Are renewables the future of cheap electricity?
A report released yesterday (31/07/12) suggests that the cost of producing electricity through renewable sources, including wind and solar, will be price competitive to coal based technologies by 2030. The Australian Energy Technology Assessment released by the Bureau of Resources and Energy Economics compared the current and future costs of 40 technology options including solar, wind, coal, wave, geothermal and nuclear. The carbon tax was included in the cost assessments.
Coal based technologies no longer cheap electricity
One of the key findings of the report is that long term prospects of fossil fuel based electricity technologies have diminished in attractiveness due to the impact of the carbon tax and the higher cost of coal and gas as a supply source.
The rise of solar
The projected costs of solar photovoltaic technologies have decreased substantially over the past few years, making solar electricity generators more favourable than previously projected. The current cost of a MWh of electricity produced by solar generators was calculated to start at $150, with the cost halving by 2020 and reducing further to about $50 by 2030.
The Government was quick to claim credit for the projected decrease in the cost of renewable electricity with Minister Ferguson saying:
The Australian Government is driving innovation and investment in these emerging technologies by putting a price on carbon and through the newly established $3.2 billion Australian Renewable Energy Agency and the $10 billion Clean Energy Finance Corporation.
Which electricity is cheapest
The report uses various assumptions to rank the Levelised Cost of Energy (LCOE) for each electricity source, including adjusting the Australian exchange rate. By 2030, onshore wind farms, solar pv are projected to cost about $50/MWh with offshore wind farms and wave generators costing approx $100/MWh. From the fossil fuel technologies, one of the cheapest forms of electricity is combined cycle gas ($100/MWh) and nuclear power ($75/MWh).
Given the average cost for purchasing electricity on the NEM for 2011-2012 was about $30/MWh, all of these technology options are significantly more expensive than the current technology mix of approx 75% coal, 15% gas, 5% hydro, 2% wind and 3% other.
Whilst the concept of producing more renewable energy may make us feel good about contributing to a greener, cleaner future, we may need to be willing to accept further increases to our electricity bills in the short term in order to reach this utopia.
The above graph was taken from the Bureau of Resources and Energy Economics report Australian Energy Technology Assessment 2012.
Feature image from janie.hernandez55