In Australia, Wind Power Is Already Cheaper Than Fossil Fuels, And Solar Is …

February 10, 2013 by  
Filed under Green Energy News

According to the latest research from Bloomberg New Energy Finance, electricity from wind power can now be supplied more cheaply in Australia than power from either coal or natural gas — and solar and other forms of renewable energy aren’t far behind.

Older coal-fired power plants from the 70s and 80s still compete at lower prices than renewables — but only because their construction costs have depreciated. For the deployment of any new power generation in Australia, renewables now appear to be the way to go.

Australia currently charges polluters $23 in Australian dollars per metric ton of carbon they emit, but the study concluded that wind power would still undercut fossil fuels even without that correction of the market’s failure to properly build in the costs of carbon pollution:

The study shows that electricity can be supplied from a new wind farm at a cost of [$80 per megawatt hour in Australian dollars], compared to [$143 per megawatt hour] from a new coal plant or [$116 per megawatt hour] 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.

Bloomberg New Energy Finance’s research on Australia shows that since 2011, the cost of wind generation has fallen by 10% and the cost of solar photovoltaics by 29%. In contrast, the cost of energy from new fossil-fuelled plants is high and rising. New coal is made expensive by high financing costs. The study surveyed Australia’s four largest banks and found that lenders are unlikely to finance new coal without a substantial risk premium due to the reputational damage of emissions-intensive investments – if they are to finance coal at all.

Here’s a graphic of BNEF’s findings, courtesy of Renew Economy:

So the study expects both coal and natural gas to rise in cost over the next two decades. Among other things, coal power consumes more water than any other source of energy. That will drive up coal’s cost, as fresh water becomes scarcer due to the very climate change driven by coal power’s carbon emissions. And in America, at least, there’s evidence that the major proven natural gas reserves will peak out within the time frame of BNEF’s analysis, rendering the boom in that energy source decidedly temporary.

Meanwhile, while the costs of solar and other forms of renewables are currently lagging, they’re dropping fast:

BNEF’s analysts conclude that by 2020, large-scale solar PV will also be cheaper than coal and gas, when carbon prices are factored in. By 2030, dispatchable renewable generating technologies such as biomass and solar thermal could also be cost-competitive.

According to companies like Ratch Australia, the cost of deploying new solar photovoltaics is already down to between $120 and $150 per megawatt hour, suggesting it may be dropping even faster than BNEF concluded. Kobad Bhavnagri, head of BNEF’s clean energy research in Australia, expects that by 2020 or 2030 “we will be finding new and innovative ways to deal with the intermittency of wind and solar.” And since Australia is most likely set for baseload capacity until at least 2020, when solar as well as wind will be undercutting fossil fuels, “it is quite conceivable that we could leapfrog straight from coal to renewables to reduce emissions as carbon prices rise.”

The world’s biggest manufacturer of wind turbines already has 50 percent of Australia’s market, which it expects to hold. And China’s largest manufacturer is eyeing the market as well. The deployment of rooftop solar is already dramatically reshaping the energy market in southern Australia, and the Green Party in Western Australia recently proposed installing solar panels on all public housing homes.

And while a move towards renewable energy by Australia’s economy certainly won’t fix global warming on its own, it’s a step in the right direction, away from the rash of heat waves and wildfires — worsened by the climate change driven by fossil fuels’ carbon emissions — that have recently slammed the nation.


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11 Responses to In Australia, Wind Power Is Already Cheaper Than Fossil Fuels, And Solar Is Right Behind

  1. The most positive thing I’ve seen in years on climate change is the rapid recent realization by the financial giants about “unburnable carbon” and the “carbon bubble”. So to me the key quote above is:

    “lenders are unlikely to finance new coal without a substantial risk premium due to the reputational damage of emissions-intensive investments”

    Both USA and China have shown that piling on lots more renewables doesn’t necessarily cut back on fossil burning. All of the above energy strategies won’t do it on climate.

    We need more than pro-renewable for a safe climate system…we need anti-fossil too. So heartening to see both carbon pricing and carbon-risk pricing emerging down under.

