Wind and solar are the most economic source of electricity generation and storage in Australia, new research shows.
CSIRO’s annual GenCost report has found that renewables generally remain the cheapest new-build electricity generation option in Australia, although inflation and supply chain disruptions could put cost reductions on hold for the next year.
The 2021-22 report confirmed past years’ findings that wind and solar top the lot, even considering additional costs due to the variable output of renewables, such as energy storage and transmission.
According to CSIRO Chief Executive Dr Larry Marshall, Australia’s energy sector faces a number of unique challenges in the transition to net zero emissions.
“The latest report shows renewables are holding steady as the lowest cost source of new-build electricity”, Marshall said.
“With the world’s largest penetration of rooftop solar, unique critical energy metals, a world-class research sector and a highly skilled workforce, Australia can turn our challenges into the immense opportunity of being a global leader in renewable energy,” he said.
Projections in the report assume that cost reductions for all technologies will stall for the next 12 months because tight global supply chains will require more time to recover from the pandemic.
However, after the current inflationary cycle ends, solar, wind, and batteries are all projected to keep getting cheaper.
CSIRO Chief Energy Economist Paul Graham said researchers had observed annual cost reductions for most technologies and this year’s report is no exception.
“What will be different in the next year is that we will have a confluence of factors impacting project costs”, he said.
“The war in Ukraine has resulted in fossil energy price inflation which flows through to all parts of the economy through transport and energy costs. We also have tight supply chains that are still recovering.”
The final 2022 report includes an update on hydrogen electrolysers which are experiencing rapid cost reductions and could support a faster transition to green hydrogen, particularly in the current context of high natural gas prices.
The updated analysis also found that both onshore and offshore wind costs have fallen faster than expected. Onshore wind cost changes reflect Australian projects. Offshore wind is yet to be developed in Australia however, cost reductions achieved overseas mean that Australian projects are expected to be lower cost than previously expected.
Cost reductions for technologies not currently being widely deployed such as carbon capture and storage (CCS), nuclear Small Modular Reactors (SMRs), solar thermal, and ocean energy are lagging and would require stronger investment to realise their full potential.
The status of nuclear SMR has not changed. Following extensive consultation with the Australian electricity industry, report findings do not see any prospect of domestic projects this decade, given the technology’s commercial immaturity and high cost. Future cost reductions are possible but depend on its successful commercial deployment overseas.
AEMO’s Executive General Manager, System Design Merryn York said the analysis shows that timely investment in new, firmed renewables will provide the most economic form of electricity generation moving forward.
“With growing opportunity to decarbonise Australia’s economy, understanding the investments that can support a low emissions power system, provide resilience to international pressures, and reduce consumer costs is critically important to enabling the energy transition”, York concluded.