The industry argues the cheapest path for consumers is to invest in replacing ageing coal generators with firmed-up renewable energy, rather than forcing the extensions of ageing and increasingly unreliable plants, which can break down with no notice and cause huge price rises, or building new coal-fired facilities.
“The least-cost, lowest-impact pathway is an energy system dominated by renewables and firmed by battery storage, gas and pumped hydro,” the chief executives said.
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However, the Australian Energy Council stresses that replacing ageing power stations is “not costless”, and will push up people’s electricity bills – at least for a while.
Building more wind and solar farms, large-scale storage projects and thousands of kilometres of extra pylons and power lines to stitch together a bigger and more complex grid will all add to costs that need to be passed on to consumers, it said.
The report noted that electricity prices had “never been under more pressure” due to heavy investments needed to replace and decarbonise ageing generation assets. It called for a more open and honest dialogue about what the energy transition would cost homes and businesses.
“I think it’s the calm before the storm,” one chief executive said.
In particular, network costs to maintain and upgrade transmission infrastructure, which account for about a third of a customer’s bill, are expected to increase significantly in the coming years.
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The CSIRO calculates that a new coal-fired power plant, using modern technology to keep emissions down as much as possible, would produce electricity for between $111 and $178 a megawatt hour – at a midpoint of $145. Power from renewables in a mostly renewable grid, meanwhile, would cost between $116 and $165 a megawatt hour (a midpoint of $141), which also factors in the billions of dollars in additional costs such as paying for batteries, gas and transmission lines.
Once built and operating, renewables were among the lowest-cost sources of energy, Australian Energy Council chief executive Louisa Kinnear said. “But we still need to account for the costs of constructing new supply and adopting our existing system to accommodate and firm up low emissions, intermittent sources,” she said.
“In the long run, this approach will still be cheaper than continuing to invest in existing or new coal-fired power generation, but we need to ensure the transition is managed carefully.”
The push to scrap the commitment to net zero by 2050 and weaken interim climate targets would breach the conditions of the Paris Agreement, which Australia signed up to in 2016.
Large investors, who have been pouring billions of dollars into green energy projects across Australia, described the Coalition’s backdown as “material and disappointing”.
“However, the fundamentals remain,” said Clean Energy Investor Group chief executive Richie Merzian, who represents funds including US-based BlackRock, France’s Neoen and Australia’s Macquarie Bank. “New generation is required, clean energy is the best path for returns, and the current government is committed to supporting that.”
Debby Blakey, chief executive of the $100 billion superannuation giant HESTA, which invests heavily in the energy transition, said bipartisan support for climate targets including net zero was important for investors to know that policies would remain stable.
“This is critical given investors commit capital over very long time frames for investments like energy infrastructure,” she said. “Attracting global private capital to invest in Australia’s transition is underpinned by long-term policy certainty.”
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