Wind, solar, coal and gas to reach similar costs by 2030: report

Paul Graham, CSIRO

By 2030 renewable energy sources such as solar and wind will cost a similar amount to fossils fuels such as coal and gas, thanks to falling technology costs, according to new forecasts released in the CO2CRC’s Australian Power Generation Technology (APGT) Report.

The report also shows that technology costs will fall faster under climate policies that limit the concentration of carbon dioxide in the atmosphere to 450 parts per million. (The current CO₂ concentration is around 400 parts per million).

While the practice of forecasting is often derided, with multi-billion dollar assets that can last 50 years or more, the electricity industry and the policy-makers, academics and stakeholders who study it have no choice but to get involved.

Updating the data

A key input to all energy crystal-ball gazing is the cost of generating electricity, and performance data. However the last comprehensive update of electricity generation costs was the then Bureau of Resource and Energy Economics’ Australian Energy Technology Assessment (AETA) in 2012 (followed by a minor update to selected data in 2013).

The lack of consistent up–to-date data disadvantages technologies such as solar photovoltaic power systems whose costs have been improving rapidly since then.

To avoid misrepresenting the possible future role of fast-moving technologies, many analysts have had to slowly abandon use of the old data and create their own more up-to-date estimates.

While diverse opinions are sometimes useful, a proliferation of inconsistent alternative cost data sets creates confusion for the industry as it makes each published study less comparable.

The delivery today of a new and consistent electricity cost data set therefore is an important and long awaited addition to the electricity industry’s toolkit. The new report was conducted over the July-November period and utilised an electricity industry reference group of around 40 organisations to provide input and feedback along the way.

Given the often heated debates in Australia around energy sources, the CO2CRC recognised that it is crucial that studies like these are conducted in an open and unbiased manner.

The report includes key “building block” data such as capital and operating costs, and performance data such as emissions intensity, water usage and expected usage rates.

The cost of energy

Whenever a new electricity generation technology cost and performance data set is created there is an opportunity to update our view of the relative competitiveness of each technology.

This is calculated using a measure called the Levelised Cost of Electricity (LCOE). The LCOE captures the average cost of producing electricity from a technology over its entire life. It allows the comparison of technologies with very different cost profiles, such as solar photovoltaic systems (high upfront cost, but very low running costs) and gas-fired generators (moderate upfront cost, but significant ongoing fuel and operation costs).

The LCOE is the best technology comparison measure available but is not without limitations. It cannot recognise the different roles technologies might play in an electricity system (e.g. such as supplying everyday, baseload power, or power for periods of peak demand) or the relative flexibility of plant to increase or decrease power supply as needed.

Accepting the limitations, the updated LCOE analysis finds that in 2015 natural gas combined cycle and supercritical pulverised coal (both black and brown) plants have the lowest LCOEs of the technologies covered in the study. Wind is the lowest cost large-scale renewable energy source, while rooftop solar panels are competitive with retail electricity prices.

It is interesting to note that all 2015 LCOE estimates are higher than the current wholesale price of electricity of around A$40 per Megawatt-hour. The reflects reduced demand in the electricity network, which is putting downward pressure on electricity prices.

By 2030 the LCOE ranges of both conventional coal and gas technologies as well as wind and large-scale solar converge to a common range of A$50 to A$100 per megawatt hour. This outcome is consistent with observations from many commentators noting that the continuing reductions in wind and solar photovoltaic costs must inevitably lead to an intersection with the costs of the existing mature technologies before too long.

Of course, equality in LCOE will not necessarily translate to an equal competitive position in electricity markets, given differences in the flexibility of renewable and conventional coal and gas plants (which LCOE does not capture as already noted).

Falling technology costs

The convergence of conventional and renewable energy costs depends on the capital costs of these energy sources. These were modelled for the new report by CSIRO’s Global and Local Learning Model. This model is a relatively objective way of projecting costs based on historical learning rates. Learning rates show that for each doubling of installed capacity of an energy source, costs fall by a particular amount.

We can model these costs across different climate policies, as you can see in the chart below.

Projected electricity generation capital costs assuming a 550ppm consistent global carbon price signal

CSIRO’s projections included carbon price signals consistent with either concentration of 550 parts per million or 450 parts per million of greenhouse gas emissions. However, we found the total amount of cost reduction was fairly similar, but more accelerated in time, by approximately five years, in the 450 ppm case.

With the future policy environment of the electricity industry potentially becoming a little clearer after the COP21 meeting in Paris next week, the new report makes the job of understanding the role of different technologies in that future a little easier.

