GenCost Report confirms solar and wind cheapest energy sources

GenCost

CSIRO and the Australian Energy Market Operator (AEMO) have released their annual GenCost Report, stating that solar photovoltaics (PV) and wind continue to be the cheapest sources of new electricity generation capacity in Australia. 

This is despite the inclusion of renewables integration costs, according to the 2020-21 report. 

In consulting with industry stakeholders to estimate the costs of generating electricity for new power plants, the latest report also analysed these additional integration costs, such as storage and new transmission infrastructure. This was a more accurate approach for determining the cost of renewables. 

An early draft of the report was released to stakeholders in December 2020, which was improved by reflecting feedback on the impact of weather variability on driving up integration costs, CSIRO chief energy economist Paul Graham said. 

“The final report addresses this feedback: our analysis of renewable integration costs now includes greater recognition of this year-to-year weather variability and the impact it has on electricity demand and supply,” Graham said. 

“We took the integration costs from the highest of nine historical weather years.” 

The analysis also recognised that batteries are achieving longer lives before needing to be replaced as well as costing less. This means that storage costs from batteries are lower than previously thought. 

Overall, the report concludes that:  

  • Solar and wind continue to be the cheapest sources of new-build electricity. 
  • Battery costs fell the most in 2020-21 compared to any other generation or storage technology and are projected to continue to fall. Lower battery storage costs underpin the long-term competitiveness of renewables.  
  • Pumped hydro is important and more competitive when longer durations of storage (above eight hours) are required. 
  • The new approach is a model of the electricity system that optimises the amount of storage needed and includes additional transmission expenditure. 
  • Previous reports added arbitrary amounts of storage costs and did not include transmission or other costs. 

The 2020-21 GenCost Report included hydrogen electrolysers for the first time and found that hydrogen is following a similar trajectory to more established renewables. 

With increased interest in global deployment and many demonstration projects worldwide, substantial cost reductions in hydrogen technologies are anticipated over the next decades.