According to a recent report by Australia’s national science agency, the CSIRO, renewable sources of energy remain the cheapest new-build electricity generation option in Australia, despite a 20% increase in technology costs.
CSIRO’s report suggests that wind and solar energy remain strong contenders despite this spike in costs due to the creation and deployment of clean energy technologies in line with net-zero goals, which requires large-scale manufacturing, raw materials, and labour.
The report was the result of a collaboration between gts and the Australian Energy Market Operator (AEMO), which was produced under their annual project, GenCost. GenCost works with industry stakeholders to adjust electricity generation and storage, as well as hydrogen production costs in Australia. The modelling in the report indicates that technology costs in Australia will return to normal levels by 2027 but are predicted to remain high until 2030 in global scenarios with accelerating energy transitions.
“Australia’s energy challenge lies in the transformation of our existing energy system, while ensuring the continuing delivery of sustainable, reliable, and affordable energy as we strive to achieve net-zero emissions by 2050,” CSIRO’s director of energy, Dietmar Tourbier, said.
“This imperative is not only essential for environmental stewardship, but also to maintain Australia’s economic competitiveness in the global market.”
The report emphasizes that global supply chain constraints caused by the COVID-19 pandemic resulted in increased capital costs for all technologies currently being considered for construction, impacting both raw material prices and freight costs.
Aurecon has provided data on the new cost levels, factoring in the assumption that costs for technologies not yet deployed would also have increased had contracts for construction commenced. The estimates are based on increases in the costs of inputs required for their construction and installation, and data on local content, imported content, and installation share of costs.
The data indicates that technology costs have increased by an average of 20%, with solar photovoltaic technologies seeing a 9% increase and wind experiencing a 35% increase, largely reflecting differences in material inputs and exposure to freight costs. The inflationary cycle is expected to peak in 2022-23 and return to normal costs by 2027 under current global climate policy commitments, or by 2030 under stronger commitments requiring faster global technology deployment. Following this adjustment period, standard projection methodologies will resume.
AEMO’s executive general manager of system design, Merryn York, said collaborating with CSIRO to deliver GenCost (Australia’s most comprehensive generation cost projection report) is an important input for the transition to net-zero in the energy sector.
“As coal fired power generation leaves Australia’s grids, we need investment in generation to fill those gaps. And as more variable renewables deliver our energy for consumers and decarbonisation, we need investment in firming — which is on-demand energy to smooth out the peaks and troughs from renewable generation,” York said.
“GenCost is important data for AEMO to plan the least-cost investments needed to fill the gaps from coal generation that is reaching end of life. This is important to deliver the transition, while maintaining reliable, secure, and affordable energy supply for consumers.”