  2. It’s nice – but misleading. It is not comparing apples with apples

    The figures compare the cost of electricity production between:
    •Marginal costs of introducing incremental new wind, which will be intermittent with capacity factors around 30%
    •Marginal cost of introducing new modern coal, which would be baseload and quite large, with potential capacity factors above 85%
    •Marginal cost of introducing new baseload gas, which would be combined cycle plant, again quite large, again with potential capacity factors above 85%

    The headline from Bloomberg should read

    “New wind power at low penetrations cheaper than new baseload fossil in Australia”

    A fact later acknowledged on Twitter by Bloomberg when challenged

    By all means lets push renewables as hard as we can. But let;s not cherry pick the data – after all that’s what denialists do

    • I’m happy to criticize bad headlines, but they don’t have to explain the whole story. I think the headline is fine. The denialists make up crap, so THAT really is not an apples to apples comparison.

      Also, true apples to apples would be paid off wind vs paid off coal — and wind would win again!

    • “potential capacity factors above 85%” potential indeed. In the UK actual capacity factors for conventional and nuclear was about 42% in 2011, falling from about 52% in 2007.

      see Figure 5.10

    • Comparisons between an intermittent form and a baseload form might be theoretically interesting but they don’t take us very far.

      As far as I know, no one is pushing for an electricity system that depends 100% on wind generators. Proposals for 100% renewable electricity usually suggest wind as one element in a combination of renewables. The valid question re wind is whether it is cost-effective in a proposed mix of renewables.

      Solar Thermal with storage is commercially viable technology that offers baseload capacity that is better than coal or nuclear because it is dispatchable. The BNEF report shows that the cost of Solar Thermal will be comparable to coal by 2020.

      Deployment will be required if Solar Thermal is to achieve those projected lower costs, so it’s a good thing that Solar Thermal plants are now being rolled out in 10+ countries worldwide.

      Maybe the true comparison is not paid-off wind vs paid-off coal, but paid-off Solar Thermal vs paid-off coal, with some adjustment for the extra flexibility that Solar Thermal offers with respect to dispatchability.

  3. And in the southwestern US they are selling solar cheaper than coal generated electricity. The future is coming whether or not our bought and paid for politicians are ready for it.

  4. …Right, before saying the following, I would just like to emphasize that I fully accept all the science behind global warming and recognize the extreme danger posed both to human civilization and to Earth’s biosphere by all the CO2, methane, and NO2 we’ve been churning out into the air. I’ve no interest whatsoever in advocating a laissez-faire approach to the climatological systems that are keeping us all alive, and think that we need to transition away from fossil fuels as soon as ever may be.

    That said, though…well, based on this and on other similar articles I’ve read, it seems to be the case that both wind and solar are rapidly approaching parity with fossil fuels, and in some places already have. Won’t it be the case that this’ll encourage a rapid decarbonization for purely economic reasons? I realize that there’s a huge installed base of coal, oil, and gas-burning plants already in existence, and those aren’t going to just be shut down, but is it reasonable to expect that in the near future, the only plants that it will be economical to build will be renewable ones, thus effectively shutting down the production of all new carbon-burning plants and forcing humanity’s emissions to stop growing and begin falling as, one by one, old plants are decommissioned? I get the impression, from articles like this, that the problem’s sort of solving itself–but that seems too convenient for me to quite trust that impression. Am I missing something?

    • These are new plants. We need to cut emissions — and replace existing fossil fuel plants.

  5. “The study surveyed Australia’s four largest banks and found that lenders are unlikely to finance new coal without a substantial risk premium due to the reputational damage of emissions-intensive investments – if they are to finance coal at all.”

    It’s nice bankers say they are leery of financing coal generators, now I want to see them equally nervous about financing coal mines.

    Currently, there is a loud grassroot campaign against one of the Big Four banks, ANZ, and their $1+bn finance for Maules Creek coal projects that will obliterate 700 hectares of remnant Liverpool Plains eucalypt forest in the Leard State Forest – rare habitat for a whole ecology of plants and animals, including koalas.

    Banks pay attention to grassroot community action – they spend a lot on promoting their reputations and public opposition can create a real stink.

    • One reason the development of the Galilee Basin has been slow has been the inability to find finance, ME

  6. Renewables are the future.The sooner the major power producers embrace this reality the better it will be for all of us.

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