What does the new long-term energy forecast from Bloomberg New Energy mean for Australia? Dan Cass take a look.
The new long-term energy forecast by Bloomberg New Energy roasts all those gloomy predictions made by former deputy PM Barnaby Joyce.
The headline says it all, ‘Renewables can make Australia a cheap energy superpower again’.
BNEF’s detailed forecasts for Australia predict that will we have one of the two most decentralised energy systems in the world. Rooftop and other small-scale solar PV will replace ‘baseload’ coal as the backbone of the National Electricity Market by 2035.
Even with no bipartisan political agreement on credible climate targets, 98% of our existing coal generation will be phased out by 2050.
This rosy future is due to technological progress. Coal languishes around the same price point, solar PV has become 28.5% cheaper for every doubling of cumulative capacity since the mid-1970s. By 2050 solar and wind will cost around US$20–21/MWh to build, versus the cost of simply refurbishing existing coal plants at around US$56/MWh.
BNEF’s New Energy Outlook makes it clear that even Donald Trump can’t save outdated technology from being out-competed by wind, solar and batteries, with America having almost no coal or nuclear power by 2050. Market forces alone will see half the world’s electricity generated from wind and solar by mid-century.
Meanwhile, the rapid evolution of storage technology will allow renewables to safely dominate the grid, with support from pumped hydro and gas. Lithium-ion battery costs have dropped 79% since 2010 and BNEF’s Elena Giannakopoulou says this is ‘chilling’ for fossil fuels, a scenario that The Australia Institute has been predicting since 2016.
That all puts great pressure on the COAG Energy Council when it meets in August to consider the National Energy Guarantee. The natural growth of renewables will overtake the Government’s 26% emissions target for the electricity sector. To ensure the electricity sector does its fair share to meet our Paris obligations we need the National Energy Guarantee to deliver more clean energy than expected trends. If the NEG delivers anything short of ‘renewables-as-usual’, then it is effectively a subsidy for coal and will push prices up for consumers.
BNEF’s report shows that renewables will naturally overtake fossil fuels in the NEM by 2031. AGL’s plan to close the Liddell coal-fired power station is just one nail in the coffin of last century’s energy system. In America, Xcel Energy has just released details of a similar plan, to retire 660 MW of coal-fired generation in Colorado a decade early, replacing it with a portfolio of renewables, storage and some gas, which will save consumers $US215 million.
The Story of Coal: expensive and unreliable
At the same time as coal is under pressure over price, it is under increasing pressure over reliability. The Australia Institute’s Gas & Coal Watch has demonstrated that coal (and gas) are not the rock-solid energy sources that their boosters claim. In early June 2018, while electricity spot prices soared to over $2400 /MWh, over 40% coal generation in New South Wales (up to almost 5 GW) was idle, largely because of breakdowns.
BNEF’s data demonstrates there are two parallel trends at work in the transformation of the energy sector. Climate policy is one and the other is technological progress. What this means for the NEM is that whilst governments deliberate over climate targets, regulators must accelerate the opening up of the market to competition from new, cleaner technologies.
Batteries, wind, solar, pumped hydro and electric vehicles are the key ‘supply side’ technologies that regulators must unleash, for the benefit of consumers. Equally important are the ‘demand side’ technologies, that reduce peak and average energy consumption levels. Back in 2013 the International Energy Agency declared that energy efficiency is the world’s ‘First Fuel’. Saved ‘negawatts’ of energy are cheaper than generated megawatts and more popular with the Australian electorate.
We have argued that reforms which allow negawatts and clean energy to fully compete, can deliver on the ‘energy trilemma’ of price, reliability and emissions. Importantly, the Federal Minister for the Environment and Energy, Josh Frydenberg took a similarly optimistic view when he ordered a Special Review in April 2017 from the Climate Change Authority and Australian Energy Market Commission, on policies that would ‘enhance’ system security whilst reducing prices and ‘achieving’ Paris Agreement emissions reduction.
Unfortunately however, BNEF’s Outlook shows that technological trends alone would see global electricity sector emissions continue to rise (by 2% by 2027) before dropping away 38% out to 2050.
Australia and the rest of the world clearly have much more to do if we are to avoid climate disaster, but clean energy technology is up for the challenge, and cheaper than ‘coal-as-usual.’
Tanya Martin Office Manager
Jake Wishart Senior Media Adviser