In Australia, Wind Prices Beat Out New Coal

In Australia, unsubsidized wind energy is much cheaper than electricity from new coal and even gas-fired power plants, reports Bloomberg New Energy Finance.

"The perception that fossil fuels are cheap and renewables are expensive is now out of date", says Michael Liebreich, CEO of Bloomberg New Energy Finance. "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."

A new wind farm can supply energy at $83 per megawatt-hour (MWh) in contrast to $186 per MWh for a new coal plant and $119 per MWh from a new baseload gas plant.

Those prices include the country’s carbon tax, but even without that tax, wind energy is 14% cheaper than new coal and 18% cheaper than new gas.

Large-scale solar will also be cheaper than coal or gas by 2020, they project, after factoring in carbon taxes. And by 2030, dispatchable renewable generating technologies such as biomass and solar thermal could also be cost-competitive.

Since 2011, wind energy prices have dropped 10% and solar PV prices have declined 29%.

In contrast, the cost of energy from new fossil fuel plants is high and rising, largely because of increased risks associated with financing their construction.

Australia’s four largest banks require substantial risk premiums to finance new coal plants – if they finance them at all. That’s because of the "reputational damage of emissions-intensive investments," says Bloomberg. Gas is expensive because of the massive expansion of liquefied natural gas, which is forcing local prices upwards. Carbon prices add more costs and are expected to increase substantially over the lifetime of new plants.

"It is very unlikely that new coal-fired power stations will be built in Australia. They are just too expensive now, compared to renewables", says Kobad Bhavnagri, head of clean energy research for Bloomberg New Energy Finance in Australia. "Even baseload gas may struggle to compete with renewables."

And Australia doesn’t need new baseload capacity until after 2020. By then, renewables will be much cheaper.

Still, renewables can’t compete on price with old coal plants built in the 1970s and 1980s because their construction costs have now been depreciated.

That’s why policy support is necessary to encourage investments in renewables today.

The same is true in parts of the US. In Michigan, the cost for wind is a third less than from a new coal plant and new solar plants coming online are also cheaper than new coal.

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