Renewable Energy Index - April 2019
To assist the Australian community in understanding the role and contribution of renewable energy to meeting our energy needs while also providing an important source of employment and reducing pollution, Green Energy Markets produces the monthly Renewable Energy Index.
The index tracks the contribution of the renewable energy sector broken down by fuel type and state on a series of metrics that are intended to translate abstract concepts such as megawatts and tonnes of CO2 into concepts the community can understand and appreciate such as number of households powered, and number of cars’ pollution avoided.
This edition of the RE Index has assembled actual project and market data to assess the realism of results from the highly publicised modelling by BAEconomics of Federal Labor’s carbon reduction policies, including its 50% renewables target by 2030
- BAEconomics forecasts that increasing the share of renewable energy to 50% of electricity supply, as per Federal Labor’s emissions policies, will drive up wholesale electricity prices to between $110 to $135 per megawatt-hour by 2030.
- This does not appear to be realistic when compared with publicly released data on the contract power prices from a series of wind and solar projects in Australia (see Chart 1).
- While the price for power from solar farms contracted back in 2012 and 2013 were quite high, they have since declined dramatically. Prices publicised for wind projects beginning in 2015 under the ACT Government’s 1st auction process were never close to the BAEconomics forecast, and have since also fallen considerably.
- Since mid-2016 several thousand megawatts of wind and solar projects have been contracted at prices which are half what BAEconomics forecasts for 2030.
- The most recently publicised contract prices were revealed by Snowy Hydro’s CEO Paul Broad at the Morrison Government’s press conference announcing Snowy 2.0 would proceed. At the press conference Broad told the assembled press, “we did a deal just before Christmas when we announced 888 megawatts of renewables and the average price for buying that was $40 [per megawatt-hour]”.
- Our sample of project contract data is corroborated by information Origin Energy has provided to investors (see Chart 2). Origin indicates that for the 2018 financial year it was able to obtain contracts from wind and solar projects at prices half that forecast by BAEconomics, of between $45 to $65 per megawatt-hour.
- An increased need for energy storage to manage reliability can not explain the large discrepancy between actual market transactions and BAEconomics’ estimates of increased costs under Labor policy (see Chart 3). A report involving the Australian Academy of Science and the Australian Academy of Technology and Engineering estimated that we require 5 gigawatt-hours of energy storage where renewables represented 52% of electricity supply. Yet Snowy 2.0 alone will provide 350 gigawatt-hours of storage - 70 times more than needed.
- At the Morrison Government Snowy 2.0 press conference, Paul Broad stated the combination of low cost wind & solar plus pumped hydro meant he could offer 100% firmed, reliable electricity supply contracts to customers at less than $70/megawatt-hour.