Electricity from Coal is Becoming More Expensive
22nd Dec 17
Cameron Quin

The Australian electricity sector suffers from a lack of public information in the wholesale energy market. We all know the price we pay for each kilowatt-hour in power bills, but there is little information on how much it costs to produce this electricity at power plants.

Power bills in Australia doubled for many customers in less than a decade, and solar and wind power are the newcomers in the energy mix, so it’s easy for established players in the energy industry to blame them. However, the numbers tell a different story: the established market structure in the electricity sector has caused the sharp rise in Australian power bills.

Coal and Natural Gas Generation: Recent Price Increases

Research by the Australian Competition and Consumer Commission (ACCC) reveals that power network operation costs represent nearly half of the power bill we pay. In addition, the Australian Energy Regulator have revealed that coal-based generation became much more expensive in recent years. For example, wholesale electricity prices from in New South Wales increased from $30-65/MWh to $80-110/MWh in 2017, and the state gets 88% of its electricity from coal. This is no coincidence.

The price of coal itself increased from $71/tonne to $110/tonne, while electricity generation costs increased from $30/MWh to $55/MWh. Consider that this is the price of generation alone before adding financing costs, and also consider the environmental damage. Utility-scale solar and wind power can now beat this price.

The case of natural gas is even more drastic, as electricity prices of up to $300/MWh have been reported from peaking power plants. In particular, South Australia has suffered from the rise in natural gas prices, leading to investment in two utility-scale batteries to reduce dependence on gas during peak demand hours.

This information continues to dispel the myth that energy from solar panels and wind turbines is expensive. In fact, numbers from around the world tell the opposite story, as both solar and wind power continue to break their own price records.

Can Solar Panels Displace Coal and Natural Gas?

Conventional solar PV systems and wind turbines have a very low ownership cost, but you can’t rely on them during nighttime or cloudy days. Adding batteries raises the cost of ownership, but electricity has become so expensive in Australia, that solar plus batteries can beat the kilowatt-hour retail price in many cases.

When it comes to environmental impact, the advantage of renewable energy cannot be disputed. Fossil fuels once had a price advantage, but this is no longer the case – coal and gas become more expensive while solar panels and wind turbines are installed for less capital each year. Fossil fuels still have the advantage of controllable energy output, but will lose it as battery storage continues to drop in price.

You can start purchasing clean energy from solar panels even if your local energy provider plans to use coal and natural gas in the foreseeable future. A Power Purchase Agreement (PPA) allows you to purchase solar energy directly, and there are no transmission losses because the photovoltaic array from which you purchase electricity is installed on your property.

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Cameron Quin

22nd Dec 17
Cameron Quin

Cameron Quin has been heavily involved in business development from an early age. After founding and selling two online companies, Cameron found a strong passion for renewables and the opportunities it brings for the commercial and industrial sector. Sharing the possibilities of solar and the knowledge from the Solar Bay team is his favourite pastime.