In Australia the cheapest source of energy today is large-scale solar plants that track the sun.
These projects will “challenge” the existing coal-fired power plant fleet, according to a new analysis of global power prices by energy consultancy Bloomberg New Energy Finance (BloombergNEF).
“In Australia, renewables are by far the cheapest new source of bulk generation,” BloombergNEF analyst Lara Panjkov said.
“Our analysis also suggests that colocating renewables and batteries can be attractive for the provision of new dispatchable power. Today we estimate that approximately 711 megawatts (MW) of new renewable energy plants with paired storage have secured financing.”
The study used the levelised cost of electricity, or LCOE, which measures a power plant’s average net present cost of electricity generation over its lifetime.
Cost of doing business in Australia
The highest quality tracking and fixed axis solar, and onshore wind projects are the cheapest forms of power generation to build in Australia today, according to BloombergNEF data.
Tracking solar PV comes in at $US26-67 per megawatt hour (MWh), fixed axis solar PV has an LCOE of $US29-80/MWh and onshore wind costs $US32-83 per MWh.
A combined cycle gas turbine power plant costs $US66-96/MWh while an open cycle gas turbine power plant comes in at $US146-309/MWh.
As costs for battery storage come down this is making renewables more attractive.
South Australia has two big batteries, the 100MW Tesla battery at Hornsdale and Infigen’s (ASX:IFN) new 25 MW/52 MWh Lake Bonney battery.
READ: South Australia is leading the renewable energy pack, and it’s pushing to go further
Victoria has two, one in Ballarat and one in Gunnawarra, and Neoen says it is planning to install a massive 600MW battery in Geelong. NSW is still considering large-scale battery storage.
The Northern Territory is investing in small scale batteries, while Queensland has plans to install a 100MW battery at Wandoan.
BNEF data indicates that onshore wind plus storage in Australia has an LCOE of $US50-124/MWh MWh, and fixed-axis PV plus storage has an LCOE of $US58-178/MWh.
Building a new coal-fired power plant is likely to be much more expensive, in terms of LCOE, than a solar or wind power farm, but an analysis by the RBA last year found that once storage is included in renewable energy projects that analysis becomes less clear.
“For example, LCOE estimates for a new renewable plant with six hours of pumped hydroelectricity storage is around that of a new coal-fired plant,” the March 2020 report said.
It’s a worldwide thing
Solar and wind are now the cheapest form of energy for two-thirds of the world, BNEF said.
It said the global LCOE for onshore wind and large-scale solar had halved from two years ago to $US44/MWh and $US50/MWh respectively.
“Globally, we estimate that some of the cheapest PV projects financed in the last six months will be able to achieve an LCOE of $US23-29 per megawatt-hour,” the report said.
“Those projects can be found in Australia, China, Chile, and the UAE.”
In China, new-build solar is almost on par with the running costs of existing coal-fired power plants, at an average LCOE of $US35/MWh.
“This is significant as China advances on its deregulation agenda, opening up competition in the power sector,” the report said.
China is a significant market for Australian thermal coal exporters.
Battery storage is now cheaper to build for energy peaking purposes than gas, in regions and countries which import the fuel such as Europe or Japan.
For onshore wind the key factor has been rising turbine sizes. This combined with lower interest rates means the best projects in the US, India and Spain can deliver power for as little as $US26/MWh.
Solar is benefiting from better performing monocrystalline modules, the more expensive but more efficient version of a silicon solar panel.
“There have been dramatic improvements in the cost-competitiveness of solar and wind. Part of it is due to photovoltaic and wind technology getting better at extracting renewable resources,” Tifenn Brandily, lead author of the report at BloombergNEF, said.
“But our analysis also suggests that since 2016, auctions are forcing developers to realise cost savings by scaling up project size and portfolios. Larger scale enables them to slash balance-of-plant, operations and maintenance expenses – and have a stronger negotiating position when ordering equipment.”