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Spectacular falls for solar, wind and battery costs squeeze fossil fuels

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The spectacular falls in the cost of wind and solar energy continued in 2017, dropping another 18 per cent across the globe, according to the latest report from Bloomberg New Energy Finance.

The report also highlights the falling cost and growing uptake of battery storage, which together are mounting an unprecedented challenge to fossil fuel power, particularly as batteries start to encroach on the flexibility and peaking revenues enjoyed by those fossil fuel plants.

The new report from BNEF highlights Australia as one of the key countries to have led the cost reductions in both wind and solar. India is also cited for both wind and solar.

Coal and gas are facing a mounting threat to their position in the world’s electricity generation mix, as a result of the spectacular reductions in cost not just for wind and solar technologies, but also for batteries,” the BNEF report says.

It notes that the cost of solar has fallen by 77 per cent to a benchmark global average of $70/MWh over the last seven years, while the cost of wind has fallen 38 per cent to a benchmark global average of $US55/MWh.

The benchmark price for lithium-ion batteries has also fallen nearly 80 per cent from $US1,000 per kWh in 2010 to $US209/kWh in 2017.

To be sure, there are countries where the cost of wind and solar is significantly cheaper than this, but it is interesting to note that these correspond roughly to the cost of wind and solar in Australia – if the $A was substituted for the $US calculation.

“Our team has looked closely at the impact of the 79 per cent decrease seen in lithium-ion battery costs since 2010 on the economics of this storage technology in different parts of the electricity system,” says Elena Giannakopoulou, head of energy economics at BNEF.

“Some existing coal and gas power stations, with sunk capital costs, will continue to have a role for many years, doing a combination of bulk generation and balancing, as wind and solar penetration increase.

“But the economic case for building new coal and gas capacity is crumbling, as batteries start to encroach on the flexibility and peaking revenues enjoyed by fossil fuel plants.”

The BNEF report says that fossil fuel power is now facing an unprecedented challenge in all three roles it performs in the energy mix – the supply of ‘bulk generation’, the supply of ‘dispatchable generation’, and the provision of ‘flexibility’.

In bulk generation, as energy authorities in Australia have long recognised, the threat comes from wind and solar photovoltaics, both of which have reduced their LCOEs further in the last year, thanks to falling capital costs, improving efficiency and the spread of competitive auctions around the world.

In dispatchable power – the ability to respond to grid requests to ramp electricity generation up or down at any time of day – the challenge to new coal and gas is coming from the pairing of battery storage with wind and solar, enabling the latter two ‘variable’ sources to smooth output, and if necessary, shift the timing of supply.

In flexibility – the ability to switch on and off in response to grid electricity shortfalls and surpluses over periods of hours – stand-alone batteries are increasingly cost-effective and are starting to compete on price with open-cycle gas plants, and with other options such as pumped hydro.

BNEF’s calculations for LCOE for wind, solar and storage take into account equipment, construction and financing costs, as well as  maintenance expenses and average running hours.

It noted that in India, where Australian conservatives continue to try to justify new coal mines such as Adani’s Carmichael project on the basis that coal is cheaper, wind and solar are winning out easily after spectacular falls in the past year, well beyond the global average.

The BNEF index is now showing benchmark LCOEs for onshore wind in India of just $US39/MWh, down 46 per cent  on a year ago, and for solar PV at $US41/MWh, down 45 per cent.

By comparison, coal comes in at $US68 per MWh, and combined-cycle gas at $US93/MWh. Wind-plus-battery and solar-plus-battery systems in India have wide cost ranges, of $34-208/MWh and $47-308/MWh respectively, depending on project characteristics, but the center of those ranges is falling fast.

Seb Henbest, head of Europe, Middle East and Africa for BNEF, says the cost falls have been driven by competitive auctions for new renewable energy capacity.

“Thanks to this and to progressively more efficient technology, we are seeing record-low prices being set for wind and solar, and then those records being broken again and again on a regular basis. This is having a powerful effect – it is changing perceptions.”  

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  • MikeH

    Seb Henbest on Twitter

    >Actually, the cost of new PV in Australia is down 24% in the past year. That 18% figure is for our global benchmarks.

    https://twitter.com/SebHenbest/status/979004297986887685

  • Megs

    Yep, and its not just a cost argument. There is the matter of defense characteristicss such as de-centralisation of critical supply from the one to the independent many, the reduction of ships full of gas, oil and coal at sea, of concentrations at ports etc…. to which we should be adding local sustainable healthy food and water supply , decentralised multi pathway communications etc . If “defense” can justify billions of dollars for submarines and so on, then why is localised independence not valued as a defense factor. Maybe because vested interests and control freaks like big centralised stuff.

