STEPHEN LONG. The reality is new coal power is not the answer for cheaper electricity bills (ABC News, 03.09.18)

The tipping point’s been reached: renewable energy is now a cheaper source of power for Australia’s future electricity needs than coal.

Surprised? That’s understandable, given the plethora of politicians in Canberra who keep saying that coal is the key to cheap electricity and renewables drive up prices.

Among them, the “insurgents” — demanding that new coal-fired power stations be built — who helped roll a prime minister viewed as not sufficiently pro-coal.

But it’s a fact. The cold, hard numbers show that new renewable energy is supplying cheaper electricity than new coal-fired power plants could and will continue do so.

No less an authority than the Australian Energy Market Operator agrees.

In a recent report, based on deep, sophisticated modelling, it looked at the most economical way to replace our fleet of ageing coal plants as they retire.

“The lowest cost replacement for this retiring capacity and energy will be a portfolio of resources, including solar (28 gigawatts), wind (10.5 GW) and storage (17 GW and 90 GWh), complemented by 500 megawatts of flexible gas plant and transmission investment,” it said.

New coal power didn’t rate a mention.

And no wonder.

Prices of electricity from new renewable energy projects are already far cheaper than the likely price from the new-generation coal plants some Coalition MPs want to see built.

The only way for renewable power prices is down

Last year, Origin Energy stunned the market by signing a long-term deal to buy electricity from the Stockyard Hill windfarm being developed west of Ballarat in Victoria, reportedly at less than $55 a megawatt hour.

That set a new benchmark. AGL swiftly followed suit at its Coopers Gap windfarm project in south-east Queensland, which is set to be the largest wind farm in Australia.

A series of similar deals followed, firmly establishing a wholesale price for wind energy at between $50 and $60 a megawatt hour.

Electricity from large-scale solar power plants is now similarly priced, after dramatic declines in the costs of production for solar modules.

“The numbers right now are between $50 and $60 a megawatt hour,” says David Leitch of ITK Services, an independent energy analyst with decades of experience, who has previously worked for major investment banks.

How does the price of new coal power compare?

Given Friday’s events, it’s worth briefly recapping our national energy policy over the past 20 years.

At market rates of financing, the lowest cost of electricity from a new coal generator using so-called “high-efficiency, low-emissions” technology would be more than $150 a megawatt hour, according to Bloomberg New Energy Finance.

In the absence of big government subsidies and underwriting, analysts say a new coal generator would need a price of more than $80 a megawatt hour for its electricity just to cover the costs of its operation.

Meanwhile, the only way for renewable power prices appears to be down.

The cost of solar power modules has fallen by up to 30 per cent this year alone, according to recent analysis by Bank of America/Merrill Lynch, with huge supply from China driving prices down.

With new solar panels now available that you can simply print and stick on your roof, the likelihood is that prices will plummet in the future.

The reality is new coal power is not the answer

According to Goldman Sachs, wind and solar power prices will fall by between one-third and 43 per cent by 2025. Some analysts consider this a estimate conservative.

There is a caveat — because renewable energy sources are variable, there will be a future need for “balancing” or stabilising technologies to maintain adequate electricity supply 24/7 as the penetration of renewable energy increases.

But the cheapest way to do this, according to the Australian Energy Market Operator and most analysts, is a combination of battery storage (likely to fall in price as production scales up), pumped hydro and electricity from gas-fired power plants to meet peaks in demand — not coal.

All this poses an interesting challenge for new Energy Minister Angus Taylor — dubbed the minister for electricity “price busting” by Prime Minister Scott Morrison.

“My personal focus, the Prime Minister’s focus and this Government’s focus will be single-minded — getting power prices down,” he maintained last week in his first speech as Energy Minister.

Have no doubt, some Coalition MPs will want Mr Taylor and the Government to back new coal-fired power plants to meet future energy needs, regardless of the numbers.

But the economic reality is that, if lowering electricity prices is really the focus, new coal power is not the answer.

Mr Taylor has been a vocal opponent of windfarms and a darling of the anti-wind farm lobby and of the anti-renewables right-wing of the Coalition.

But the politician, whose grandfather was the first commissioner and chief engineer of the Snowy Mountains hydro-electric power scheme, takes umbrage at suggestions by political opponents that he is anti-renewable energy.

“Renewables are in my blood,” he responded.

“For more than 30 years I have shared concerns about climate change and the impact of C02 equivalents on our climate,” he told a small business forum.

“I am not sceptical about climate science, but I am, and have been for many years, deeply sceptical of the economics of so many of the emissions reductions schemes dreamed up by vested interests, technocrats and politicians around the world.”

Absolute faith in coal

But if subsidies are his objection, Mr Taylor’s solutions are curious.

He’s advocating the “upgrading of legacy [coal] generators” — something which is highly unlikely to happen without government paying for it or underwriting the investment.

He’s endorsed the Government’s announced plan to underwrite new investment in “new stable, low-cost” power generation, though this too amounts to a form of subsidy.

As a Rhodes scholar with distinguished qualifications and experience in economics, Mr Taylor would understand that coal power plants in Australia enjoy an implicit subsidy because they do not have to pay for the cost to the environment of their carbon emissions, or the health costs from their air pollution, not to mention direct subsidies such as diesel fuel rebates.

Meanwhile, subsidies designed to encourage the uptake of renewable energy are diminishing.

Renewable energy certificates — the currency of the Renewable Energy Target — have been a valuable commodity. Power companies that invested in renewable energy received them; those that fell short on renewable investment had to buy them or pay a penalty.

But with the Renewable Energy Target all-but met, this subsidy for renewable investment is all but gone.

Infigen, one of the nation’s biggest renewable energy providers, told investors that there is likely to be no new demand for large scale renewable energy certificates after 2020 — which implies that their value will fall to zero.

The new Energy Minister says he sees “a strong role for commercially viable renewables, alongside continued focus on coal and gas”.

But would someone who accepts the climate science want investment in new coal power plants that not only contribute to carbon emissions and global warming, but produce costlier electricity? Let alone subsidise the investment with public money?

The answer, presumably, lies in the divisive politics of the Coalition Government on energy.

The phrase Mr Taylor’s predecessor used to describe the Government’s position on electricity generation was “agnostic about technology” and, if you believe his recent manifesto, that’s the new Minister’s position too.

The trouble is so many of his colleagues have absolute faith in coal.

This article first appeared on ABC News on 03.09.18

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One Response to STEPHEN LONG. The reality is new coal power is not the answer for cheaper electricity bills (ABC News, 03.09.18)

  1. Tim Shaw says:

    Interestingly, the Snowy scheme was not launched due to a desire to use renewables, but to provide an alternative source of electricity to the coal fired power stations that were beholden to the coal miners and coal industry.

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