Renewables remain the cheapest, but cost reductions are on hold
Renewables remain the cheapest new power generation option in Australia, although inflation and supply chain disruptions are likely to put cost cuts on hold for next year, according to the annual GenCost report PDF (2 MB) of CSIRO.
Each year, Australia’s national science agency CSIRO and the Australian Energy Market Operator (AEMO) work with industry to provide an up-to-date estimate of the costs of large-scale electricity generation in Australia.
The report considers a range of future scenarios to understand the mix of technologies that can be adopted and the costs for each of these possible pathways.
The 2021-22 report confirms previous years’ findings that wind and solar are the cheapest source of electricity generation and storage in Australia, even taking into account the additional integration costs resulting from generation renewable energy variable, such as energy storage and transmission.
According to CSIRO Director General Dr. Larry Marshall, the detailed scientific and technical analysis reported in GenCost provides important electricity market insights, helping industry and government navigate the country’s energy transition. Australia.
“Australia’s energy sector faces a number of unique challenges as we navigate the transition to net zero emissions. GenCost is a rigorous analysis to help inform decision makers with detailed information to support the decarbonisation of Australia’s energy system.
“The latest report shows that renewable energy remains the cheapest source of electricity for new construction.
“With the world’s highest penetration of rooftop solar, unique critical energy metals, a world-class research sector and a highly skilled workforce, Australia can turn our challenges into the huge opportunity to be a global leader in renewable energy,” he said.
The report’s projections assume that cost reductions for all technologies will stagnate over the next 12 months as tight global supply chains take longer to recover from the pandemic.
However, after the current inflationary cycle is over, solar, wind and batteries should all continue to be cheaper.
CSIRO chief energy economist Paul Graham said researchers have seen year-on-year cost reductions for most technologies and this year’s report is no exception. .
“What will be different next year is that we will have a confluence of factors impacting project costs. the economy through transportation and energy costs. We also have tight supply chains that are still recovering,” he said.
The 2022 final report also includes an update on the costs of hydrogen electrolyzers which are experiencing rapid cost reductions and could support a faster transition to green hydrogen, especially in the current environment of high natural gas prices. .
The updated analyzes also revealed that:
Onshore and offshore wind costs fell faster than expected. Changes in onshore wind costs reflect Australian projects. Offshore wind has yet to be developed in Australia, but cost reductions achieved overseas mean Australian projects are expected to be less expensive than expected.
Solar and wind continue to be the cheapest sources of electricity for any expected share of renewables in the grid – between 50% and 90%. A 100% renewable system would not consist entirely of wind and solar energy, but would include other renewable energies such as hydroelectricity, biomass and green hydrogen.
Solar and wind begin to require additional investment in storage and transmission once variable renewables reach around 50% of generation share. Solar and wind require new transmission connections to access the best resource. Storage, in the form of batteries or pumped hydro, combined with existing flexible gas generation, ensures that demand can be met reliably from these variable generation sources.
Cost reductions for technologies that are not currently widely deployed, such as carbon capture and storage (CCS), small modular nuclear reactors (SMRs), solar thermal and ocean power, are lagging and would require greater investment to realize their full potential.
The status of nuclear SMRs has not changed. Following extensive consultation with the Australian electricity industry, the report’s findings see no prospect of domestic projects this decade, given the commercial immaturity and high cost of the technology. Future cost reductions are possible but dependent on its successful overseas commercial deployment.
AEMO Executive Director General – System Design, Ms. Merryn York, said the analysis shows that timely investment in new renewable energy will provide the most economical form of electricity generation in the future.
“With the growing opportunity to decarbonise the Australian economy, understanding the investments that can support a low-emission electricity system, provide resilience to international pressures and reduce consumption costs is critically important to enabling the energy transition” , she said.