Renewables cheaper than coal in Australia — a preview of things to come

Feb 8, 2013 by



By David Roberts

I’m morbidly fascinated by the way conventional wisdom lags behind evidence, unhealthy like the notion that renewable energy is expensive and fossil fuels cheap. In fact, cheap there is a tectonic shift underway. Renewable energy prices are declining as technology improves, economies of scale kick in, financing mechanisms mature, and public policy begins to take some (inadequate) account of the negative externalities of fossil fuels.

Meanwhile, the cost of coal-fired electricity is heading up. It’s getting harder to finance coal plants in the face of competition from clean(er) energy, activist opposition, and the inevitability of some kind of carbon policy. Construction costs are rising. Transportation costs are rising. It’s getting harder to reach the coal that’s left in the ground. Etc.

The two lines — falling renewable energy costs and rising coal costs — are going to cross. It’ll happen everywhere eventually. According to a Bloomberg New Energy Finance (BNEF) analysis, it’s already happened down under: “Renewable energy now cheaper than new fossil fuels in Australia.”


No new wind farm can compete with existing fossil fuel generators that are already paid off. So it’s not like Australia’s climate battle is won or anything. (They’re exporting all that coal anyway.) But when power companies consider new generation assets in Australia, wind is the way to go:

The study shows that electricity can be supplied from a new wind farm at a cost of [U.S. $83/MWh], compared to [U.S. $147]/MWh from a new coal plant or [U.S. $120]/MWh from a new baseload gas plant, including the cost of emissions under the Gillard government’s carbon pricing scheme. However even without a carbon price, wind energy is 14% cheaper than new coal and 18% cheaper than new gas.

(BNEF projects that large-scale solar PV will be cheaper than coal or gas by 2020.)

The lines will cross in different places at different times; much depends on changes in technology and policy that are difficult to predict. But they will cross. As BNEF head Michael Liebreich puts it, “The perception that fossil fuels are cheap and renewables are expensive is now out of date.”

How long will it take conventional wisdom to catch up?


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