In Australia, Renewable Energy is Cheaper Than Coal

A new report from Bloomberg New Energy Finance shows that the price of renewable energy in Australia is so low that it’s now cheaper to invest in wind and solar power than in a new coal-fired power plant.

According to Bloomberg, energy from a new wind farm costs about $83 per megawatt hour. Building a new coal plant would cost consumers $148 per megawatt hour, and a new baseload gas plant would cost $120 per megawatt hour.

Part of the reason behind these dramatic differences is that Australia has a tax of about $25 per ton on carbon dioxide emissions. But even without the tax, wind energy is still cheaper than coal and gas.

From the article:

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 is very unlikely that new coal-fired power stations will be built in Australia. They are just too expensive now, compared to renewables”, said Kobad Bhavnagri, head of clean energy research for Bloomberg New Energy Finance in Australia. “Even baseload gas may struggle to compete with renewables. Australia is unlikely to require new baseload capacity until after 2020, and by this time wind and large-scale PV should be significantly cheaper than burning expensive, export-priced gas. By 2020-30 we will be finding new and innovative ways to deal with the intermittency of wind and solar, so it is quite conceivable that we could leapfrog straight from coal to renewables to reduce emissions as carbon prices rise.” he added.

I wonder how this change in Australia’s energy mix could affect the American coal industry. Australia has pretty extensive coal reserves—and in 2011 was actually the world’s biggest exporter of metallurgical coal (which is used to make steel). Thermal coal is what’s burned in power plants, so a drop in Australian coal-burning wouldn’t necessarily affect the met coal export market.

But Australia also produced 199 million tons of steam coal in 2011, while the United States produced 849 million tons. If that Australian steam coal isn’t needed at home and is increasingly exported overseas—to countries like India and China—it could conceivably reduce the demand for American coal in those places. Australian coal would likely be less expensive, because the coal wouldn’t have to travel as far.

And so far, there’s still no word about the status of the deal to ship Kentucky coal to India. The first shipment was supposed to go out last September.

Erica Peterson

Erica Peterson reports on energy and the environment for WFPL.

@ericampeterson

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