Source: Institute for Energy Economics and Financial Analysis
The era of cheap coal power in Australia is over; brought to an abrupt end by ever cheaper solar and wind power generation, and by rising coal prices, according to Bloomberg New Energy Finance’s Kobad Bhavnagri.
“This is something that we only projected would occur in the mid 2020s. But the change in economics, particularly the increase in domestic coal pricing, has meant that this tipping point is already upon us today,” Bhavnagri said.
Certainly, the fact that solar and wind have become the cheapest forms of new bulk electricity supply in almost every major energy market around the world – including Australia – is well accepted, including by the Australian Energy Market Operator.
“It’s also cheapest, now, to build bulk dispatchable capacity from a wind farm, coupled with a battery, than it is to build a new coal-fired power station – or gas. The cost of building new peaking generation in Australia now favours batteries. For short durations, for an hour or so, a battery is cheaper than building an open cycle gas turbine or a gas reciprocating engine.”
But the fact that Australia’s existing coal power fleet is – already – no longer the cheapest form of energy generation has not yet sunk in, Bhavnagri says, even against the backdrop of the global climate emergency. “A phenomenon that has not been well understood or well publicised is that the era of cheap coal in Australia has really come to an end. And that is true even for the existing generation assets.”
This conclusion is also reflected in AEMO data, and in its newly released Quarterly Energy Dynamics report, that found the biggest reason for record prices was the rising cost of coal and gas generation. In the last quarter, coal was bid at prices of more than $100/MWh for more than half the time.