The cost of generating electricity in an Australian grid powered by 82% renewable energy would be a third cheaper than current wholesale electricity costs, according to new CSIRO analysis.
The organisation has for the first time modelled the likely cost of electricity generation from different combinations of technology that could make up Australia’s grid in 2030 and 2050. Previous work has only looked at the comparative costs of individual technologies.
The modelling suggests that by 2050 the country’s main electricity market – covering all states and territories except the Northern Territory and Western Australia – could run almost entirely on renewable energy without any increase in the cost of electricity generation.
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The results undercut claims from the Coalition that adding solar, wind and storage such as batteries to Australia’s grid will cause electricity costs to surge.
The Albanese government has a target that 82% of electricity generation should come from renewables by 2030, but many experts warn the target is likely to be missed.
The CSIRO GenCost report found a grid with this level of renewable energy would result in wholesale electricity costs of $91 a megawatt hour, including the extra cost of connecting renewables in 2030. This compares with the current average cost of $129 a MWh, the report said.
The actual cost of renewable generation is likely to be lower because the CSIRO took as a baseline the most expensive year for solar and wind between 2011 and 2023.
The cost of wholesale electricity makes up about one-third of domestic bills.
Another third is from the cost of distributing power through local poles and wires, with the rest made up of transmission costs, retail costs and government programs.
The price of electricity has been a dominant political issue this year with the Coalition blaming the influx of renewable energy for a 40% rise in power bills.
In the 12 months to October electricity bills jumped by 37.5%, mainly because federal and state government rebates ran out, the Australian Bureau of Statistics said. When those rebate changes are excluded, electricity prices rose 5% in the past year, the ABS has said.
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The CSIRO modelled a range of scenarios to estimate the costs of electricity in 2050, from a future where there were no further system-wide cuts to emissions after 2030 to a grid that was completely emissions free.
The GenCost report found it was “not economically efficient” to have a completely emissions-free grid.
Instead, the report suggested using fossil gas rather than green hydrogen to provide back-up to the grid.
If Australia was aiming to reach net zero emissions economy-wide, it would be more efficient, the report said, to allow a small amount of emissions from gas in the electricity system and then capture CO2 elsewhere in the economy.
The report found the cheapest option to generate electricity would be to use only mature technologies – coal, gas, solar and onshore wind – and make no further efforts to cut emissions from the electricity market beyond 2030.
In all the scenarios, adding offshore wind, fossil fuel generation with carbon capture and storage and nuclear increased the cost of wholesale electricity.
Elsewhere, the report looked at the changing costs of different technologies and found the biggest change was in the price of batteries, which dropped 15% on the previous year, after a 20% fall the year before.
The biggest cost increases were in coal and open-cycle gas generation because of the rising costs of manufacturing turbines. Large-scale solar costs had risen slightly and onshore wind costs had shown “tentative signs of stabilising”.
