Each year, CSIRO and the Australian Energy Market Operator (AEMO) work with a range of industry stakeholders to give an updated estimate of the cost to generate electricity for new power plants in Australia, through their GenCost report.
This year, the report — which is now open for public consultation — was improved by using a more accurate system for calculating the levelised cost of energy (LCOE, a metric to compare the cost of electricity generation technology).
CSIRO Chief Energy Economist Paul Graham said the new metric added extra insight to this year's report.
"Previous GenCost reports added arbitrary amounts of storage costs, but this year we used a model of the electricity system that optimises the amount of storage needed, and also includes additional transmission expenditure," Mr Graham said.
"Even taking into account these extra system integration costs, solar photovoltaics (PV) and wind continue to be the cheapest new sources of electricity for any expected share of renewables in the grid — anywhere from 50 per cent to 100 per cent.
"This is projected to continue to be the case throughout the projection period to 2050."
The updated analyses also find that:
- Solar PV and batteries are projected to continue experiencing the fastest cost reductions of any source of energy technology.
- Hydrogen electrolysers are also projected to experience substantial cost reductions that will make them competitive with natural gas-based hydrogen production in the long run.
- Wind capital costs are falling more slowly than solar, reflecting their relative maturity as an energy source; however wind capital costs continue to make gains through capturing more energy from the same wind resources, which means they will continue to be competitive.
- Costs reductions for technologies not currently being widely deployed, such as carbon capture and storage, nuclear small modular reactors, solar thermal and ocean energy are lagging and would require stronger global investment to realise their full potential.
AEMO Group Manager Forecasting Nicola Falcon said the report was critical to future modelling.
"Electricity generation costs are a key ingredient into the electricity sector modelling which underpins much of the sector's strategic planning and policy analysis, including our Integrated System Plan," Ms Falcon said.
"Given the importance of this cost data, we are providing an opportunity for industry and other stakeholders to review the data as part of our Draft Inputs, Assumptions and Scenarios Report published today (available from 10am AEST) for consultation."
The final GenCost report is due to be delivered in March 2021.
Read the full draft report GenCost 2021 PDF (2 MB)