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- Title
The future of coal and renewable power generation in Australia: A review of market trends.
- Authors
Webb, Jeremy; de Silva, H. Nadeeka; Wilson, Clevo
- Abstract
Recent estimates of the levelized cost of energy (LCOE) indicate a watershed moment where market forces have become the foremost driver in the replacement of coal by renewable sources. Current studies indicate an energy market is emerging in which not only new renewable plants are more cost effective than new coal fired power plants (CFPPs), but also the former is becoming more cost effective than existing CFPPS on a levelized cost of energy (LCOE) basis. However, an accelerated retirement of existing CFPPs depends both on the price received by power plants on a time weighted basis and on the total cost of energy which, in addition to the LCOE, takes into account costs of distribution and storage needed to overcome intermittent supply. We use Australia – which is undergoing the world's most rapid decarbonisation of power consumption – as a case study to analyse the economics of this transition and to identify its key drivers. In doing so, we provide an updated estimate of the LCOE for renewable and non-renewable power sources for Australia. We confirm that, currently, the LCOE of both solar PV and wind are substantially below that of coal. It is pointed out that LCOEs are an imperfect metric to gauge the rate of transition which will equally depend on total costs of energy and the prices received by energy providers. However, accounting for total costs (most importantly the cost of intermittency and distribution) we show that, combined with other types of non CFPP storage, the time weighted average price received for renewable power is now above that of CFPPs. In Australia, that is being reflected in purchasing power agreements and auction prices for current and future commercial solar and wind projects. Taking into account the strong and continuing downward trajectory of renewables' total costs we find that a market forces driven further acceleration of the retirement of Australian CFPPs could occur if Government policy does not intervene.
- Subjects
AUSTRALIA; ECONOMIC trends; POWER purchase agreements; COAL; GOVERNMENT policy; SOLAR wind
- Publication
Economic Analysis & Policy, 2020, Vol 68, p363
- ISSN
0313-5926
- Publication type
Article
- DOI
10.1016/j.eap.2020.10.003