The national science agency, CSIRO and energy market operator, AEMO today announced a new report on costs of electricity generation.
The inaugural GenCost report, prepared collaboratively with a range of industry stakeholders, updates estimates of the cost to generate electricity from new power plants in Australia; GenCost 2018 found solar and wind technologies to be lowest cost.
CSIRO Chief Energy Economist and report lead author Paul Graham said GenCost 2018 was an essential annual benchmark to guide strategic decision making, given technology costs change significantly each year.
"Electricity generation costs are a key ingredient into the electricity sector modelling which underpins much of the sector's strategic planning and policy analysis," Mr Graham said.
"Our data confirms that while existing fossil fuel power plants are competitive due to their sunk capital costs, solar and wind generation technologies are currently the lowest-cost ways to generate electricity for Australia, compared to any other new-build technology.
"At a global level, the investment costs of a wide range of low emission generation technologies are projected to continue to fall, and we found new-build renewable generation to be least cost, including when we add the cost of two or six hours of energy storage to wind and solar.
"This also holds when the cost of fossil generation technology is adjusted for climate policy risk or not.
"Data from GenCost 2018, combined with some of our previous research, indicates we may need additional flexible technologies – such as energy storage, demand management, and peaking gas plants – if the share of variable renewables increases beyond 50 per cent."
The collaborative process involved consultation with a broad range of industry stakeholders, including release of draft estimates and projections for review and industry workshops and briefings.
AEMO Group Manager, Forecasting Nicola Falcon said AEMO looked forward to using the GenCost figures.
"The reports will act as the foundation for initial discussions with stakeholders when we commence our modelling inputs and scenario consultations for the next Integrated System Plan," Ms Falcon said.
Authors largely based analysis on levelised cost of electricity (LCOE), which includes operating as well as investment costs, and is the best way known to compare the costs of different technologies, like fossil fuel plants (which require relatively low capital costs, but higher operating expenses) and wind and solar (which require high capital outlays but low operating expenses).
Research in 2019 will identify in more detail the least cost set of balancing solutions required by variable renewables once they represent a significantly larger share of the generation portfolio.