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Tuesday, July 15, 2014

Renewable energy cheaper than new fossil fuels

This is a report from Bloomberg New Energy Finance, from last year:

Sydney, 7 February 2013 – Unsubsidised renewable energy is now cheaper than electricity from new-build coal- and gas-fired power stations in Australia, according to new analysis from research firm Bloomberg New Energy Finance.

This new ranking of Australia’s energy resources is the product of BNEF’s Sydney analysis team, which comprehensively modelled the cost of generating electricity in Australia from different sources. The study shows that electricity can be supplied from a new wind farm at a cost of AUD 80/MWh (USD 83), compared to AUD 143/MWh from a new coal plant or AUD 116/MWh from a new baseload gas plant, including the cost of emissions under the Gillard government’s carbon pricing scheme. However even without a carbon price (the most efficient way to reduce economy-wide emissions) wind energy is 14% cheaper than new coal and 18% cheaper than new gas.
“The perception that fossil fuels are cheap and renewables are expensive is now out of date”, said Michael Liebreich, chief executive of Bloomberg New Energy Finance. “The fact that wind power is now cheaper than coal and gas in a country with some of the world’s best fossil fuel resources shows that clean energy is a game changer which promises to turn the economics of power systems on its head,” he said.

[Read more here]

Since then, of course, new solar and wind electricity costs have fallen.  The coal price has fallen, too, though gas and oil have gone up, but of course, the fossil fuel costs are only part of the total operating cost of a power station.  As the report points out, power stations which have been fully depreciated still produce cheaper electricity than solar and wind.  But for how much longer?  PV (solar panel) costs are falling by 18% per annum, wind power by 5% per annum, batteries by 13% per annum.  The decline in solar and wind power costs and in battery costs is inexorable. If it totals a 10% per annum fall for some mixture of the three, it will fall by 40% in 5 years.  40%!!!!  That will make new renewables half the cost of new power stations.  And equal to the cost of existing power stations.

It would be better to plan for this, at government and utility and coal mine level than to pretend it's not happening.

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