According to new modeling by RepuTex, an energy analysis firm, ambitious clean energy targets could lead to lower wholesale energy prices in the Australian market. Prior to that, a review by Australia’s chief scientist, Alan Finkel, published last month, suggested that the government should established a clean energy target (CET), to cut emissions from the national electricity market and drive down wholesale and retail prices. Both reviews modelled a 28 percent reduction in electricity sector emissions from 2005 levels, by 2030. Notably, however, analyses have found that such a cut would be insufficient to meet the country’s emissions reduction targets agreed to in the Paris accord.

Reputex modelled the effect of a 28 percent target, as well as one that met the Paris agreement target of limiting temperature increases to 2 degrees Celsius, which would entail a 45 percent cut from 2005 levels by 2030. The firm found that both scenarios led wholesale electricity prices to drop significantly, relative to taking no action.

With no action taken, they found prices would hover around 100 dollars per MWh, which is the current price. With a 28 percent reduction, they found prices would drop to less than 40 dollars around 2030, before rising to almost 60 dollars by 2030. The 45 percent reduction had similar effects, but with prices falling more slowly and then remaining low for longer, hovering between 40 and 50 dollars throughout the 2020s.

According to the analysis, the CETs drove prices down by incentivizing new sources of power generation in the market, meaning expensive gas power would less often be able to set electricity prices in the wholesale market.

Prices fell more in the Reputex report than in the earlier Finkel review, largely due to what Alan Finkel himself called conservative modelling of renewable energy costs. At the National Press Club, Finkel explained:

“We were conservative in our estimates of wind and large-scale solar generator prices. Indeed, in recent months the prices for wind generation have already come in lower than what we modelled.”

The report also found the economics of the national electricity market no longer supports traditional generation such as coal power, that are unable to scale to demand. It said they would not be built without the government distorting the market.

“With a premium placed on flexible generation that can ramp up or down, baseload only generation – irrespective of how clean or dirty it is – is likely to be too inflexible to compete in Australia’s future electricity system,” according to the report.

“In this context, renewable energy remains attractive to the market given it is able to deliver energy reliability, with no emissions, at low cost prices. This affirms that renewables are a lay down misere to out-compete traditionally fossil-fuel sources in Australia for the foreseeable future.”

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