The Conversation

Paul Graham, Chief economist, CSIRO energy, CSIRO

This article was originally published on The Conversation. Read the original article.

With big solar Australia could be backing a winner, but it still needs leadership

Iain MacGill, UNSW Australia

The Australian Renewable Energy Agency (ARENA) and Clean Energy Finance Corporation (CEFC) announced this week A$350 million in joint funding to support up to ten new large-scale solar photovoltaic (PV) projects in Australia and drive down the cost of large-scale solar.

It’s not the first support for utility-scale PV offered by these government agencies. ARENA supported the 102-megawatt Nyngen power plant (Australia’s largest), which recently came online, and a 53 MW plant in Broken Hill that is still to come, under the former Labor government’s Solar Flagships program. Both ARENA and the CEFC are supporting the 57 MW Moree Solar Farm currently under construction, while the CEFC also facilitated financing for the 20 MW PV plant at Royalla in the ACT.

Still, the scale of this new and tightly targeted funding support is certainly significant. The CEFC’s A$250 million commitment is approaching 20% of the A$1.4 billion it has committed so far across all renewable, energy-efficiency and low-emission technologies. Also significant is the specific target of A$135 per megawatt-hour for the PV electricity from these facilities.

All of which raises some important questions about whether this support (courtesy of the taxpayer of course) is backing a renewable energy “winner” that will play a key role in transitioning Australia’s electricity industry towards a cleaner future.

Solar PV’s contribution to a clean energy future

To be clear, the focus here is on PV, which converts sunlight directly into electricity, rather than solar thermal power, which concentrates sunlight to create heat that is then used to generate electricity.

Solar PV has, without doubt, made the most surprising progress of any renewable technology over the past decade. Its costs have fallen by 80% in the past five years alone. Its installed global capacity of 177 gigawatts in 2014 is now approaching half that of wind (the most significant of global non-hydro renewables) and its average annual growth in capacity of 50% per year over the past five years is almost three times the rate that wind has achieved in that time. This data is contained in the latest report from REN21.

Its future role is, of course, less clear. Still, groups as diverse as the International Energy Agency and the Australian government itself would seem to agree that solar PV has a key role to play in a global clean energy future as its costs continue to fall (albeit not at the same rate) and enabling technologies such as energy storage also continue to progress. Just how large its role might be is a far more complex and controversial question.

Big or small?

Of solar PV’s many attractive characteristics, its scalability is unique among generation technologies. The underlying generation technology is a PV module, which is now typically sized at around 250 watts. PV systems from residential to utility scale all use this technology – typically just six to 20 modules for a 1.5-5 kilowatt system on your house, and upwards of 2 million modules for the very largest (500 MW and above) utility plants. This provides considerable flexibility in how PV is deployed in the electricity industry.

Utility-scale PV certainly has some potential advantages over household-sized systems. Its location can be chosen to maximise performance, while many rooftop installations aren’t ideally located given the available roof space and other factors such as shading. Quality components, installation and maintenance are more assured, while it also allows the use of new advanced technologies to track the sun’s movement and hence improve output (as seen in the Moree solar farm).

Utility-scale PV can also formally participate in power system and electricity market dispatch. Finally, doing things bigger generally makes things cheaper.

However, household (and commercial and industrial) systems also have their advantages. They use existing land and infrastructure (your house roof). And by being close to where you use electricity, they reduce losses from electricity having to travel a long way down the wires from large remote generators.

Costs are generally higher than utility PV but not as much as you might expect from scale economies – countries including Australia have efficient and low-cost providers of small PV systems. Finally, household PV effectively competes with retail electricity prices, which are far higher than the wholesale electricity prices that utility PV plants receive.

Questions around whether PV’s future is largely utility, largely distributed or some mix of the two are complex and controversial. Globally, almost 60% of grid-connected solar PV is large scale, but it does vary considerably country by country. In particular, eight of the ten largest solar PV plants at present are in the United States, with the other two in China and India.

Are we falling behind?

Australia presents a relatively unique context compared to the rest of the world. At the end of 2014 we were ninth for total installed solar PV capacity (including large and small) and seventh in terms of capacity additions in that year.

However, some 85% of our installed solar capacity is residential. By comparison, the US and Asia are predominantly large-scale solar markets and even Europe is only around two-thirds small-scale distributed solar.

In terms of non-hydro renewables in Australia, solar PV now exceeds wind in terms of installed capacity, although wind still contributes significantly more to overall electricity generation as it operates more of the time.

