EY Global is a worldwide consulting firm. Older readers may remember when it was Ernst & Young, one of the world’s largest accounting firms. This week, Serge Colle, head of EY Global’s power and utility section, told the Sydney Morning Herald that Australia may be one of the first nations to achieve grid parity between renewable energy and electricity generated by fossil fuels. “As early as 2021, [globally] we reach what we call grid parity. With Australia, the expectation is that this will come one year earlier, as early as 2020,” Mr Colle said.
The arrival of “grid parity” — which has arguably already been reached in most of Australia, California, Hawaii, and various other locations (by certain metrics) — is driven largely by the cost of electricity, which is higher in Australia than in most other countries. The higher the price of conventional power, the easier it is for renewable power to match it or beat it. Colle thinks “smarter” digital grids will be a factor in leveling the playing field between renewables and conventional power.
Australia’s clean energy goals will also aid the rise of renewables over the next few years. Grid defection — more people becoming energy independent and leaving the grid altogether — will also contribute. “There are incentives there around the customer side to provide affordability, but a bigger enabler to make this all work is the right encouragement to make the networks intelligent, to make this whole system work in the future,” says Stuart Hartley of EY Oceania.
“For those in the industry that still believe that [the renewable technologies] we see now will never be technically and economically equal to traditional energy solutions they should reconsider their thinking,” Colle adds. “The energy transition is accelerating. Grid parity is coming quicker than most of us in the industry expect.”
That statement is buttressed by findings in a new Australian National University study which concludes that, given the current rate of installation of new wind and solar power facilities, renewables can meet all of Australia’s commitments to carbon reduction made at the COP21 climate conference in Paris at a cost that does not exceed the cost of conventional power sources such as coal and natural gas.
“The cost of renewables includes the cost of hourly balancing of the grid to retain the same reliability as at present. Hourly balancing comprises pumped hydro energy storage, stronger interstate high voltage power lines and the cost of PV and wind spillage on windy, sunny days when the energy stores are full.” It predicts the average cost of renewables will fall to under $50 per megawatt-hour within the next 10 years — well below the projected cost of conventional energy by then.
None of this means that coal and gas-powered generating plants will disappear entirely in the next few years. And fluctuations in the price of natural gas may affect the actual time when grid parity is reached. But in coming years, renewables are expected to cost less while electricity from conventional sources is expected to become more expensive.
Serge Colle believes modernizing the grid and having the right government programs in place will be vital to attracting the sorts of investments that will drive the transition to renewable power forward. “This is going to be crucial to make sure that we continue to have the right behaviors to support and stimulate decarbonization, as well as at the same time make sure that we have an affordable energy system,” he says. “Making sure that those two worlds coexist for the next 15 to 20 years, while supporting the right investments, is going to be extremely crucial.”