Rising Power Prices – What’s the Story?
27 Jul 2017
The simple fact is, Australia’s electricity prices have risen because the price of power we buy on our customers’ behalf has increased substantially.
25 May 2016
If we're serious about climate change, we must shift to low-carbon energy sources. But can we reach the global goal of net zero emissions by 2050?
Government sources state that electricity generation in Australia will grow 30% by 2050, but that 80% of the growth will come from non-renewable sources.1
This statement is at odds with the recent United Nations Paris Climate Conference in which the intent is for net-zero carbon emissions from electricity generation by around 2050, that is, any amount of carbon emitted is offset by sequestration (e.g long term storage of carbon in forests), at least for advanced economies such as ours.
Since the 1970s, scientists have warned of greenhouse gases such as carbon dioxide (CO₂) dangerously warming the planet. Most man-made carbon comes from burning oil, gas and coal. Yet via the United Nations Framework Convention on Climate Change (UNFCC)2 nations have agreed to keep global warming below 2ºC above pre-industrial levels, and this requires a global agreement to reach net-zero carbon emissions in the second part of this century. It won’t be an easy task.
According to the International Energy Agency3 World Energy Outlook 2015, by 2040 the global demand for electricity will grow 70%. In Australia a third of our greenhouse gases are produced by electricity generation4, largely because about 70% of our electricity comes from coal, the biggest emitter of carbon. So if we are serious about net zero emissions, the key will be a shift to low-carbon energy sources. According to the Australian Government’s Bureau of Resources and Energy Economics (BREE)5 business as usual forecasts, coal will actually increase its share by 2050 – from 64% to 65% – while natural gas-fired generation (which results in around half the carbon emissions of coal) will drop from 19% to 14% , and renewable electricity generation will only rise from 15% to 20%. Clearly this type of prediction will not deliver the required emission reductions from the energy sector.
Other forecasts are more ambitious. A report for the World Wildlife Fund in 2015, conducted by the Australian National University6, considers a scenario that by 2050 we could be 100% powered by renewable energy if governments committed to long-term emission policies. For example, the report cites that the cost of utility-scale solar is forecast to drop from around $120 per megawatt/hour (in 2015) to under $80 MW/h in 2018.
The reducing costs of renewables is encouraging but Tony Wood, energy program director at the Grattan Institute, says our energy sources must be efficient, reliable and environmentally sustainable, without one factor outweighing the others.
He says fossil fuels are so abundant in Australia that ensuring a greater share for renewables in 2050 means having a ‘price’ on carbon. Emitting carbon into the atmosphere has to be priced sufficiently that coal loses its cost advantage over renewable technologies.
If combined-cycle gas generation is not too expensive, gas could become a more significant power generation technology in Australia, says Wood, because it can act as baseload generation with much lower emissions than the coal we mostly depend on today.
The baseload equation is important to our future power mix and our expectations of reliable power. Australian households and industry have high expectations that they will have power available whenever they want to use it. And as a country, we have a low tolerance for power blackouts.
The main baseload generation technologies are currently coal (the highest carbon emitter), gas (accounting for up to a fifth of Australia’s power generation) and nuclear, which has almost zero emissions but is disregarded because it is expensive and legislation currently prevents it being used.
Gas and hydro are often used to cover peak demand, or the point of maximum load on a power network, which may only last a short time but must be met to avoid the network failures or power blackouts. Gas and hydro also support less reliable generation sources such as solar and wind, which produce zero emissions but are intermittent and still comparatively more expensive.
There are several ways to achieve net zero emissions by the second part of the century, according to the head of research at ClimateWorks Australia, Amandine Denis. In one scenario, Australia’s grid is virtually 100% renewables, with some gas-turbine power to cover the intermittency of renewables.
By 2050, Denis says, solar and wind will dominate power generation in Australia because they will have attracted investment and their costs will have fallen to economic levels.
In another scenario, she says that by 2050, two-thirds of Australia’s electricity will be generated by renewables, the balance coming from combined-cycle gas turbines.
Denis refers to the energy transformation task in Australia as drastic. For Australia to reach 50% renewables we’ll have to build as many wind projects each year as we have in any previous year, and grid scale solar power will have to achieve the same penetration as it does in Germany. Germany had a quarter of the world’s total installed solar PV in 2013 (predominantly large scale) – Australia had 2.3%, even though we have one of the highest levels of installed roof-top solar PV.7
“Solar has an important role to play in helping to decarbonise and broaden our energy economy, both at a household level and through large scale solar farms. Australia has been a world leader in the uptake of residential solar and we are likely to see an increasing amount of large scale solar built as it becomes more cost competitive with other forms of renewable energy generation", says Phil Mackey, General Manager Solar & Emerging Businesses, Origin Energy.
The energy mix of the future is likely to change with developing technologies, societal expectations and new government policies. Solar PV use, for instance, could be much higher in 2050 than is currently forecast because emerging battery storage makes the power available for night-time use and the price of the technology is already dropping.
Erwin Jackson, deputy chief executive of the Climate Institute, says the goal of net zero emissions is an achievable one. Origin’s view is that in order to meet Australia’s climate change targets we need a combination of a carbon price signal, regulation and support for new technologies.
Tony Wood of the Grattan Institute says Australians will not accept a reduction in the quality of their power supply, regardless of the risk to the environment.
“I have a place in the country, and it’s all solar PV and batteries. We’re basically off the grid but I have a diesel generator in the shed. We have to be realistic – we’re not going back to caves.”
1. Bureau of Resources and Energy Economics (BREE) Australian Energy Technology Assessment 2013.
3. Energy Statistics IEA figures from the 2014 Statistics publication
4. National Greenhouse Gas Inventory, 2013-14, cited Department of the Environment Australia’s Emissions Projections 2014-15, page 17
5. Australian Energy Technology Assessment 2013
6. Australia can cut emissions deeply and the cost is low 2015, Australian National University’s Crawford School’s Centre for Climate Economics and Policy; report commissioned by the World Wildlife Fund-Australia.
7. Sundown, sunrise, The Grattan Institute 2015, page 8