“Because that new supply will produce more competition, it will reduce our reliance on very expensive gas and will help to put downward pressure on electricity prices.
“So, it is really renewable energy target to the rescue.”