New analysis from Bloomberg New Energy Finance reveals unsubsidised wind energy is now cheaper than electricity from new-build coal- and gas-fired power stations in Australia.
The study shows that electricity from a new wind farm can be supplied at AUD 80/MWh compared to AUD 143/MWh from a new coal plant or AUD 116/MWh from a new baseload gas plant, including the cost of emissions under the recent carbon pricing scheme. However, even without a carbon price wind energy remains more economical over new coal and gas – by 14% and 18% respectively.
Michael Liebreich, chief executive of BNEF, said the findings prove ‘the perception that fossil fuels are cheap and renewables are expensive is now out of date’. ‘The fact that wind power is now cheaper than coal and gas in a country with some of the world’s best fossil fuel resources shows that clean energy is a game changer which promises to turn the economics of power systems on its head,” he said.
This transition between energies has arisen because since 2011 the cost of wind energy has fallen by 10%. In contrast, the cost of energy from new fossil-fuelled plants is high and rising. Specifically, new coal is being made more expensive by high financing costs. A survey of banks found that lenders are unlikely to finance new coal without a substantial risk premium due to the reputational damage of emissions-intensive investments.
Kobad Bhavnagri, head of clean energy research at BNEF believes ‘it is very unlikely that new-coal fired power stations will be built in Australia. They are just too expensive now, compared to renewables’. However, despite new wind being cheaper than new coal and gas, old assets that have already been paid off remain competitively advantageous. Therefore, ‘policy support is still needed to put megawatts in the ground today and build up the skills and experience to de-carbonise the energy system in the long-term’.
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