Renewable vs Fossil fuels. Which is cheaper for Australia?

solar-vs-coal

The world is ever changing, and one of the driving factors of this change is the endless pursuit of knowledge and the inevitable technological advancements.

Amongst the most hotly contested debates across the globe is renewable vs. non renewable energy production.

In Australia, key arguments revolve around the environmental and economic impacts for the nation.

Which sources of energy production are the cheapest for the consumer today and in the future?

The true cost of electricity between fossil fuels and renewable sources is not as black and white as both sides of the argument would have you believe.

Recent studies have revealed that the wholesale cost of energy production currently from fossil fuel generation is 3-4 cents per KW/h, whereas Wind generation is said to cost 8 cents and Solar 12 cents per KW/h.

At first glance it seems like a shut down case. However the bulk of the energy production produced by fossil fuels is from existing coal plants whose capital cost has already been recovered, whereas renewable sources have not paid down their capital costs of setting down the infrastructure.

So, to better compare apples with apples, we have to compare the cost of electricity from newly built coal plants, against those of newly built renewable plants. The cost of energy production via gas and coal from newly built power plants is 8-12 cents per KW/h which at the moment is similar to the cost of renewables.

Source: https://theconversation.com/the-greens-plan-for-90-renewables-by-2030-sounds-hard-but-it-stacks-up-51115

Again this is not the whole picture as the increasing production of installations and advancements in technology in renewables has seen a consistent decline in price of energy production as systems become more efficient and infrastructure becomes cheaper to build. Coal technology is a mature technology so room for further innovation and efficiency is very limited, where the same does not exist for renwables which are a much newer technology.

In fact, the most up to date independent study (commissioned by more than 30 Australian utility providers, environmental organisations and governments), states that by 2030 the cost of producing Solar, via photo voltaic solar panels (PV) will decrease by 35% and with Solar thermal  (using mirrors to concentrate the heat of the sun and drive a turbine), reductions could be as much as 50%. Wind which is already the cheapest renewable source is likely to see similar decreases in costs.

Source: http://old.co2crc.com.au/dls/brochures/LCOE_Executive_Summary.pdf

So yes, at the present moment, for existing fossil fuel generated power plants it is ultimately cheaper to allow them to operate for the consumer, but that will change over the next decade with renewable sources  being on par with fossil fuels and with wind specifically surpassing all sources as the most cost efficient.

This context is very important and dictates how we should plan our grid’s future.

Like all products in the world our power plants have an expiry. Typically a power plant has an effective life span of approximately 40-50 years at which point the infrastructure needs to be replaced.  As power plants approach their effective life span they lose efficiency. This year we saw the closure of the Hazelwood Power plant which was no longer economical to operate. The Hazelwood power plant was commissioned in 1964 and  became fully operational in 1971.

Source: http://www.abc.net.au/news/2016-11-03/hazelwood-power-station-in-victoria-to-close/7987018

Many of Australia’s power plants are quickly approaching their end cycle. In fact 12 of 22 coal plants in Australia will have reached their effective life span between now and 2040.

Source: Submission 87 of http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/Coal_fired_power_stations/Submissions

The transition from fossil fuels to renewable in Australia is inevitable from an economic point of view. It makes no commercial sense to replace  old coal plants with new coal plants when renewables will be cheaper at the time of closure of all existing coal plants.

In fact, an argument can be made that the Kogan Creek coal plant (built 2007) and the two Blue Water coal pants (built 2009 and 2010) should never have been built in place of renewable plants.

This is all without factoring the environmental impacts of using fossil fuel energy production and the additional economic costs of polluting the environment.

One key environmental impact of coal powered stations is the increase of acid rain in the immediate areas around the plants. Acid rain degrades the buildings of residents, business owners and public infrastructure which then costs more to maintain and ultimately shortens their life span. The additional environmental factors caused by pollution makes the transition a no-brainer.

Source:  https://www.epa.gov/acidrain/what-acid-rain

So is there still room in our grid’s future for fossil fuel plants?

The short answer is yes, but in a limited way.

The down side of renewable sources of energy is that they don’t produce a steady baseline of power year round. Their generation is dependent on the elements and environment that can change daily in some cases.

This is where gas powered “back up generators” can play an important part at times when energy production may dip while at the same time energy uptake may increase. It’s important to have a grid that can maintain reliably the entire demand of the consumer and industrial sectors of Australia.

For Australia this type of back up infrastructure integrated into a renewable grid make particular sense for many reasons. Gas powered stations provide many advantages over coal plants for this particular use in a nations grid and energy requirements.

Gas plants have a quicker ramp up time then coal plants in times where electrical shortfalls need to be made up in the grid. Gas plants also emit about half the carbon emissions of coal plants, making them better for the environment.  Australia also has vast reserves of natural gas (but in fairness we have immense coal reserves as well). Lastly Gas plant infrastructure is cheaper to build then Coal plants.

These reasons combined make gas preferable of coal.

Source: http://blog.aigroup.com.au/should-we-be-looking-at-new-coal-fired-power-stations/

So where does our government stand in all of this?

Armed with this information, it is disappointing to see that our government is pushing for the construction of new coal fired plants in Northern Australia that will ultimately cost the consumer more money then constructing renewable plants in their place.

Whats worse, the government wants to utilise money set aside for the Clean Energy Finance Corporation fund (CEFC)  to pay for new coal-fired power stations.

Source: http://www.abc.net.au/news/2017-02-02/clean-energy-money-could-fund-coal-power-stations-morrison-says/8234118

This doomed policy is further demonstrated by the government’s recent push for a $1 billion tax payer funded hand out to Indian billionaire Adani to build a coal mine in QLD, when coal is not the future of energy production world wide.

Source: http://www.smh.com.au/federal-politics/political-news/turnbull-government-eyes-1-billion-adani-loan-backed-by-new-infrastructure-fund-20161204-gt3joz.html

Further more, there is a severe lack of any comprehensive future plannting to make the inevitable transition from old to new technology as smooth as possible. A proper transitional plan will assist in how to close coal-fired power stations to reduce pollution, balanced with the need to  help workers find new jobs in the renewable sector as well as maintaining energy security.

Source: http://www.abc.net.au/news/2016-11-29/coal-power-retirement-senate-report/8074114

The current policies and lack of planning are not economically viable. They are counter productive to the interests of Australia. The current policies not only slug the Australian tax payer, they also will cost the same tax payers more as a consumer of energy, while maintaining job insecurity for workers.

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