Renewables are cheapest new-build electricity generation in Australia – report

Windorah Solar Farm in Australia. (Reference image by Aaronazz, Wikimedia Commons.)

A recent report released by CSIRO, Australia’s national science agency, shows that renewables, led by wind and solar, have retained their position as the country’s cheapest new-build electricity generation despite a 20% average rise in technology costs.

The price spike is attributed to the immense scale of manufacturing, raw materials and labour required to develop and deploy clean energy technologies consistent with net zero goals.

The report’s modelling projects that technology cost pressures felt in Australia will revert to normal levels by 2027 but are delayed to 2030 in global scenarios where the speed of the energy transition is highest.

The document was produced under GenCost, an annual collaboration between CSIRO and the Australian Energy Market Operator (AEMO) that actively consults industry stakeholders to revise domestic electricity generation and storage, as well as hydrogen production costs.

“Australia’s energy challenge lies in the transformation of our existing energy system while ensuring the continuing delivery of sustainable, reliable and affordable energy as we strive to achieve net-zero emissions by 2050,” CSIRO’s director of energy, Dietmar Tourbier, said. “This imperative is not only essential for environmental stewardship, but also to maintain Australia’s economic competitiveness in the global market.”

Raising prices

According to Tourbier and Paul Graham, the report’s lead author, the covid-19 pandemic resulted in lingering global supply chain constraints which impacted the prices of raw materials required in technology manufacturing as well as freight costs.

The Ukraine war exacerbated the global supply chain inflationary pressures by raising energy input costs for all industries.

Renewables are cheapest new-build electricity generation in Australia - report
(Graph by GenCost).

“During the recovery from these global events, various input costs are showing signs of moderation, however, there is an expected delay due to future price uncertainties and the robust demand associated with the global energy transition,” Graham said. “GenCost analysis anticipates that technology costs have mostly peaked and the risk of cost pressures extending beyond 2030 will be mitigated, as the global manufacturing capability established by that time will adequately meet deployment needs.”

The updated analyses also found that technology cost rises were not uniform due to variations in material inputs and exposure to freight prices.

When it comes to energy storage, the study suggests that batteries are set to play a crucial role in supporting both variable renewable generation in the electricity sector and the rapid expansion of electric vehicle deployment in transport.

“As coal-fired power generation leaves Australia’s grids, we need investment in generation to fill those gaps,” AEMO’s executive general manager – system design, Merryn York, said. “And as more variable renewables deliver our energy for consumers and decarbonisation, we need investment in firming – which is on-demand energy to smooth out the peaks and troughs from renewable generation.”