Renewable energy beats ‘clean coal’ on cost in Australia

A part of the extension of the Snowtown Wind Farm in South Australia that added 90 new 3 megawatt turbines. In South Australia wind farms contribute 27% of annual electricity, notes University of New South Wales’ Mark Diesendorf. Photo by David Clarke, used via Flickr Creative Commons license.

It’s unlikely that fossil fuel power stations that capture and store their CO2 emissions could supply eastern Australia’s electricity more cheaply than renewable energy technologies like solar and wind power. That’s according to a study based on hour-by-hour analysis of electricity demand by Ben Elliston, Iain MacGill and Mark Diesendorf from the University of New South Wales in Sydney. Although renewables are often seen as expensive, these findings highlight that they can be competitive after accounting for the impact of burning coal and gas on our climate. “Our studies, and those conducted by other research groups around the world, find that it is possible to operate reliable national and subnational electricity systems on predominantly renewable energy generated by commercially available technologies and that these systems are affordable,” Mark told me.

Ben is a PhD student, supervised by Iain and Mark, and together the three have sought to answer key questions about renewable energy. Is it possible to supply a whole electricity grid’s needs with these technologies, or are some ‘base-load’ coal or gas power stations needed to fall back on? And if it is possible, would it be affordable?

To answer these questions, Ben designed a computer programme to simulate running an electricity supply system. His program can go through a year’s hourly data on electricity demands, wind and sunshine over the region in a fraction of a second. “Everything else follows from this, provided of course one asks the right questions,” Mark noted.

Over the last two years they have published work exploiting that programme, first showing that it’s possible to reliably supply 100% of eastern Australia’s electricity using renewable energy. Wind and solar power supplied most of the electricity, but output from these technologies varies due to changes in weather. But rather than filling gaps with fossil fuels, they showed existing hydroelectric power stations and gas turbines burning biofuels could be used to meet the grid’s reliability standard.

Set the price right

Mark Diesendorf from the University of New South Wales and collagues Ben Elliston and Iain MacGill used hour-by-hour simulations of electricity demand in eastern Australia to compare their 100% renewable energy strategy against gas and coal with carbon capture. Image credit: University of New South Wales.

Then last year, the three researchers published a study looking at how to provide reliable renewable energy at the lowest cost. They took projections of costs of building and running renewable energy and fossil fuel power stations in 2030 from an Australian Bureau of Resources and Energy Economics report. Using these costs, they ran hundreds of simulations using a ‘genetic algorithm’, evolving towards the lowest cost renewable technologies for 100% renewable energy.

The cheapest mix, costing 19.6 billion Australian dollars (AU$) per year, used around half wind, around two-fifths solar of different types, and the rest came from liquid and gaseous biofuels and hydroelectric. They also estimated the impact of ‘carbon prices’, the fee the government charges for the right to release greenhouse gases, on competitiveness of this plan in 2030. At prices over AU$50 for emissions equivalent to a tonne of CO2, rebuilding eastern Australia’s power station network with renewable energy is a lower cost option than fossil fuels. Today, Australia’s carbon price is AU$25.40, but is set to fall to around AU$6 in July.

But that work had not yet answered another key question: Is 100% renewable electricity likely to be less expensive than coal power stations with carbon capture and storage (CCS)? To study this, in a paper published online on 31 December 2013, Mark’s team compared their renewable energy scenario against three using fossil fuels. One was a medium-carbon scenario using only gas power stations without CCS. The other two were low carbon scenarios using CCS, one with just coal power stations and the other using gas.

The researchers simulated varying carbon and gas prices, costs of fossil fuel power stations with and without CCS, and costs of transporting captured CO2 to storage sites. As CCS is not yet widely used, and judging its cost is therefore hard, they used a wide range of possible technology and transport costs for it.

The only situation where a scenario using coal and CCS was cheaper than the renewable energy scenario was when three unlikely conditions combined. “The capital cost of the coal-fired power station must not be higher than currently expected, the coal power station must be located close to the CO2 repository and the carbon price must be low,” Mark said. “However, if the carbon price is low there are unlikely to be any coal power stations with CCS, apart from pilot plants.”

Powerful messages

The Edwardsport coal-fired power station in Indiana is an example of the problems faced by carbon capture and storage. When it was originally planned, it was thought the site was ready for carbon injection. After conducting further research, it was determined that the site is actually not geologically suitable for underground storage of carbon. Instead, its owners Duke Energy Indiana will need to seek approval to construct a pipeline to transport carbon to a more suitable site if they do adopt CCS. Image credit: Duke Energy, used via Flickr Creative Commons licence.

The gas-only scenario that doesn’t include CCS would force Australia over its 2050 emission targets. Its cost would also be comparable to the renewable scenario if gas prices hit AU$12 per gigajoule (GJ), even without a carbon price. “At present gas prices are increasing rapidly in eastern Australia as competition from high export prices drags them up,” Mark noted. “For fuelling power stations in some parts of Queensland, gas prices are already around AU$10/GJ.”

And although gas with CCS produced a more complex picture, at realistic costs for gas, carbon, and CO2 storage, the 100% renewable scenario was still cheaper. The results for gas undermine the possible continuing role some see for it that would exploit its lower carbon footprint compared to freely-emitting coal. “In the carbon-constrained world, large-scale use of gas for power generation has to be ruled out on environmental grounds,” Mark said. “This can be implemented by means of an appropriate carbon price.”

Though the renewable energy mix Ben, Iain and Mark propose is specific to eastern Australia, some other aspects of their results are broader. “The general finding that base-load power stations are unnecessary for supplying base-load demand, holds across the world,” Mark said. He hopes their findings will help people – including governments – better understand the economics of electricity systems based mainly on renewable energy and how to operate and plan these systems.

Overall, the team’s findings also give a valuable perspective on comments made by people such as Nigel Lawson in the UK that renewable energy is costly. “Conventional fossil-fuelled power is only ‘cheap’ because its price does not include to a significant degree the costs of environmental, social and economic damage caused by burning fossil fuels,” Mark stressed. “In South Australia wind farms contribute 27% of annual electricity and, as a result, the wholesale price of electricity has fallen. The state’s two coal-fired power stations are now shut down for half the year. If wind and solar power continue to grow in South Australia, it will be just a matter of time before its coal stations are closed permanently.”

Journal references:

Elliston, B., Diesendorf, M., & MacGill, I. (2012). Simulations of scenarios with 100% renewable electricity in the Australian National Electricity Market Energy Policy, 45, 606-613 DOI: 10.1016/j.enpol.2012.03.011
Elliston, B., MacGill, I., & Diesendorf, M. (2013). Least cost 100% renewable electricity scenarios in the Australian National Electricity Market Energy Policy, 59, 270-282 DOI: 10.1016/j.enpol.2013.03.038
Elliston, B., MacGill, I., & Diesendorf, M. (2014). Comparing least cost scenarios for 100% renewable electricity with low emission fossil fuel scenarios in the Australian National Electricity Market Renewable Energy, 66, 196-204 DOI: 10.1016/j.renene.2013.12.010