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Industry Insight

Down Under, Renewable Energy Is Now Cheaper Than Fossil Fuels

From Bloomberg New Energy Finance,

By Richard Romano
Published: February 12, 2013

From Bloomberg New Energy Finance, the results of a new study that found that energy from renewable energy—specifically wind farms—is now cheaper than gas or coal plants.
This new ranking of Australia’s energy resources is the product of BNEF’s Sydney analysis team, which comprehensively modelled the cost of generating electricity in Australia from different sources. The study shows that electricity can be supplied from a new wind farm at a cost of AUD 80/MWh (USD 83), compared to AUD 143/MWh from a new coal plant or AUD 116/MWh from a new baseload gas plant, including the cost of emissions under the Gillard government’s carbon pricing scheme.
I know what you’re thinking, but:
 However even without a carbon price (the most efficient way to reduce economy-wide emissions) wind energy is 14% cheaper than new coal and 18% cheaper than new gas.
The consequences?
The results suggest that the Australian economy is likely to be powered extensively by renewable energy in future and that investment in new fossil-fuel power generation may be limited, unless there is a sharp, and sustained, fall in Asia-Pacific natural gas prices.
It will remain a work in progress for a while. Legacy power stations that have had their construction costs depreciated produce power less expensively than cheaper than that produced by new renewable stations, but as they age and go offline will likely not be replaced by anything but renewables.
“New wind is cheaper than building new coal and gas, but cannot compete with old assets that have already been paid off,” [Kobad Bhavnagri, head of clean energy research for Bloomberg New Energy Finance in Australia] said. “For that reason policy support is still needed to put megawatts in the ground today and build up the skills and experience to de-carbonise the energy system in the long-term.

Please offer your feedback to Richard. He can be reached at richard@whattheythink.com.



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