Renewable energy now cheaper than new fossil fuels in Australia
Renewable energy nowcheaper than new fossil fuels in Australia Australia wind beats new coal in theworld’s second- largest coal exporter
Sydney, 7 February 2013 –Unsubsidised renewable energy isnow cheaper than electricity fromnew-build coal- and gas-fired powerstations in Australia, according tonew analysis from research firmBloomberg New Energy Finance.
This new ranking of Australia’s energy resources is theproduct of BNEF’s Sydney analysis team, whichcomprehensively modelled the cost of generatingelectricity in Australia from different sources. Thestudy shows that electricity can be supplied from anew wind farm at a cost of AUD 80/MWh (USD83), compared to AUD 143/MWh from a new coalplant or AUD 116/MWh from a new baseload gasplant, including the cost of emissions under the Gillardgovernment’s carbon pricing scheme. However evenwithout a carbon price (the most efficient way toreduce economy-wide emissions) wind energy is 14%cheaper than new coal and 18% cheaper than new gas.
“The perception that fossil fuels are cheapand renewables are expensive is now out ofdate”, said Michael Liebreich, chiefexecutive of Bloomberg New EnergyFinance. “The fact that wind power is nowcheaper than coal and gas in a country withsome of the world’s best fossil fuel resourcesshows that clean energy is a game changerwhich promises to turn the economics ofpower systems on its head,” he said.
Bloomberg New Energy Finance’s research on Australiashows that since 2011, the cost of wind generation hasfallen by 10% and the cost of solar photovoltaics by 29%.In contrast, the cost of energy from new fossil-fuelledplants is high and rising. New coal is made expensive byhigh financing costs. The study surveyed Australia’s fourlargest banks and found that lenders are unlikely tofinance new coal without a substantial risk premium dueto the reputational damage of emissions-intensiveinvestments – if they are to finance coal at all. New gas-fired generation is expensive as the massive expansion ofAustralia’s liquefied natural gas (LNG) export marketforces local prices upwards. The carbon price adds furthercosts to new coal- and gas-fired plant and is forecast toincrease substantially over the lifetime of a new facility.
BNEF’s analysts conclude that by 2020, large-scalesolar PV will also be cheaper than coal and gas, whencarbon prices are factored in. By 2030, dispatchablerenewable generating technologies such as biomassand solar thermal could also be cost-competitive.The results suggest that the Australian economy islikely to be powered extensively by renewableenergy in future and that investment in new fossil-fuel power generation may be limited, unless there isa sharp, and sustained, fall in Asia-Pacific natural gasprices.
“It is very unlikely that new coal-fired power stationswill be built in Australia. They are just too expensivenow, compared to renewables”, said KobadBhavnagri, head of clean energy research for BloombergNew Energy Finance in Australia. “Even baseload gasmay struggle to compete with renewables. Australia isunlikely to require new baseload capacity until after2020, and by this time wind and large-scale PV shouldbe significantly cheaper than burningexpensive, export-priced gas. By 2020-30 we will befinding new and innovative ways to deal with theintermittency of wind and solar, so it is quiteconceivable that we could leapfrog straight from coal torenewables to reduce emissions as carbon prices rise.”he added.
Before that time, clean energy investment will bedriven up, and power sector emissionsdown, only with the support of Australia’sLarge-scale Renewable Energy Target. Despitecompelling economics for new-build renewablestoday, Australia’s fleet of coal-fired powerstations built by state governments in the 1970sand 1980s can still produce power at lower costthan renewables, because their originalconstruction cost has now been depreciated.
“New wind is cheaper than building newcoal and gas, but cannot compete with oldassets that have already been paid off,”Bhavnagri said. “For that reason policysupport is still needed to put megawatts inthe ground today and build up the skillsand experience to de-carbonise the energysystem in the long-term.”
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