A new report from BloombergNEF (BNEF) says by 2030, the cost of building wind and solar power plants will be cheaper than using existing coal and gas generators.
The new energy finance consultancy says solar panels and wind turbines are already the most economical means of generation in California, China and parts of Europe.
According to the report, two-thirds of the world’s population live where PV or wind are cheaper than coal and gas generators.
The future also looks bright for solar in Australia. BNEF estimates recent lowest cost solar PV farms to reach an LCOE of $27-36/MWh, assuming competitive returns for equity investors.
The LCOE — levelised cost of energy — of a generator is calculated by looking at how much it costs to build, fuel and maintain. This is offset by the amount of income it will produce over its lifetime.
Rise of renewable energy in 3 phases
The report’s author, BNEF analyst Tifenn Brandily, says the rise of renewables will happen over three phases:
- New solar and wind plants become cheaper than new coal and gas plants on a cost-of-energy basis (already common).
- Renewable electricity cost reaches parity with existing power prices (as has happened in China and California).
- Building new renewable electricity generators becomes cheaper than using existing coal and gas plants.
“Our analysis shows that phase one has now been reached for two-thirds of the global population,” he says.
“Phase two started with California, China and parts of Europe. We expect phase three to be reached on a global scale by 2030.”
Reduced coal role in energy future
No one is arguing that Australia could safely shut down its coal-fired power stations overnight and live on 100% renewables. However, BNEF is predicting a black future for coal.
Brandily sees a future where coal and gas generators will become the exception, not the rule.
“As this all plays out, thermal power plants will increasingly be relegated to a balancing role, looking for opportunities to generate when the sun doesn’t shine or the wind doesn’t blow,” he says.
Integration now the key challenge
However, a hidden cost in the integration of renewable energy is the transformation of the transmission network.
Set up to handle a steady load from a handful of coal generators, state power grids are not ready for hundreds of large-scale renewable generators adding their power. Include business and household rooftop solar systems and that number is slightly north of 2.2 million.
Right now, the AEMC is working on ways to future-proof Australia’s electricity grid by recommending changes to the traditional rules.
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