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2023-24 GenCost consultation draft released 

The drafting considers inputs sourced on real-time engineering and construction cost data points in Australia, as well as overseas parallels, information from equipment manufacturers, software and literature. Key points in the current draft are: 

Annual change in capital costs: Across the board, new build costs have generally stabilised as the impacts of inflation ease. However, cost pressure remains on gas, onshore wind and nuclear SMR.

  • Pre-2030 integration costs now included. 
  • Variable renewables still found to have the lowest cost range of any new-build technology. 
  • Inflation impacts easing. 
  • Large scale solar falls. 
  • Pressure remains on gas, onshore wind and nuclear SMR.

The 2023-24 GenCost draft report has found that new build costs across the board have generally stabilised since the 20 per cent increase reported last year, albeit with some outliers.

The cost of onshore wind generation rose by 8 per cent, while large-scale solar photovoltaic (PV) fell by the same proportion. The cost of gas turbine technologies increased by 14 per cent. 

Nuclear small modular reactors (SMRs) emerged as the highest-cost technology explored in the report. This corresponds with new data from the most advanced SMR project in the US. 

Levelised cost of electricity (LCOE): Variable renewables have the lowest cost range of any new-build technology, both now and in 2030.

Initial analysis indicates the inconsistent impact of weakening global inflation is due to the unique material inputs and supply chains of each new build technology. 

GenCost is an annual collaboration between Australia’s national science agency, CSIRO, and the Australian Energy Market Operator (AEMO) to update the costs of new-build electricity generation, storage and hydrogen production with a strong emphasis on stakeholder engagement.  

Pre-2030 costs now included 

In response to feedback on the previous report, the 2023-24 draft report incorporates pre-2030 integration costs, such as storage and transmission for variable renewables in the levelised cost of electricity (LCOE) data. This addresses the concern that leaving out pre-2030 projects under-estimates the cost of the renewable transition. 

While this change leads to higher cost estimates, variable renewables were still found to have the lowest cost range of any new-build technology.    

Download the GenCost 2023-24 report 

The final report encompasses updated current capital cost estimates commissioned by AEMO and delivered by Aurecon. 

Next steps

The draft report is open for consultation until 9 February 2024. Feedback should be sent to AEMO

As part of the consultation process, AEMO and CSIRO hosted a 90-minute webinar on 31 January, 2024 regarding the report's key insights and its role in AEMO's forecasting and planning activities. Watch the recording

The final GenCost 2023-24 report will be released in the second quarter of 2024.

Transcript to be supplied

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GenCost is an annual collaboration between CSIRO, Australia’s national science agency, and the Australian Energy Market Operator (AEMO) to update the costs of new-build electricity generation, storage and hydrogen production out to 2050.

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You can also listen to an interview with Chief Energy Economist Paul Graham. He discussed the 2023-24 GenCost Consultation report on RN's breakfast radio program on 21 December, 2023. Presenter: Sally Sara, Producer: Max Chalmers.

FAQ: Popular GenCost questions and where to find the answers

The GenCost Report is one of several studies used by business leaders and decision-makers to plan and build reliable and affordable future energy solutions and help us achieve net zero emissions by 2050. 

Each year, CSIRO publishes GenCost in collaboration with the Australian Energy Market Operator (AEMO). It’s an unbiased, accurate and up-to-date economic report that provides cost estimates of building new electricity generation and storage projects, and hydrogen technologies, up to the year 2050.  

This includes coal, natural gas, solar photovoltaics, onshore and offshore wind, solar thermal, nuclear small modular reactors, bioenergy, pumped hydro, hydrogen electrolysers and batteries. 

The GenCost process is highly collaborative and draws on the deep expertise and knowledge of a large number of energy industry stakeholders. It includes engagement and consultation with members of the energy community to review the work and provide pre-publication feedback to improve its quality. 

For more detail view this animation explaining the GenCost process.

GenCost reports are developed over an annual cycle and actively provides opportunities for government, industry, the private sector, and economic specialists to ask questions and provide feedback. 

Each year more than 100 different organisations provide input, ensuring that a diverse range of perspectives and deep industry knowledge contribute to refining the report. 

GenCost receives unprompted feedback throughout the year, but specifically targets the December/January period for invited consultation.

The project maintains a mailing list to share draft outputs which is open to all. To request inclusion, visit www.csiro.au/en/contact. On CSIRO’s behalf, AEMO also circulates the report to its Forecasting Reference Group mailing list and hosts a consultation web page which outlines the submissions period and procedures.

The draft report is open for consultation over a six-week period. The input and feedback gathered during consultation shapes the final report, which is released mid-year. 

For more detail go to GenCost section 1.1 Scope of the GenCost project and reporting from page 11.

GenCost projects the cost of electricity generation and storage for a wide range of technologies up to the year 2050. 

To do this, the report includes two types of data; capital costs and levelised costs.

Capital costs provide the investment cost for each technology, but not the running costs. They are updated with input from an engineering firm. 

Levelised costs represent the per-unit cost of building and operating a generator over its lifetime, providing a standardised measure for comparing the cost of electricity production across different technologies. 

For more detail go to GenCost section 5 Levelised cost of electricity analysis from page 54; the GenCost explainer; and view this animation explaining the Gencost process.

Levelised cost of electricity (LCOE) is a simple and widely used metric for comparing the cost of different technologies.

Levelised costs combine capital costs with running costs such as operating, maintenance and fuel, in units that enable us to compare technologies side by side. 

The costs to maintain reliable renewable energy supply, known as ‘firming’ costs, are factored in from the current year forwards.

