No longer 'alternative', mainstream renewables are pushing prices down | Simon Holmes à Court
On the first day of autumn tens of thousands of Victorians received a welcome surprise from their power company - their electricity bills were going down. Prices were cut 5% because the retailer increased their investment in renewable energy. This will likely come as a surprise to many.
From article, (On the first day of autumn tens of thousands of Victorians received a welcome surprise from their power company — their electricity bills were going down. Prices were cut 5% because the retailer increased their investment in renewable energy.
This will likely come as a surprise to many. Since the prime minister, Malcolm Turnbull, and the energy minister, Josh Frydenberg, decided that bashing renewables would play well for them — perhaps more so in the party room than in the electorate — hardly a day goes by without claims that renewables have made our grid unreliable and have pushed prices sky high.
A decade ago, power from a large-scale solar farm was unthinkably expensive at close to $200 per megawatt hour, equivalent to 20c/kWh, almost five times the grid average at the time. Wind energy was less expensive, but, at $120 per megawatt hour still much more expensive than coal and gas.
Renewable energy prices have since plummeted. “Five years ago, when we built Mt Mercer, the equivalent cost was in the 80s” reports Ed McManus, chief executive officer of Meridian. Power companies are notoriously tight-lipped about their contract prices, but McManus said about the offers “we saw solar pretty consistently in the 60s and wind pretty consistently in the 50s, including very low 50s”.
Meanwhile the price of gas has tripled, now that we’re sending most of what we produce offshore, and prices for thermal coal are the highest they’ve been in almost a decade.
The old guard can’t understand why prices for wind and solar have dropped so far, so fast. It’s not sleight of hand, just the cumulative effects of three factors:
● The technology has improved in leaps and bounds. A 150m tall wind turbine built this year will generate energy for almost 3,000 average Victorian homes. A decade ago, a top-tier turbine would have generated well less than half as much.
● Unlike coal plants, solar panels and wind turbines are products not projects. Repetition leads to cheaper manufacturing and more efficient supply chains. China now produces seven solar panels every second — providing countless opportunities to trim unit costs.
Last week I spoke with a solar farm installer who quietly boasted they had multiple crews installing 15 MW of solar a week. In the year to March 2008, Australia’s entire effort totalled just 7.9 MW.
Last week I spoke with a solar farm installer who quietly boasted they had multiple crews installing 15 MW of solar a week. In the year to March 2008, Australia’s entire effort totalled just 7.9 MW.
● A decade ago, few banks understood renewables, and investments were seen as “alternative” and risky. Now that renewables are mainstream, the risk premium applied by banks for renewables is much lower than for coal projects. Capital intensive projects are extremely sensitive to the cost of finance.
As our experience over summer and a letter from ten energy retailers to the government attests, Australia doesn’t have a reliability problem. And even Josh Frydenberg has acknowledged that the new renewables coming on line will push energy prices down.
Economics now dictate that a transition to a cleaner energy system is inevitable. Our grid operator has demonstrated it needs no government interference to keep the grid reliable.)
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