    • Ian

      Our energy imports are mainly liquid fuels, in the refined state. This fuel comes from states that are belligerent and a threat to our independence and peace. How stupid to not rapidly phase out oil imports for transportation and improve EV and public electric transportation.

    • stucrmnx120fshwf

      I’d have to agree with both you and Ian, the strategic value in 12 Barracuda class submarines with lead batteries, over evolved Collins, is marginal, for $50 billion. Compared to fibre, to the premises, or distributed generation and storage of electricity, electric vehicles, taking away our dependence, on sink able shipping, from strategically unstable suppliers. If we look at the internet, it was developed, to be able to find multiple pathways for communications, by the military, virtual powerplants are much the same, an internet of energy. If a node goes down, it nearly instantaneously, is rerouted, from another source, the difficulty of disruption, is it’s own disincentive, to try, in the first place.

      The fact that electric vehicles, need 1/10th of the maintenance, of internal combustion engines, make a tiny acoustic, sound, reducing their detectability, is another set of strategic assets. If you are going to make a stealthy vehicle, an electric vehicle, benefits the most, from a composite material body, since in an internal combustion engine vehicle, the weight of the engine restricts the advantages. Whereas in the electric vehicles, the weight reduction, leads to a virtuous cycle of engineering, body weighs less, batteries can weigh less, batteries weigh less, batteries to carry the weight of the batteries, can weigh less. So yes, clean disruption, reduces Keystone strategic weaknesses and reduces the threat of warfare, by reducing the hair trigger effect, of specific resource dependencies, which can be interdicted, by submarines, aircraft and ground forces.

      Even more important, clean disruption, increases overall prosperity and health, thus giving a potential adversary, more to lose, than to gain, from warfare.

  • Ralph Buttigieg

    Yes and SA still has the highest electricity prices in Australia. Which probably helped the libs defeat the labor government.
    I think the more leisurely approach the NSW government makes sense. Just replace the old coal burners with cheaper renewables as they burn out.

    • MikeH

      Very poor argument which misses the fact that NSW power prices are not far behind SA with almost new RE. They have their grid carbon emissions reduction largely all in front of them.

      • Ralph Buttigieg

        Its a very good argument if your a politician who doesn’t want to lose an election. No mad rush to build emergency generators in NSW. This way they can just take of the cheaper renewable tech when required. NSW is already about 19% renewable , when Liddell closes its going to take a big jump forward. ( I think over 30% from memory) .

        • CU

          Long before Liddell closes, the whole sale prices in SA will be below NSW,

          • stucrmnx120fshwf

            I think investment uncertainty, was one of the main causes of the price rises, after the certainty of the carbon price, was removed, prices, went way up, due to a lack of supply. Given that the investment environment, with regards to renewables, became unknown, so delay investment, until prices go up and renewable energy prices go down, as an insurance against uncertainty. Since there wasn’t a known price signal, why not wait, the customer has no choice after all, electricity is a necessity of life, unless you want to live in a cave.

        • Brian Tehan

          Nsw doesn’t need emergency generators because it’s able to import all it needs from Victoria and Queensland. In fact, it’s the state most dependent on imports. It has big connectors, whereas SA has a pretty small one so it needs to be much more self sufficient. Nsw has no actual plan to replace Liddell and Eraring Power stations.
          Sure, some renewables are being built but there doesn’t seem to be a plan at this point in time, unlike Victoria and Queensland.

    • CU

      You have to update your knowledge, wholesale prices in SA is below Vic and Tas:
      https://reneweconomy.com.au/aemo-shatters-some-marshall-myths-about-south-australia-energy-15608/

      And we wiill see what they are next year!

      • Alastair Leith

        And ten years ago were double the eastern states in wholesale prices. Guess what brought that down to where it is today? The national RET and SA Govt supporting renewables.

  • Paul Surguy

    The SA liberal gov is looking at selling our own 9 back up turbines They must have there mates in mind

    • mick

      yep marshall said that was on pre election if they go to a monopoly incumbent then that will be another backward step,frustrating much

  • neroden

    Link to the BNSF release, please. It’s only polite to link to the source material. Do it.