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Renewable energy winning the price war

The tide has turned in favour of clean energy as an economically rational choice and all we can hope for is that government policy catches on to the logic.

By Clean Energy Council Executive General Manager, Industry Development Natalie Collard

While the energy industry is often fixated on the finer details surrounding the transition towards cleaner energy, we never forget that when it comes to power the main thing that mums and dads, businesses and industrial users care about is the figure in bold at the bottom of their bill each month.

Renewable energy solutions have come forward in leaps and bounds over the last year, and price matters. The aim of the power game at the moment is to drive down power prices while reducing emissions and ensuring a reliable electricity system. This can be achieved through strong bipartisan policy which provides the stability needed to unlock new clean energy investment.

In among the Federal Government’s sales pitch on its proposed National Energy Guarantee (NEG) one fact stood out – the analysis showed that the new wind, solar and bioenergy currently being built because of the national Renewable Energy Target (RET) will reduce the average power bill by hundreds of dollars a year during the next decade.

This 6000 MW of new renewable energy means more competition in the power system. And new renewable energy is already the cheapest kind of power you can build today – less than either new coal or new gas. All this is good for consumers, because it means the extra energy being supplied will deliver cheaper power across the board. In 2017, the RET also delivered more than $9 billion in investment and thousands of jobs, showing just how much of a winning trifecta the policy has been for energy users, communities and the economy.

AGL’s decision to close its Liddell coal plant in 2022 and replace it with a clean energy hub provides one of our clearest glimpses yet into Australia’s clean energy future. The AGL plan involves a mix of wind and solar along with storage, demand management and some new gas. Overall, it will shrink the company’s carbon footprint by 17.6 per cent.

As AGL chairman Graeme Hunt said in December last year: “This plan demonstrates that old power plants can be replaced with a mixture of new, cleaner technology, while improving reliability and affordability.”

But the kicker is really the price. Earlier in 2017, AGL faced pressure from some in the Federal Government to keep the Liddell plant open or sell it to someone who would.

But the company says its new clean energy plan will deliver all the things Liddell currently does, just $20/MWh cheaper than running the old coal plant for another five years. It is a very good example of how far the industry has come in a short period of time.

Down, down, down

The drop in the cost of renewable energy this decade has been remarkable and there is the potential for it to get even cheaper in the years ahead. It is this economic success story that will allow our industry to continue building on the unprecedented year we had in 2017. Soon this will flow through to consumers and this will help to make the case for renewables even stronger.

However, anyone who has looked at their power bills recently can see that the job is far from done. And big power users like factories, steel mills or aluminium smelters will be acutely aware of just how much they are spending on power. With no long-term energy policy implemented, the chaos in the market and the rising price of gas has increased power prices to unsustainable levels because there hasn’t been enough new investment to date. And it is only because of the RET that this has changed for the better.

Big users of energy are increasingly taking their future into their own hands by contracting power from new renewable energy facilities. Telstra has just entered into its second major contract for renewable energy, buying power from the Murra Warra Wind Farm in Victoria. In November, a buying conglomerate led by the City of Melbourne, which featured such household brand names as National Australia Bank, inked a deal to buy power from a wind farm being built by Pacific Hydro.

And these projects are just the tip of the iceberg, as agricultural operations, small businesses and many more look for ways to increase their energy independence and reduce their bills. You can bet this will be a big trend in 2018, as businesses look to save costs through technologies such as wind, solar and storage.

This article was first published in the February 2018 edition of ecogeneration.