23 April 2019 (IEEFA Australia) – Renewables are the lowest cost, most sustainable solution to Australia’s energy policy crisis and potentially one of the country’s largest export industries of the future, according to a briefing note published today by the Institute for Energy Economics and Financial Analysis (IEEFA).
The briefing note, Why Renewables are the Solution for Australia: The Low-Cost Source of New Electricity Generation, highlights recent technological advances that have made renewables one of the country’s fastest growing industries, and Australia a world leader in battery storage.
Author Tim Buckley, IEEFA’s Director of Energy Finance Studies Australasia, says the integration of renewable electricity generation is already being achieved at a world-leading scale in the Australian Capital Territory, Tasmania and South Australia, with Victoria and Queensland recently lifting ambitions for 50% renewables by 2030 and, as a result, unlocking large-scale regional investment and employment opportunities.
“The expanding ability to integrate domestic renewables adds resilience to Australia’s electricity grid while providing sustainable national energy-security benefits,” said Buckley. “It also delivers on the country’s international obligations under the Paris Agreement.”
The briefing note compares the fossil fuel and renewable energy industries, noting that the fossil fuel industry is still heavily subsidised by Australian taxpayers via diesel fuel rebates, free water and carbon emissions, taxpayer-funded enabling infrastructure and long dated royalty holidays (as offered to Adani, for example).
“The renewable energy industry no longer requires major subsidies going forward, only transparent, effective policies,” said Buckley.
“Most fossil fuel projects in Australia are owned by foreign multinationals that use tax haven-based offshore marketing hubs and also have a history of paying next to no corporate tax in Australia – ever,” said Buckley, “there is no other private industry so dependent on using public, finite assets for private, foreign, largely tax-free gain at such a cost to the community.”
Renewable costs are expected to continue to fall some 10% annually over the coming decade
With renewables now the low-cost source of new electricity generation, solar and wind projects are being built across Australia at just A$40-50/megawatt hour (MWh), down some 70% in the last three years. In contrast, a new coal-fired power plant would cost over A$100/MWh (and up to A$150/MWh including carbon costs and increasing capital requirements).
“Renewables are deflationary,” said Buckley. “Once built, there is no fuel cost, with proponents primarily bearing only the interest cost on their debt capital. And like storage costs, renewable costs are expected to continue to fall some 10% annually over the coming decade due to economies of scale and accelerating technology gains.”
Further, renewables are clean and sustainable, use almost no water, and once built, create no air or particulate pollution, nor do they discharge carbon emissions, said Buckley.
Meanwhile, thermal coal-fired power plants are struggling to get debt or equity financing, as highlighted when over 100 major global lenders recently announced exits from thermal coal-fired power, and Australia’s three largest electricity generators, Energy Australia, Origin Energy and AGL, all ruling out any involvement in new coal-fired plants.
“There is a major pivot towards renewables globally and Australia should have been at the head of that market shift,” said Buckley. “There have been major technological advances in strengthening the country’s electricity supply, and the markets are responding, making Australia a world leader in adopting new battery technology and rooftop solar. With multiple proposals and investments in utility-scale batteries underway, there is a clear endorsement for the bankability and viability of this technology.”
Investing in renewable energy infrastructure builds Australia’s engineering and scientific capacity, leverages its financial capacity, creates multiple jobs, and builds export industries of the future, according to the briefing note.
In addition to investing in renewables, Australia needs to reintroduce a “whole-of-economy” price on carbon emissions as the low-cost solution to achieving the deep decarbonisation of the entire economy. Australia should also belatedly consider an outright ban on any new thermal coal mine development, consistent with its Paris Climate commitments, and particularly given that Australia is a top-three exported-emissions nation globally, according to the briefing note.
“The inevitability of renewables is not happening fast enough in Australia to deliver on Paris,” said Buckley. “Without a national energy policy, this leaves a growing stranded asset risk, as recently highlighted by both the Reserve Bank of Australia and the Australian Prudential Regulatory Authority, as well as the Bank of England. Australia must step up and take advantage of this increasingly low-cost, sustainable solution for its energy future – today.”
Briefing Note: Why Renewables are the Solution for Australia: The Low-Cost Source of New Electricity Generation
Media Contact: Tim Buckley ([email protected]) +61 408 102 127
Kate Finlayson ([email protected]) +61 418 254 237
About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.