Source: Institute for Energy Economics and Financial Analysis
Australia’s leading scientific research group and the country’s energy market operator have released a benchmark study that shows the cost of new wind and solar – even with hours of storage – is “unequivocally” lower than the cost of new coal generation.
The joint study – GenCost 2018 – by the CSIRO and AEMO shows that the levelised cost of energy (LCOE) of solar and wind is well below that of any other generation source. Even adding two and six hours of storage with batteries or pumped hydro still leaves the cost of “firm” solar and wind power cheaper than any fossil fuel alternative.
The study follows similar conclusions from the likes of Bloomberg New Energy Finance, and the observations of big utilities such as AGL, Origin, and the government’s own Snowy Hydro. But it has added significance because of the importance and reputation of the two institutions involved.
“I fully expected the LCOE of renewables to be cheaper,” CSIRO economist and lead author Paul Graham told RenewEconomy in an interview. “I thought that once you added storage, maybe it would be line ball. But it is unequivocally cheaper. Wind and solar are still lower cost even if you take into account those balancing costs.”
And Graham says these are conservative estimates. He points out, as previous studies from the CSIRO and chief scientist Alan Finkel have shown, that the level of storage required for wind and solar is minimal up to a point of around 50 per cent. That is because of the existing back-up required to support the fleet of coal and gas generators. But even when storage is required, Graham says there will be cheaper alternatives such as demand response, better use of existing back-up, more transmission, more “non-coincident” wind and solar (in different regions) or even hydrogen and fuel cells.
The significance of this report is immense, both for its contribution to the political debate – which is usually derailed by the false claims of the fossil fuel industry and the Far Right – and for the choices to be made for grids like NSW, where much of the existing ageing coal fleet will have to be replaced over the next 15 years. AEMO will also use it as its guide for the Integrated System Plan – its 20-year blueprint for managing the energy transition – and Graham says it will be updated every year from now on.