Renewables, led by wind and solar, have held their position as Australia’s cheapest new-build energy generation despite a 20% average increase in technology prices, according to the CSIRO‘s latest GenCost report.
The CSIRO stated that the 2022-23 report is the first time that all technology costs have grown from the prior year since GenCost began in 2018.
The report emphasises industry concerns that the rapid speed of the global energy transition will lead to rising costs.
This is due to the massive scale of manufacturing, raw materials, and labour necessary to create and install renewable energy systems that meet net zero goals.
According to GenCost models, technology cost pressures in Australia will return to normal levels by 2027, but this will be postponed until 2030 under global scenarios where the speed of the energy transition is highest.
GenCost is a yearly collaboration between CSIRO and the Australian Energy Market Operator (AEMO) that actively surveys industry stakeholders to modify residential electricity generating and storage prices and hydrogen production costs.
CSIRO Director of Energy Dr Dietmar Tourbier stated that GenCost’s thorough scientific and engineering analysis provides Australia’s most complete prediction of power generating costs.
“Australia’s energy challenge lies in the transformation of our existing energy system, while ensuring the continuing delivery of sustainable, reliable and affordable energy as we strive to achieve net-zero emissions by 2050,” Dr Tourbier said.
“This imperative is not only essential for environmental stewardship, but also to maintain Australia’s economic competitiveness in the global market, Dr Tourbier added.
According to CSIRO Chief Energy Economist and GenCost lead author Paul Graham, the COVID-19 pandemic resulted in enduring worldwide supply chain restrictions, influencing the pricing of raw materials used in technology manufacture and freight costs.
Graham noted that the Ukraine war worsened global supply chain inflationary pressures by rising energy input prices for all industries.
“During the recovery from these global events, various input costs are showing signs of moderation, however there is an expected delay due to future price uncertainties and the robust demand associated with the global energy transition,” Graham said.
“GenCost analysis anticipates that technology costs have mostly peaked and the risk of cost pressures extending beyond 2030 will be mitigated, as the global manufacturing capability established by that time will adequately meet deployment needs,” he added.
The updated analyses also found that:
- Technology cost increases were inconsistent due to variations in material inputs and exposure to freight prices.
- Renewables, led by wind and solar, are the fastest-increasing energy source globally.
- Batteries are expected to play an essential part in both variable renewable generation in the electricity industry and the rapid increase of electric vehicle deployment in transportation.
AEMO’s Executive General Manager – System Design Merryn York stated that cooperating with CSIRO to develop GenCost, Australia’s most comprehensive generation cost forecast study, is crucial to the energy sector’s transition to net zero.
Yok noted that as coal-fired power generation leaves the Australian energy systems, generating investment is required to fill the gaps.
“And as more variable renewables delivers our energy for consumer and decarbonisation, we need investment in firming — which is on-demand energy to smooth out the peaks and troughs from renewable generation,” York said.
She stated that GenCost data is critical for AEMO in planning the least-cost investments required to replace the gaps left by coal generation that is nearing the end of its useful life.
“This is important to deliver the transition while maintaining reliable, secure and affordable energy supply for consumers,” she added.
