The rapidly falling cost of renewable energy and batteries is "chilling" for the future of the fossil fuels sector, raising doubts about the viability of new coal power stations.
A Bloomberg New Energy Finance report has found the price of renewables has fallen by almost a fifth over the last year, with wind and solar generators becoming cheaper than both coal and gas-fired power stations.
Elena Giannakopoulou, head of energy economics at BNEF, said the rapidly falling cost of renewable generation and battery power is changing the game for the electricity sector.
"The conclusions are chilling for the fossil fuel sector," she said.
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| The combination of batteries and wind farms is providing more power flexibility. Photo: David Mariuz |
Wind and solar are proving cheaper because their cost of electricity has fallen significantly, while that for coal, gas, nuclear and large hydro projects has only slightly decreased.
"We are seeing record-low prices being set for wind and solar, and then those records being broken again and again on a regular basis. This is having a powerful effect – it is changing perceptions," BNEF head of Europe, the Middle East and Africa, Seb Henbest, said
BNEF said Australia had one of the world's lowest levelised cost of electricity for onshore wind and solar.
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| Solar power will likely be cheaper than coal by 2020. |
The ASX forward prices for NSW between the 2020 March quarter and 2021 December quarter run to an average of $75.73 a megawatt hour for coal-fired power.
Globally, the levelised cost of electricity for wind farms was $US55 per megawatt hour for the first half of 2018, down 18 per cent from the same time last year, while solar power has also fallen 18 per cent to $US70 per megawatt hour. Only offshore wind generation failed to fall significantly, dipping 5 per cent in costs year on year
EY believes Australian renewable energy will cost the same or be cheaper than fossil fuels as soon as 2020.
This parity is forecast to happen as the Renewable Energy Target - a government scheme designed to support building renewable generation like wind and solar - comes to an end.
However, Ms Giannakopoulou said despite the rapidly falling costs of renewables it does not spell the end for fossil fuels.
"Some existing coal and gas power stations, with sunk capital costs, will continue to have a role for many years, doing a combination of bulk generation and balancing, as wind and solar penetration increase," she said.
"But the economic case for building new coal and gas capacity is crumbling, as batteries start to encroach on the flexibility and peaking revenues enjoyed by fossil fuel plants."
Australia has been putting wind and solar through its paces to see if it can provide both more stable, instantly available energy to the grid, overcoming the issues of how to generate electricity when the wind isn't blowing and the sun doesn't shine.
The government recently announced new trials to improve the accuracy of the renewable systems’ self-forecasting ability, which allows them to predict the weather in their immediate area and know how much electricity they can provide into the grid, ensuring there is no sudden shortfall when the weather changes.
There are also trials to use wind farm-generated electricity to provide power that smooths out demand and supply to make sure it is balanced.
Neoen Australia’s South Australian Hornsdale 2 wind farm also carried out trials providing intermittent energy into electricity markets under a wide range of operating conditions, saving the market about $3.1 million due to the lower cost of energy.
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