A new report by GenCostan Australian energy market operator and leading scientific research agency found that wind and solar are clearly the cheapest new form of electricity generation.
Acknowledging the need to factor storage into new wind and solar projects, the study found that even when variable renewables are backed up with two or six hours of battery or pumped hydro storage, the renewable generators were able to undercut their competitors.
Looking ahead to 2050, the models show the gap widening further with the cost of solar predicted to fall dramatically.
The resource has been developed through a collaboration between AEMO and CSIRO and will be updated annually to reflect the changing costs of technology.
GenCost 2018 also predicts that the electricity sector will draw more deeply on demand response to maintain the stability of the system and reduce costs.
The projections show that the cost of solar PV is continuing to fall faster than other technologies, which the authors expect will make solar one of the largest contributors to electricity generation by 2050.
Cost reductions in wind, batteries, pumped hydro and carbon capture and storage are also expected as the technologies are increasingly deployed around the world.
CSIRO Chief Energy Economist and report lead author Paul Graham said he expects the cost of low emission generation to continue to fall.
Given our capital cost projections are a function of global and local technology deployment, it is important to set a global context. The key contextual factors which we have chosen to set are the global climate change goal, electricity demand and fuel prices.
We apply two scenarios called 4 degrees and 2 degrees which describe the global climate policy goal. The goal is implemented in the model via carbon prices which are sourced from Clarke et al. (2014).
These scenarios are used to develop alternate cost projections from a global perspective, and may help set the global scenario narrative for AEMO forecasting and planning scenarios, but are not directly linked.
Projected global electricity generation mix under the 4 degrees and 2 degrees scenarios.
“Our data confirms that while existing fossil fuel power plants are competitive due to their sunk capital costs, solar and wind generation technologies are currently the lowest-cost ways to generate electricity for Australia, compared to any other new-build technology,” Graham said.
“At a global level, the investment costs of a wide range of low emission generation technologies are projected to continue to fall, and we found new-build renewable generation to be least cost, including when we add the cost of two or six hours of energy storage to wind and solar,” he said.