The falling cost of renewable energy and the increased cost of financing high emission fuels means Australia is unlikely to build new baseload power stations, according to a new report by Bloomberg New Energy Finance states.
The BNEF research found that even without a carbon price, wind energy is already 14 per cent cheaper than a new baseload coal-fired power station and 18 per cent cheaper than a new gas one.
SMH reported that the gap widened even further when the carbon tax is added. Wind farms can now generate electricity at $80 per megawatt-hour, compared with $143 for a new coal power station and $116 for a new baseload gas power station.
BNEF said that in Western Australia large-scale photovoltaic (PV) power stations are already cheaper than new coal-fired generating capacity, coming in at $157 per MWh compared with $190.
“It's very unlikely that new coal (power stations) would be built in Australia,” Kobad Bhavnagri, head of clean energy research for BNEF in Australia, said.
Carbon tax aside – which the coalition has promised to scrap if they’re elected this year – the research also found those looking to source funding for emission heavy coal developments would have trouble because of the reputational risks associated with the investment.
“Financing for coal would be made very expensive because of all the risks involved,” Bhavnagri said.
“A bank would be quite conscious of financing a highly polluting asset,” he said.
“That would likely make them susceptible to environmental activism.”
A threat that was proven very real earlier this year when Whitehaven Coal fell victim to activist Jonathon Moylan’s fake press release purporting to be ANZ which temporarily wiped $314 million off the company’s market valuation.
Adding to this argument is the drop in demand for electricity. Currently usage in NSW is at 10 year lows, Victoria is sitting at 8 year lows, according to data for the December-January period, said Mike Sandiford, director of the Melbourne Energy Institute.
‘‘Nobody in their right mind would be building coal-fired power plants now,’’ Sandiford said.
Rising electricity prices, a slump in manufacturing output and the spread of solar PV on residential roof tops are combining to sap power demand, he added.
Since 2011 BNEF estimates that the cost of wind generation has fallen by 10 per cent and the cost of solar PV by 29 per cent, and it is expected further technology advances will drive prices even lower.
Bhavnagri said that by 2020, wind power's cost per megawatt-hour will drop to $70 and then to $66 by 2030.
To date gas has been marketed as a low cost, low emission alternative to coal has been largely quashed by the liquid natural gas export boom which will force prices upwards.
“The perception that fossil fuels are cheap and renewables are expensive is now out of date”, said Michael Liebreich, chief executive of BNEF.
“The fact that wind power is now cheaper than coal and gas in a country with some of the world's best fossil fuel resources shows that clean energy is a game changer which promises to turn the economics of power systems on its head.”
But BNEF did clarify that while the price of renewables is dropping, they still can't compete with Australia's existing coal-fired, government built power stations, and whose construction costs have already been depreciated.
“New wind is cheaper than building new coal and gas, but cannot compete with old assets that have already been paid off,” Bhavnagri said.
“For that reason policy support is still needed to put megawatts in the ground today and build up the skills and experience to de-carbonise the energy system in the long-term.”
Late last year the Climate Change Authority completed its review of the Renewable Energy Target scheme and recommended leaving the target for large-scale generators unchanged at 41,000 gigawatt hours of renewable energy per year by 2020.
The government has six months to respond.