Coal or renewables: Which is cheaper?


There is no shortage of forecasts from authoritative sources on this question, so let’s review them.

The Australian National University’s Energy Change Institute director Ken Baldwin has written that in 2017 the marginal cost of generating power from an existing black coal-fired station was less than $40 a megawatt hour and brown coal-fired power was even cheaper.

Looking ahead, according to the ASX, forward prices for NSW coal-fired power between the 2020 March quarter and 2021 December quarter run to an average of $75.73 a megawatt hour.

(A watt is a measure of power. A megawatt hour is equal to a million watts of electricity used continuously for one hour).

Now to renewables. The Australian National University has forecast that the future prices of new renewable energy generators would fall to $50 a megawatt hour in the 2020s.

And Origin Energy agreed to buy all the power to be generated by the Stockyard Hill Wind Farm in Victoria between 2019 and 2030 for less than $60 per megawatt hour.

Projections show energy from renewables will soon be cheaper than from coal.Credit:Joe Armao

So while existing coal plants are presently one of the lowest cost forms of power, new wind and solar farms are projected to soon be cheaper. The CSIRO and Australian Energy Market Operator say this would occur even without a carbon price – a cost applied to polluters for the environmental damage they cause.

The CSIRO also says that solar and wind generation technologies are the cheapest ways to generate electricity compared to any other newly built technology.

This is an important point. Most of Australia’s energy comes from ageing coal plants, and much of this capacity is due to retire by 2040 when the facilities reach the end of their lives.

The Energy Market Operator says that under existing government policies, the cheapest way to replace this lost capacity is with solar and wind – the technology costs for which are rapidly falling – backed by storage and gas.

Meantime a new coal-fired power plant would cost an estimated $3 billion, drive up energy prices and take eight years to build, according to energy analysts.

Mr Turnbull on Friday said the Snowy 2.0 expansion, his pet project as prime minister, would make renewables reliable and enable “lower emissions and lower energy prices”. It promises to act as a massive battery that stores unused renewable energy then releases it on demand.

Tony Abbott with independent Warringah challenger and climate action advocate Zali Steggall at a forum last week.

Tony Abbott with independent Warringah challenger and climate action advocate Zali Steggall at a forum last week. Credit:AAP

The International Energy Agency’s latest outlook said the increasing competitiveness of solar photovoltaic means it will probably overtake total wind power capacity by 2025, hydropower by 2030 and coal by 2040.

British billionaire Sanjeev Gupta, who bought South Australia’s troubled Whyalla steelworks, plans to power it using solar, battery and pumped hydro.

“It’s still everybody’s perception that it is cheaper to make power from coal than it is from renewables, and it is no longer the case,” he told Guardian Australia last year.

Mr Abbott did not respond for a request from this publication to provide sources supporting his statement that coal was the cheapest form of power.

Nicole Hasham is environment and energy correspondent for The Sydney Morning Herald and The Age.

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