Focus on Australia |
Renewables are cheapest, even with integration costs
PV and wind continue to be the cheapest sources of projected new electricity generation capacity in Australia, even when the integration costs of renewables are included, according to the 2020-21 GenCost report. The GenCost report is produced annually by national science agency CSIRO and the Australian Energy Market Operator (AEMO) in consultation with industry stakeholders with the aim of estimating the generation costs for new power plants in Australia.
The new report estimates that battery costs fell more than any other technology in 2020/21 and are projected to continue to fall. Stakeholder feedback led to more optimistic assumptions about battery life.
The study bases its projections on a global electricity generation and capital cost projection model recognising that cost reductions experienced in Australia are largely a function of global technology deployment. Three scenarios
are considered: ● Central: current stated global climate polices (as of late 2020).
● High VRE: a world that is driving towards net zero emissions by 2050.
● Diverse Technology: a world where most developed countries are striving for net zero by 2050 but others are lagging such that global net zero emissions is reached by 2070. In the High VRE scenario, global non-hydro renewable generation reaches a share of 82% by 2050, with the majority sourced from PV and wind.
In the Diverse Technology and Central scenarios, wind and PV shares are lower, at around 50%.
Access to wind and solar PV is assumed to be constrained in the Diverse Technology scenario. Consequently, generation from gas and coal with carbon capture and storage is deployed
to meet the climate policy ambitions of that scenario. CCS is also used more commonly in hydrogen production. Nuclear small modular reactors could also play a role in the Diverse Technology scenario from 2030 so long as investors are willing to drive down costs through multiple deployments in the late 2020s, the report says.
Falling battery storage costs underpin the long-term competitiveness of variable renewables, the report notes, while pumped hydro is more competitive than batteries when longer duration storage is required. The technology cost projections in the new report have been extended to include electrolysers, reflecting strong interest in this technology that, combined with low cost renewable generation could potentially underpin a low emission hydrogen fuel industry for export or Australian domestic consumption.
Counting the costs of integration There have been concerns for many years that it is difficult to quantify the additional system costs associated with variable renewable electricity (VRE) generation, the GenCost report notes, with traditional approaches to calculating the levelised cost of electricity failing to include these additional costs and underestimating the full costs to the electricity system. The GenCost team says it has been seeking to address this issue since its first report in 2018. CSIRO has therefore constructed an electricity system model that can calculate the required additional investment considering any existing resources in the system. The key
additional investments required are in: ● New transmission to access Renewable Energy Zones.
● Additional transmission to strengthen the grid.
● Synchronous condensers to support system security.
● Battery and pumped hydro storage to meet demand during low renewable generation periods.
The required amount of additional investment depends on the share of VRE generated. The GenCost team calculated the additional costs of variable renewable generation for VRE shares from 50% to 90% for the National Electricity Market (NEM).
It found that the additional costs to support a combination of PV and wind generation in 2030 are between $6 to $19/MWh depending on the VRE share and region of the NEM. These represent a maximum of costs across nine weather years over which the costs were estimated.
When added to variable renewable generation costs and compared to other technology options, these new estimates by the GenCost team indicate that wind and solar PV remain the lowest cost new-build technology up to a 60% VRE share.
The closest technology is gas combined cycle, the low range cost of which can match the costs of variable renewables with integration costs at a 70% or greater share.
However, the low range 2030 gas combined cycle cost assumptions will be challenging to achieve, the GenCost report says. It requires no climate policy risk at the financing stage (despite the 25 year design life extending beyond the net zero emission targets of most states), a gas price just below $6/GJ throughout that period and a capacity factor of 80% in a system with 70% or greater share of energy from near-zero marginal cost renewables.
400 350 300 250 200 150 100 50 0
Climate policy risk premium
Peaking 20% load Flexible 40-80% load, high emission Flexible 40-80% load, low emission
Standalone Variable
Wind & solar PV combined Variable with integration costs
Above: LCOE projections for 2030 (source CSIRO/AEMO 2021 Gen Cost report) 8 | July/August 2021 |
www.modernpowersystems.com
2020-21 A$/MWh
Gas turbine small Gas turbine large Gas reciprocating
Black coal Brown coal Gas
Black coal Brown coal Gas
Black coal with CCS Brown coal with CCS Gas with CCS Solar thermal 8hrs Nuclear (SMR)
Biomass (small scale) Wind Solar PV
50% VRE share 60% VRE share 70% VRE share 80% VRE share 90% VRE share
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