In terms of large-scale utility solar, Australia isn’t even in the top 20 countries, unlike Romania, Honduras and the Philippines. It should be noted that we have excellent opportunities for large-scale solar with an excellent solar resource and plentiful land by comparison with many other countries.

However, we also have very good residential opportunities as well, with lots of large stand-alone houses. Still, we are clearly a long way back in the utility PV pack.

Both wind and large-scale solar are currently supported by the large-scale Renewable Energy Target. The recent agreement between the federal government and opposition on a lower target of 33 terawatt-hours in 2020, and an overhang of renewable energy certificates, means that the scheme is not delivering much new investment.

There is no doubt that large-scale solar is currently more expensive than wind and will struggle to compete in the RET without assistance. However, recent developments internationally (most recently an auction for utility PV projects in Brazil last month that had winning bids priced at US$80 per megawatt-hour) highlights the potential for further cost reductions. In this light, further support for large-scale solar PV in Australia to help get its costs down certainly seems to be targeting a major opportunity.

It is of course just one of numerous opportunities that PV offers here in Australia. Residential has further growth potential and there is also the still largely untapped commercial and industrial market sector. These also deserve support.

More generally, the federal government really needs to get over its problems with wind power. It’s a highly competitive renewable generation technology with some important advantages over solar PV including, of course, its ability to generate at night.

It has its own limitations as well, but both wind and PV have a key and, in many ways, complementary role to play in a clean energy future – a point that modelling by our group here at UNSW , as well as others, has highlighted. Government leadership – federal and state – is urgently needed and sorely lacking over recent years.

The Conversation

Iain MacGill, Co-director, Centre for Energy and Environmental Markets, UNSW Australia

This article was originally published on The Conversation. Read the original article.

Wind commissioner? Let's have a coal commissioner too

Samantha Hepburn, Deakin University

Wind turbines have got Canberra in a spin this week, with hearings underway from the senate inquiry into wind turbines and their possible health impacts. The committee yesterday released an interim report from chair John Madigan with seven recommendations to increase regulation around the wind industry.

A dissenting report from Labor senator Anne Urquhart questioned the political timing of the report.

Meanwhile, a leaked email from environment minister Greg Hunt has offered crossbench senators a “wind farm commissioner” in return for support for the passage of renewable energy legislation.

But behind the politics, how do the report’s recommendations stack up?

The recommendations

The interim report’s recommendations include:

  • a scientific committee to look into industrial sound

  • the drafting of national infrasound and noise measures

  • the development of National Wind Farm Guidelines for planning

  • making wind’s accreditation under the Renewable Energy Target (RET) dependent on adherance to guidelines and measures (old projects would have five years to comply)

  • a national ombudsman to handle complaints

  • a levy on wind farms to fund the scientific committee and ombudsman

  • data to be made freely and publicly available.

If implemented, these rigorous and extensive recommendations will create wide-ranging monitoring, compliance and review obligations. They are likely to produce a strong national health review framework for the sector. They will, however, also alter the operational dynamics of the industry. This has the potential to affect market progression.

Wind energy accounts for almost a quarter of Australia’s clean energy generation. Investment in wind has the capacity to return fuel savings that significantly outweigh the initial investment cost over the lifetime of the purchase.

This, combined with technological innovations and market subsidies such as the RET, has given the sector a reasonable degree of market force. Fostering wind energy has been crucial for the creation of a greater energy mix in response to growing climate change imperatives.

Health impacts compared

The Senate committee noted that it was “concerned” that the health consequences of wind turbines, in particular, dizziness, nausea, migraine, high blood pressure, tinnitus, chronic sleep deprivation and depression, had been ignored or derided. But how do these compare to other energy industries?

The health consequences of the fossil fuel industry have been ignored for many years. On any comparison, it is unfair to focus exclusively on the health implications of wind turbines and, at the same time, ignore the health implications of other forms of energy production.

Global energy demand is increasing with world energy consumption expected to increase 56% by 2040. Mitigating climate change demands a shift to renewable energy. Subjecting wind energy to a forensic degree of health regulation and ignoring the health risks of other (renewable and non-renewable) forms of energy production is disproportionate. It is unfair.

In Victoria, the Hazelwood Coal Fire Inquiry has been reopened, given the enormity of the health consequences associated with the coal fire last year.

Some of these very serious health issues: respiratory conditions such as asthma and bronchitis, long-term chronic health affects from pollutants including carbon monoxide, oxides of nitrogen and sulphur, and the longer term chronic health effects if the coal undergoes significant distillation and produces measurable amounts of toxic hydrocarbons such as benzene, toluene, xylene, and polycyclic aromatic hydrocarbons.

