CEC: Investment roadmap should prioritize solar and wind as lowest-cost technologies
The government’s task is to identify and develop a suite of energy technologies that can provide low-cost, low-emissions electricity system of the future, and the Clean Energy Council says that this can be achieved by leveraging Australia’s comparative advantage and the mature industry built around solar and wind. Technologies that extend the life of higher cost, fossil fuel generation should not be prioritized for investment, the CEC says, instead, the roadmap should focus on plenty of challenges to accelerate renewable energy investment.
As costs of solar and wind continue to tumble, analysts are warning that new gas-fired generation is at risk of becoming stranded assets.
Consultation on the Australian government’s Technology Investment Roadmap Discussion Paper officially closed on Sunday, after gathering submissions from industry and community that will help inform Australia’s first Low Emissions Technology Statement later in 2020. With the final document set to guide the government’s investment decisions towards lower emissions, the Clean Energy Council (CEC) said that decarbonizing Australia’s electricity sector should be the roadmap’s top priority given the size of its contribution to domestic emissions, its potential to support the decarbonization of other sectors, such as transport, and Australia’s world-leading levels of investment in distributed solar energy.
Despite a variety of challenges to the deployment of solar and wind as the cheapest sources of electricity generation, the CEC argues that Australia’s abundant resources and a mature renewable energy industry should be the basis of efforts to turbo-charge the country’s energy transition. Quoting BloomberNEF’s latest LCOE figures, its submission points to the steep declines in the costs of solar and wind over the last 10 years – 90% and 67% respectively, as well as a dramatic reduction in the price of battery storage by around 50% in the last two years alone.
It also refers to the finding from CSIRO’s GenCost report published last month that shows that standalone solar PV and wind technologies now generate by far the cheapest LCOE among the wide range of electricity generation technologies and are also becoming more and more competitive in price with coal and gas plants when short-duration storage is added. “This reality is being borne out in the market in which over 15 GW of new wind and solar energy generation has been added or committed since 2017, with very little in the way of new fossil fuel based capacity, and no carbon capture and storage capability, added to the system,” the CEC says.
Follow the money
In addition to prioritizing wind and solar, the roadmap should support renewable energy enablers (storage, grid-forming inverter technology, transmission network, integrated systems architecture) and exploiters of renewable energy (in the form of green hydrogen and electric and hydrogen vehicles), the CEC said. Such a coordinated investment approach would address some of the major challenges that are currently hindering the deployment of renewables on Australia’s slow-to-adapt grid.
Released last month, the government’s draft roadmap has looked into over 140 new and emerging technologies, specifically “their abatement potentials, technological and commercial readiness levels, and cost-effectiveness”. While it stated that solar and wind are the cheapest forms of generation, the document echoed the federal government’s support for gas as complementary to intermittent renewable energy and flagged examining two contentious technologies – carbon capture and storage (CCS) and “emerging nuclear technologies”, such as small modular reactors. Coal was also not out of the picture, with the roadmap saying that “technologies that increase the efficiency of existing thermal generators and reduce emissions also merit consideration”.
When it comes to the electricity system decarbonization, the CEC is adamant that technologies that extend the life of higher-cost, coal and gas-fired generation should not be included within the priority shortlist, as “they will increase risk in the energy sector and disincentivize new private investment in least-cost clean technology.” As one of the most effective ways to pick technology winners, the CEC suggests governments should recognize and monitor the levels and appetite of private investors.
In Australia’s case, investors have made it very clear that renewable energy and energy storage is the preferred investment choice, committing over $20 billion into new wind and solar projects over the past three years alone, the CEC finds. “A roadmap that ignores the commercial reality and enormous investment appetite for renewable energy and prioritizes technologies that are not investable would be a waste of time, taxpayer money and a distraction to the energy transition. Conversely, by prioritizing those technologies and solutions where there is a demonstrable investor appetite can give government confidence that their support will be leveraged many times over by private investors and the power of commercial reality,” the submission says.