Renewables Still Cheapest Power Source in Australia Despite Cost Spike

Renewables Still Cheapest Power Source in Australia Despite Cost Spike
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A recent report by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the Australian Energy Market Operator reveals that wind and solar power continue to be Australia’s most affordable sources of electricity generation, despite a rise in technology costs. The annual GenCost report for 2022-23 shows that all technology costs have increased by an average of 20 percent in the past year.

Onshore wind technology experienced the largest increase at 35 percent, while rooftop and large-scale solar had a smaller rise at 9 percent. Nevertheless, wind power remains one of the most cost-effective options for new-build electricity generation, alongside photovoltaic solar.

The report attributes the cost increase to the fast pace of the global energy transition, exacerbated by ongoing supply chain constraints caused by the Covid-19 pandemic, which have impacted the prices of raw materials and transportation costs.

However, the report predicts that technology cost pressures in Australia will return to normal by 2027. Paul Graham, the CSIRO’s Chief Energy Economist and lead author of the report, acknowledges that while some input costs are showing signs of moderation during the recovery from global events, uncertainties remain due to future price fluctuations and strong demand associated with the global energy transition. The report anticipates that technology costs have mostly peaked and that the risk of prolonged cost pressures beyond 2030 will be mitigated as global manufacturing capabilities align with deployment needs.