The likelihood of escalating chronic health conditions and an increase in mortality rates occurring as a consequence of the coal fire is significant. Whilst the coal fire is a catastrophic event rather than an ordinary consequence of the generation of coal-fired electricity, it nevertheless represents an example of the risks associated with the generation of fossil fuel energy.

Compared to the recommendations by the senate committee on wind turbines, the recommendations from the Hazelwood Coal Fire Inquiry were relatively tame. The Victorian government made A$25.4 million available to fund a range of initiatives that include:

  • a long-term health study in the Latrobe Valley

  • new air quality equipment to be used by the Environmental Protection Agency, which can be deployed across the state

  • a boost to the mine regulator’s capacity to assess and monitor mine planning for fire prevention, mitigation and suppression

  • development of the state smoke framework.

There was no recommendation to appoint a coal ombudsman or to create an Independent Expert Scientific Review of the Health Impacts of the Coal Industry which would be funded by the imposition of a coal levy.

CSG concerns

Things are a little different in the gas sector. There has been significant review and regulatory development for coal seam gas extraction at both the state and the federal level.

However, the recommendations proposed have largely centred around the management of resource conflict, environmental assessment and risk allocation. The actual health impacts of coal seam gas extraction upon residents have not been the subject of review in either Queensland or New South Wales.

Indeed, the 2014 Chief Scientists report on coal seam gas (CSG) in New South Wales expressly omitted an examination of the health implications of CSG extraction.

This is despite the fact that toxins in CSG produced water include such volatile organic compounds as benzene, methane, heavy metals and radioactive materials and exposure can potentially have an enormous impact upon the respiratory, endocrine, nervous and cardiovascular systems, can affect foetal development in pregnant woman and may cause cancer.

The health risks of the wind industry need to be reviewed in balance with other social, environmental and economic factors. This is exactly what has occurred in the context of the numerous reviews and reports prepared for CSG across the country. The extraction and production of many forms of energy have health impacts.

A spotlight focus on the health implications of one sector in the absence of context and sector comparability, lacks balance and perspective.

The Australian wind industry is one of the most rapidly growing renewable energy markets given improved technology, relatively low operating costs and minimal environmental impacts. The Bureau of Resources and Energy Economics (BREE) has predicted that onshore wind and solar will eventually have the lowest cost of electricity of all the renewable options in Australia leading up to 2030.

Despite this, the wind industry remains highly susceptible to cognitive barriers; the recommendations and proposals of the Senate Committee are likely to exacerbate this.

The Conversation

Samantha Hepburn is Professor, Faculty of Business and Law at Deakin University.

This article was originally published on The Conversation.
Read the original article.

Given the value of emissions cuts, solar subsidies are worth it

Dylan McConnell, University of Melbourne

Earlier this week the Grattan Institute released the report Sundown, sunrise: how Australia can finally get solar power right. It looked at the cost of solar subsides and explored emerging challenges and opportunities for solar power to “find its place in the sun”, and generated widespread reports of its headline figure, that the cost of solar photovoltaic take-up has outweighed the benefits by almost A$10 billion dollars.

That figure (A$9.7 billion, to be precise) was generated by comparing the benefits of greenhouse emission reductions from solar, against the capital and maintenance costs. The first part of this calculation is therefore dependent on the assumed carbon price of A$30 a tonne, which gives a total benefit to society of A$2 billion by 2030.

The Grattan Institute’s analysis says that rooftop solar photovoltaic panels have come at a large cost to society. Figures (in 2015 dollars) refer to benefits and costs of solar PV systems installed from 2009.
Grattan Institute

But why A$30 per tonne? And what is the actual cost of carbon emissions?

The real cost of carbon

One metric commonly used is the “social cost of carbon”. This is an estimate of the economic damages from the emission of one extra unit of carbon dioxide (or equivalent). There is a huge range and debate about what the social cost of carbon really is.

Earlier this year, a paper in Nature Climate Change estimated the social cost of carbon to be US$220 per tonne. This significantly changes the cost benefit analysis.

Rooftop solar PV has come at a large cost to society Aggregate net present benefits and costs to society of solar PV systems installed from 2009, $2015, with a carbon price of $220 per tonne
Authors illustration

Last year, Nicholas Stern and Simon Dietz updated their internationally renowned model, finding that a carbon price between US$32 and US$103 was required today to avoid more than 2C of warming, (rising to between US$82-260 in 2035).

