Unsubsidized renewable energy is now cheaper than electricity from new-build coal- and gas-fired power stations in Australia, according to new analysis from research firm Bloomberg New Energy Finance.
Although the study revealed wind power specifically to be less expensive than renewables, it also indicated that solar power is likely to follow this path – and that broad misperceptions about renewable energy costs can be challenged.â�¨â�¨Researchers found that electricity can now be supplied from a new wind farm at a cost of AUD 80/MWh ($83.00/MWh), compared to AUD 143/MWh from a new coal plant or AUD 116/MWh from a new baseload gas plant, including the cost of emissions under the federal government's carbon pricing scheme.
However, even without a carbon price wind energy is 14% cheaper than new coal and 18% cheaper than new gas, according to the study.
"The perception that fossil fuels are cheap and renewables are expensive is now out of date,’ says Michael Liebreich, chief executive of Bloomberg New Energy Finance."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.’
Bloomberg New Energy Finance's research on Australia shows that since 2011, the cost of wind generation has fallen by 10%, and the cost of solar photovoltaics has fallen by 29%. In contrast, the cost of energy from new fossil-fueled plants is high and rising. The study surveyed Australia's four 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.
New gas-fired generation is expensive as the massive expansion of Australia's liquefied natural gas 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.
According to BNEF, by 2020, large-scale solar PV will also be cheaper than coal and gas when carbon prices are factored in. By 2030, dispatchable renewable generating technologies such as biomass and solar thermal could also be cost-competitive.
The results of the study suggest that 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, unless there is a sharp and sustained fall in Asia-Pacific natural gas prices.
‘It is very unlikely that new coal-fired power stations will be built in Australia,’ says Kobad Bhavnagri, head of clean energy research for Bloomberg New Energy Finance in Australia. ‘They are just too expensive now, compared to renewables.
‘Even baseload gas may struggle to compete with renewables,’ Bhavnagri adds. ‘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.’