Renewable electricity is affordable

Our latest peer-reviewed paper, currently in press in Energy Policy journal, compares the economics of two new alternative hypothetical generation systems for 2030: 100% renewable electricity versus an “efficient” fossil-fuelled system. Both systems have commercially available technologies and both satisfy the NEM reliability criterion. However, the renewable energy system has zero greenhouse gas emissions while the efficient fossil scenario has high emissions and water use and so would be unacceptable in environmental terms.

We used the technology costs projected to 2030 in the conservative 2012 study by the Bureau of Resources and Energy Economics (BREE). (In my personal view, future solar PV and wind costs are likely to be lower than the BREE projections, and future fossil fuel and nuclear costs are likely to be higher.) Then, we did thousands of hourly simulations of supply and demand over 2010, until we found the mix of renewable energy sources that gave the minimum annual cost.

Under transparent assumptions, we found that the total annualised cost (including capital, operation, maintenance and fuel where relevant) of the least-cost renewable energy system is $7-10 billion per year higher than that of the “efficient” fossil scenario. For comparison, the subsidies to the production and use of all fossil fuels in Australia are at least $10 billion per year. So, if governments shifted the fossil subsidies to renewable electricity, we could easily pay for the latter’s additional costs.

Thus 100% renewable electricity would be affordable under sensible government policy, busting another myth. All we need are effective policies to drive the transition.