For an investor, LCOE tells them the average price of electricity they would need to receive over the design life of their investment to recover all their costs and make a reasonable return on investment. The technology with the lowest LCOE is considered the most competitive.

LCOE is only meaningful as a quick guide to competitiveness. Investors will need to carry out more in-depth modelling to support investment decision and more complex questions such as policy analysis also require deeper modelling approaches. 

For more detail go to GenCost section 5 Levelised cost of electricity analysis from page 54; the GenCost explainer; and an animation on Gencost process.

‘Firming costs’ is a term often used to describe the investments needed to make variable renewables a reliable source of electricity for our power system. In the GenCost report our preferred term is ‘integration costs’. 

Integration costs include investments in storage, peaking generation, transmission and system security devices such as synchronous condensers. Modelling is required to determine the least cost combination of investments. 

For more detail go to GenCost section 5.2 Framework for calculating variable renewable integration costs from page 55.

CSIRO’s latest 2023-24 GenCost consultation draft report has found that renewables have the lowest cost range of any new-build energy technology, even when considering additional integration costs such as storage and transmission. 

GenCost calculates the breakeven costs needed for investors to recover their capital, fuel and operating costs, including a reasonable return on investment. 

This is an indicator of what electricity prices need to be in order to encourage new investment, but it does not control the electricity price. Electricity prices are controlled by the balance of supply and demand. If supply is tight relative to demand then prices go up. If supply is significantly more than demand then prices go down. 

In 2022 global natural gas supply constraints, triggered by sanctions on Russia due to the Ukraine war, together with unplanned coal plant outages caused a price spike that is still reverberating through the electricity system.

Retailers, experiencing these conditions, secured electricity supply contracts for 2023 and factored these higher prices in.

While additional renewable supply has, in some regions, lowered wholesale electricity prices, customers may not immediately feel the impact due to existing higher priced supply contracts, and any reductions might only become noticeable next year if the recent lower wholesale prices are sustained long enough to force forward contact prices down. 

GenCost has been advised by stakeholders that small modular reactors are the appropriate size nuclear technology for Australia. Australia’s state electricity grids are relatively small compared to the rest of the world and planned maintenance or unplanned outages of large-scale nuclear generation would create a large contingent event of a gigawatt or more that other plants would find challenging to address.

In the present system, it would take two or more generation units to provide that role. As such, large-scale nuclear plants which are currently lower cost than nuclear SMR, may not be an option for Australia, unless rolled out as a fleet that supports each other - which represents a much larger investment proposition. 

The second issue is that observations of low cost nuclear overseas may in some cases be referring to projects which were either originally funded by governments or whose capital costs have already been recovered. Such prices will not be available to countries that do not have existing nuclear generation such as Australia. 

For more detail go to GenCost section 2.4.4 Perceived inconsistency between high nuclear SMR capital costs and low-cost nuclear electricity overseas from page 17. 

With ~16% of the world’s countries generating and selling nuclear power as part of their electricity mix, there are a number of considerations that impact a country’s choice to go nuclear. For Australia in the near future these include: 

  • Regulation: Nuclear power generation is prohibited in Australia under federal and state laws. 
  • Cost: Nuclear is currently the most expensive new-build electricity generation technology, particularly compared to renewables.
  • Time: Lengthy periods for certification, planning and construction mean that nuclear would take 15 years or more to be deployed, which is too late to play a serious role in near future emissions reduction.
  • Expertise and skills: The absence of a local nuclear industry means Australia would initially need to rely on offshore construction and operation experience.
  • Community licence: While other technologies face this barrier, nuclear projects in Australia have not undergone a local development approvals process, posing a unique challenge. Its acceptance as part of our domestic electricity generation is untested. 

For more detail go to GenCost section 2.4.4 Perceived inconsistency between high nuclear SMR capital costs and low-cost nuclear electricity overseas from page 17 and section 2.4.5 Timing of deployment in Australia from page 18.

More information is also available at this CSIRO Nuclear Explainer

Early thinking around the problem of backing up renewables when their output is low focussed on using different types of storage. 

However, if renewable output is low for an extended period (sometimes called a renewable drought), storage becomes very expensive to build to address this problem. 

More recent approaches find that it is better to manage these extended periods by turning on a peaking technology of some type (the two main types are gas turbines or reciprocating engines). 

Peaking technologies have low capital costs, and while the fuel can be expensive, it is only needed for a small portion of the year. Peaking technologies usually run on natural gas but there are also some low emission options available at a premium such as biogas or hydrogen.   

For more detail go to GenCost section 5.2.5 Flexible technologies from page 61. 

Traditionally, our electricity system was thought to rely mainly on steady power from coal, supplemented by gas and hydro to meet varying demand throughout the daily cycle.  

This view oversimplifies the historic reality; only a few of the very low-cost coal plants operated consistently at full capacity, most ramped up during the day and backed off at night.   

For many decades the average capacity factor of coal plant in Australia has been around 60 per cent, not the idealised 90 per cent.   

In moving to variable renewables, the capacity factor of our main energy source will be even lower, at around 30 per cent.   

This will increase the need for storage and continue the need for natural gas or its lower emission substitutes such as biogas or hydrogen.   

Fortunately, the low cost of variable renewables and the declining costs of storage make this approach to operating a reliable electricity system economically viable whilst delivering lower emissions to address climate change.   

For more detail go to GenCost section 5.3 Storage requirements underpinning variable renewable costs from page 64. 

As per feedback on the 2022-23 GenCost Report, the increased cost of Snowy 2.0 and other current electricity projects were factored into the 2023-24 GenCost’s integration costs for variable renewables in 2023.  

For more detail go to GenCost section 5.2 Framework for calculating variable renewable integration costs from page 55.

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