According to a new report published by Bloomberg New Energy Finance, wind and solar will supply the bulk of Australia’s electricity in 2040.
As part of its New Energy Outlook 2015 report published Tuesday, Bloomberg New Energy Finance (BNEF) conducted a country-by-country, technology-by-technology analysis covering electricity demand, cost of generation, and structural changes in the global electricity system.
“NEO 2015 draws together all of BNEF’s best data and information on energy costs, policy, technology and finance,” said Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance. “It shows that we will see tremendous progress towards a decarbonised power system. However, it also shows that despite this, coal will continue to play a big part in world power, with emissions continuing to rise for another decade and a half, unless further radical policy action is taken.”
Specifically for Australia, BNEF concludes that fossil fuels will only account for 41% of Australia’s electricity generation by 2040, due to aging coal and gas plants being replaced by lower-cost wind and solar installations.
Quite simply, BNEF “predicts that Australia’s power sector will fundamentally change, without any additional policy” — which is a relief, considering the lackluster and downright anti-environmental policies currently being debated and passed through Australia’s parliament.
The report’s authors determined that more than 50% of Australia’s electricity generating capacity will be located behind-the-meter by 2040, totaling 37 GW of small-scale PV and 33 GW of battery storage. “This will be driven by the superior economics of these technologies, which will be able to supply consumers with electricity at a lower cost than the grid” said Kobad Bhavnagri, the Australian-head of Bloomberg New Energy Finance and co-author of the Australian chapter of the report.
Unsurprisingly, however, BNEF does not predict fossil fuel generator retirements to happen quickly, with only 29 GW or so of fossil fuel electricity plants forecast to be retired by 2040. “Old coal is very cheap,” Bhavnagri said. “With our existing suite of policies, coal generators will run for as long as is physically possible.”
While BNEF’s outlook may seem somewhat overly-optimistic for those of us currently at the beck and call of Australian politics, its forecasts of new large-scale capacity automatically filling the gap provided by retiring fossil fuel plants does appeal as a brighter future. “The economics of new plants are very different from old,” Bhavnagri said. “Old coal is cheap, because only the running costs need to be met. But building new coal or gas is very expensive, as construction is capital intensive.”
“Relentless growth in rooftop PV” will be the additional driving factor, with over half of Australia’s power capacity, and 59% of generation, will be renewable by 2040. This will include 33 GW of storage, which is more than Australia’s current coal-fired fleet of generators. “Sophisticated market mechanisms will have to be developed to enable the system to effectively utilise these assets,” Hugh Bromley, Bloomberg New Energy Finance’s specialist in distributed energy, said. “Energy storage will need to be used to meet peak demand in winter from 2033, and households will have more than enough battery capacity to do this. But the grid will need to be managed in a much smarter way to co-ordinate the millions of new household participants.”
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