That’s according to Ross Gittens, drawing from Ross Garnaut.
Garnaut says that since his second review in 2011 there have been four big changes in the cost of renewable energy relative to the cost of energy from coal or gas.
First, costs of renewables have fallen beyond expectations. His review assumed a few per cent a year. In fact, costs have fallen by about five-sixths since that time.
Second, there have been “transformational improvements” in battery storage technology at the level of the electricity grid.
Third, there’s been a dramatic reduction in the cost of borrowing money for capital works.
Fourth, there’s been a dramatic increase in the cost of gas – and thus gas-fired electricity.
A major part of the reason for gas prices is that with the development of coal seam gas in Queensland our domestic prices are now set at export parity level. Worse than that, three foreign companies have installed huge gas liquefaction plants in Gladstone. They aren’t getting enough gas to make a return on investment, so are at times are bidding gas prices well above export parity.
- Ten years ago Australia had the developed world’s cheapest natural gas – about a third of prices in the US. Today, our prices are about three times higher than in the US.
Not-so-old gas-fired plants are close to becoming stranded assets.
Battery costs are coming down; there is the possibility of pumped storage.
Nowhere in the developed world has solar and wind resources together so abundant, says Garnaut. We have a natural advantage.
- “Play our cards right, and Australia’s exceptionally rich endowment per person in renewable energy resources makes us a low-cost location for energy supply in a low-carbon world economy.
“That would make us the economically rational location within the developed world of a high proportion of energy-intensive processing and manufacturing activity.
“Play our cards right, and Australia is a superpower of the low-carbon world economy.”
In RenewEconomy today, another study from the ANU which:
- suggests that with most of Australia’s current fleet of coal generators due to retire before 2030, a mix of solar PV and wind energy, backed up by pumped hydro, will be the cheapest option for Australia, and this includes integration costs.
The report says that wind is currently about $64/MWh and solar $78/MWh, but the costs of both technologies are falling fast, with both expected to cost around $50/MWh when much of the needed capacity is built. With the cost of balancing, this results in a levellised cost of energy (LCOE) of around $75/MWh.
By contrast, the LCOE of coal is $80/MWh, and some estimates – such as those by Bloomberg New Energy Finance which adds in factors such as the cost of finance risk – put it much higher.
Blakers says his team did not need to dial that higher price of coal into the equation: “We don’t include a risk premium or carbon pricing or fuel price escalation or threat of premature closure because renewables doesn’t need any of this to compete,” he says.
There is no need for a price on carbon either.