Renewables cheapest amid rising technology costs
According to the latest GenCost report, renewables, led by wind and solar, have retained their position as Australia’s cheapest new-build electricity generation despite a 20% average rise in technology costs.
GenCost is an annual collaboration between CSIRO and the Australian Energy Market Operator (AEMO) that actively consults industry stakeholders to revise domestic electricity generation and storage, as well as hydrogen production costs.
Released by CSIRO, the report marks the first time that all technology costs have increased from the previous year since GenCost commenced in 2018.
The report highlights concerns that the rapid pace of the global energy transition will contribute to escalating cost pressures, attributed to the immense scale of manufacturing, raw materials and labour required to develop and deploy clean energy technologies consistent with net zero goals.
GenCost predicts that technology cost pressures felt in Australia will revert to normal levels by 2027, but, in global scenarios, are delayed to 2030 due to higher energy transition speeds.
Dr Dietmar Tourbier, CSIRO Director of Energy, said GenCost’s analysis represents a comprehensive projection of electricity generation costs, with Australia’s energy challenge lying in the transformation of its existing energy system while trying to remain affordable and reach net zero goals by 2050.
“This imperative is not only essential for environmental stewardship, but also to maintain Australia’s economic competitiveness in the global market,” Tourbier said.
Paul Graham, CSIRO Chief Energy Economist and GenCost lead author, said the COVID pandemic resulted in lingering global supply chain constraints, which impacted the prices of raw materials required in technology manufacturing and freight costs. These pressures were exacerbated by the Ukraine war.
“GenCost analysis anticipates that technology costs have mostly peaked and the risk of cost pressures extending beyond 2030 will be mitigated, as the global manufacturing capability established by that time will adequately meet deployment needs,” Graham said.
The analysis also found:
- Technology cost rises were not uniform due to variations in material inputs and exposure to freight prices.
- Globally, renewables led by wind and solar are the fastest growing energy source.
- Batteries are set to play a crucial role in supporting both variable renewable generation in the electricity sector and the rapid expansion of electric vehicle deployment in transport.
Merryn York, AEMO’s Executive General Manager – System Design, said GenCost provides important data for AEMO to plan the investments needed to fill the gaps from coal generation that is reaching end of life.
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