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“The perception that fossil fuels are cheap and renewables are expensive is now out of date”, said Michael Liebreich, chief executive of Bloomberg New Energy Finance.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