According to a briefing note published today by the Institute for Energy Economics and Financial Analysis (IEEFA), renewable energy is the lowest cost, most sustainable solution to Australia’s energy policy crisis and potentially one of the country’s largest export industries of the future.
The briefing note, Why Renewables are the Solution for Australia: The Low-Cost Source of New Electricity Generation, highlights recent technological advances that has made renewable energy one of the country’s fastest growing industries, and Australia a world leader in battery storage.
Author and IEEFA’s Director of Energy Finance Studies Australasia, Tim Buckley, said the integration of renewable electricity generation was already being achieved at a world-leading scale in the Australian Capital Territory, Tasmania and South Australia.
Mr Buckley added with Victoria and Queensland recently lifting ambitions for 50 per cent renewable energy by 2030, as a result they had unlocked large-scale regional investment and employment opportunities.
“The expanding ability to integrate domestic renewable energy adds resilience to Australia’s electricity grid while providing sustainable national energy-security benefits,” said Mr Buckley.
“It also delivers on the country’s international obligations under the United Nations sponsored Paris Agreement.”
The briefing note compares the fossil fuel and renewable energy industries, noting that the fossil fuel industry is still heavily subsidised by Australian taxpayers via diesel fuel rebates, free water and carbon emissions, taxpayer-funded enabling infrastructure and long dated royalty holidays, such as that offered to the Indian coal miner Adani, for example.
“The renewable energy industry no longer requires major subsidies going forward, only transparent, effective policies,” said Mr Buckley.
“Most fossil fuel projects in Australia are owned by foreign multinationals that use tax haven-based offshore marketing hubs and also have a history of paying next to no corporate tax in Australia, ever,” said Mr Buckley, “there is no other private industry so dependent on using public, finite assets for private, foreign, largely tax-free gain at such a cost to the community.”
With renewable energy now the low-cost source of new electricity generation, solar and wind projects were being built across Australia at just $40-$50/megawatt hour (MWh), down some 70 per cent in the last three years.
In contrast, a new coal-fired power plant would cost over $100/MWh and up to $150/MWh including carbon costs and increasing capital requirement.
“Renewables are deflationary,” said Mr Buckley.
“Once built, there is no fuel cost, with proponents primarily bearing only the interest cost on their debt capital.
“And like storage costs, renewable costs are expected to continue to fall some 10 per cent annually over the coming decade due to economies of scale and accelerating technology gains.”
Further, renewable energy was clean and sustainable, used almost no water, and once built, create no air or particulate pollution, nor did it discharge carbon emissions, said Mr Buckley.
Meanwhile, thermal coal-fired power plants were struggling to get debt or equity financing, as highlighted when over 100 major global lenders recently announced exits from thermal coal-fired power, and Australia’s three largest electricity generators, Energy Australia, Origin Energy and AGL, all ruling out any involvement in new coal-fired plants.
“There is a major pivot towards renewable energy globally and Australia should have been at the head of that market shift,” said Mr Buckley.
“There have been major technological advances in strengthening the country’s electricity supply, and the markets are responding, making Australia a world leader in adopting new battery technology and rooftop solar.
“With multiple proposals and investments in utility-scale batteries underway, there is a clear endorsement for the bankability and viability of this technology.”
Investing in renewable energy infrastructure builds Australia’s engineering and scientific capacity, leverages its financial capacity, creates multiple jobs, and builds export industries of the future, according to the briefing note.
In addition to investing in renewable energy, Australia needed to reintroduce a “whole-of-economy” price on carbon emissions as the low-cost solution to achieving the deep decarbonisation of the entire economy.
Australia should also belatedly consider an outright ban on any new thermal coalmine development, consistent with its Paris Agreement commitments, and particularly given that Australia is a top-three exported-emissions nation globally, according to the briefing note.
“The inevitability of renewable energy is not happening fast enough in Australia to deliver on Paris,” said Mr Buckley.
“Without a national energy policy, this leaves a growing stranded asset risk, as recently highlighted by both the Reserve Bank of Australia and the Australian Prudential Regulatory Authority, as well as the Bank of England.
“Australia must step up and take advantage of this increasingly low-cost, sustainable solution for its energy future, today,” Mr Buckley added.
Briefing Note: Why Renewables are the Solution for Australia: The Low-Cost Source of New Electricity Generation
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