The CSIRO’s fourth annual GenCost report, released on Friday for public consultation, has again found renewables including solar PV and wind are by a “significant margin” the cheapest new-build electricity generation option in Australia.
A collaboration between the national science agency and the Australian Energy Market Operator (AEMO), the GenCost report compares and estimates the levelised cost of large-scale electricity generation in Australia.
The CSIRO said the latest modelling, which incorporates current capital cost estimates and projections of future changes in costs, confirmed past years’ findings that solar and wind are the cheapest sources of energy in Australia.
This is true even when considering their additional integration costs such as energy storage and more transmission lines that are required due to the variable nature of renewable output and their wider distribution compared to fossil fuel generation.
“Variable renewables (wind and solar PV) without transmission or storage costs are the lowest cost generation technology by a significant margin,” the report says.
“From 2030, the estimates on additional integration costs associated with increasing variable renewable generation confirms that they are also competitive when transmission, synchronous condenser and storage costs are included.”
The modelling estimates that the levelised cost of electricity (LCOE) using solar PV ranges from $44 to $65 per MWh, depending on the scale and location of the installation. Wind power costs range from $45 to $57 per MWh.
The CSIRO says the integration costs to support renewables are estimated at $10 to $15 per MWh, depending on the variable renewable energy (VRE) share.
This compares to the estimated LCOE of a new black coal generator of between $87 and $118 per MWh and gas generation costs between $65 and $111 per MWh.
The modelling forecasts that the costs of fossil fuel technologies will remain largely unchanged in real terms over the next three decades while the costs of wind, solar and integrating technologies like energy storage will continue to fall as the respective technologies advance.
CSIRO chief energy economist Paul Graham said the new report would aid industry stakeholders as they grapple with the rapid transition of the National Electricity Market (NEM).
“The energy sector is rapidly changing so we need updates like this report to ensure that our planning is based on the most up-to-date cost estimates,” he said.
“It’s also crucial that stakeholders have an opportunity to scrutinise the changes to ensure they are consistent with direct industry experience.”
While the report indicates solar PV and wind continue to provide the cheapest sources of new electricity generation capacity, the CSIRO did warn that forward projections for 2022-23 assume that cost reductions for all technologies will stall for 12 months with international supply chains dealing with fallout of the Covid-19 pandemic.
“Global supply chains are currently experiencing tight conditions following ongoing restrictions and mixed recovery from the global Covid-19 pandemic,” the report says. “This increases the potential for price pressures. Higher prices have not been observed in this year’s update of current costs. However, they are a risk for projects that will be procured or completed in the coming year.”
The updated GenCost report also shows the costs of hydrogen electrolysers, which the CSIRO believes could be an important pathway for producing low-emission hydrogen, have declined considerably, in line with 2020-21 projections.
Cost reductions for technologies not currently being widely deployed, such as solar thermal, carbon capture and storage (CCS), nuclear small modular reactors, and ocean energy are lagging and would require stronger global and domestic investment to realise their full potential.
AEMO forecasting group manager Nicola Falcon said the updated GenCost report would help frame the market operator’s future grid planning.
“The CSIRO’s process to regularly monitor, consult on and update generation technology cost trajectories is incredibly valuable as we plan for an accelerated transformation of the NEM,” she said.
“Offshore wind, for example, has great potential due to resource quality, but economics are not yet proven in Australia. If technology costs continue to track down, as foreshadowed in this year’s GenCost, then this technology could play a greater role in future Integrated System Plans.
“GenCost assists us, and industry stakeholders, to achieve the vision for a reliable, low-cost, net-zero emissions electricity system.”
The final version of the GenCost report will be delivered mid-2022.
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