Analysis suggests current federal policies will lead to a price rise after 2030 but a more ambitious target would keep bills lower.
Australia could get 90% of its electricity from renewable energy by 2040 without an increase in power prices, according to an analysis by the energy and carbon consultancy RepuTex.
Under current government policies, the country is on track to have 75% of its electricity generated by renewables within 20 years, but the analysis suggests a weak federal policy framework would lead to wholesale prices rising for a period after 2030.
RepuTex’s latest outlook for the national energy market finds investment driven by state policies, including renewable energy targets in Victoria and Queensland, will help keep wholesale electricity prices down throughout the 2020s.
But it says wholesale prices would rise again in the 2030s without federal policy to encourage investment in new clean energy generation before ageing coal-fired power stations close.
RepuTex examined two scenarios, one that forecasts wholesale electricity prices under current government policies, and another that forecasts prices under the Australian Energy Market Operator’s more ambitious “step change” scenario that uses a carbon budget in line with the Paris agreement. It has made a summary of its report and methodology, but not the full report, available on its website.
Under current policies, Australia would reach 50% renewable energy by 2030 and 75% by 2040, despite the absence of a federal policy framework beyond the underwriting of new generation investment scheme.
The report finds new investment would be driven by state-based policies and renewable energy targets, which RepuTex forecasts would bring about 17 gigawatts of new capacity by 2030, along with 4GW of rooftop solar and 3.5GW of new storage capacity.
The falling costs of clean technology would put pressure on coal and gas generation and lead to 18GW of thermal capacity exiting the market by 2040. It forecasts wholesale prices would remain at roughly the current level, between $50 -$70 a megawatt hour, over the next 10 years. Wholesale electricity prices have fallen by nearly 50% over the past year.
“As new renewable energy and storage projects such as Snowy 2.0 are commissioned, along with the continued uptake of small-scale resources, traditional volumes for black coal and gas-fired capacity are likely to be eroded,” RepuTex’s head of research, Bret Harper, said.
But the report finds that a disorderly closure of coal-fired power stations would push wholesale prices up in the 2030s in the absence of federal policy to guide investment.
RepuTex found that an increase in wholesale prices could be avoided under the more ambitious scenario, forecasting that average annual prices in the 2030s would remain below $80/MWh. The step change scenario sets out an emissions budget for the electricity sector that would lead to decarbonised energy systems by 2050, in line with the Paris agreement commitment of keeping global heating below 2C.
RepuTex forecasts this scenario would lead to Australia reaching 70% renewable energy generation by 2030 and 90% in 2040, and that the combination of more renewable energy, improved storage technologies and a carbon budget would be “fatal” for coal-fired power.
“The most interesting thing is we can have this decarbonised energy system and it won’t cost any more,” Harper said.
“In fact, it costs slightly less. Just in the last year even, energy storage costs have really come down, whether it’s battery or pumped hydro.”