Other work suggests that should global greenhouse mitigation continue to be delayed, a carbon price of US$40 per tonne of CO2-equivalent would reduce the probability of limiting global warming to 2C by only 10–35%.

The Grattan report argued that “subsidies are expensive and inefficient”, but arbitrarily used a A$30 per tonne cost, significantly underestimating the most important subsidy: the fact that polluters are allowed to emit carbon dioxide for free.

While the choice of carbon price and costs significantly changes the calculus, looking only at the emissions and avoided generation really misses the point of the support mechanisms in the first place.

Why do we have renewable energy support mechanisms?

The Grattan report concludes that “Australia could have reduced its emissions for much less money”.

This is undeniably true. As the report points out, the federal government’s Emissions Reduction Fund has purchased emissions abatement at an average price of A$13.95 per tonne, and the Warburton review estimated the cost of the large-scale Renewable Energy Target to be A$32 per tonne up until 2030.

However, the objective of renewable energy policy is not solely for cheap and efficient emissions reductions. In fact, the objectives within the legislation of the renewable energy target are to:

  • encourage the additional generation of electricity;
  • reduce emissions of greenhouse gases;
  • ensure that renewable energy sources are sustainable.

It is not particularly fair to assess a support mechanism against objectives it was not designed to achieve. Only assessing the efficacy of the renewable energy target against emissions abatement efficiency misses an important component of renewable energy support policy: industry development.

Market mechanisms, such as carbon pricing, are widely acknowledged to be the most efficient method to reduce emissions. However, they are not sufficient by themselves and do not address other market failures.

In fact this is something that the Grattan Institute itself previously reported on in a previous report, Building the bridge: a practical plan for a low-cost, low-emissions energy future, which said:

Governments must address these market failures, beyond putting
a price on carbon


…in order to develop, demonstrate and deploy the technologies that are likely to be lowest cost in the longer time frame of meeting the climate change targets, further government action is essential.

As indicated, deployment policies are an essential policy to tool to develop the renewable energy industry, and ensure the lowest cost in the long term. Typically, in the context of renewable energy deployment policies sit between R&D on one hand, and pure market mechanism (such as carbon pricing) for mature technologies on the other.

Such deployment policies are essential to enable learning-by-doing and realising economies of scale. The cost reductions enabled by this simply cannot be developed in the lab, or be captured in the market by individual companies (due to knowledge and technology spillovers and other similar positive externalities).

The cost of reducing emissions

The report concludes that solar schemes have reduced emissions at a cost of A$175 per tonne to 2030. This figure has been derived by using the net present costs and for the emissions abated to 2030, which includes the capital cost of older and significantly more expensive systems.

If carbon costs were price at A$220 per tonne, the cost of abatement becomes negative, that is, a saving.

An alternative measure looks at the subsidy paid today. Households are currently purchasing solar systems subsidised by the RET at rate of approximately A$0.80 per watt installed, while receiving cost-reflective (unsubsidised) feed-in tariffs. Over an expected 25 year life, and an average grid carbon intensity of 0.85 tonnes per megawatt hour, the cost of abatement would be approximately A$28 per tonne.

Comparing this with the cost of abatement only a few years ago (in the order of several hundred dollars per tonne), the support mechanisms look very successful in delivering on objectives of industry development, and delivering cost reductions.

Most would agree that some renewable policies have previously been poorly implemented, and the Grattan report is right in highlighting these. However measuring their costs against objectives they were not intended to achieve is unfair.

The simple cost benefit analysis fails to incorporate all benefits of renewable energy support policy, and underestimates the avoided costs of carbon emissions.

The Conversation

Dylan McConnell is Research Fellow, Melbourne Energy Institute at University of Melbourne.

This article was originally published on The Conversation.
Read the original article.

India’s huge solar water pump plan highlights how solar could leapfrog the grid


The Indian government is looking to deliver one of the most ambitious projects involving solar-powered water pumps in the world. According to Bloomberg, the Indian government is looking to exchange 26 million ground water pumps, which now mostly run on grid electricity or diesel, with more efficient and solar-powered water pumps.

The country will spend $1.6 billion over five years on getting just the first 200,000 deployed, according to the article. Farmers will get the subsidies, and in exchange will also get water-saving systems so that try to help them not use more water than they did with the grid and diesel-connected pumps. Take these project numbers with a grain of salt, as the Indian government has a long history of make these types of goals more aspirational than concrete and viable.

India water pump

India’s power grid infrastructure has long been neglected, and as the population grows — and the…

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