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Government admits renewables becoming cheap

2 August 2012

The Australian Energy Technology Assessment (AETA), a little-publicized report about energy costs released on Tuesday by the Bureau of Resources and Energy Economics (BREE), dropped a bombshell. This government body admits the government’s prior estimates on renewable energy costs have been spectacularly wrong. In contrast to the Draft Energy White Paper, which assumed renewable energy technologies would remain more expensive than fossil fuels for decades, the new projections say wind and solar PV will be the cheapest energy technologies within 10-20 years.

The result itself is not news. We already knew from a report commissioned by the Garnaut Review that renewable energy technologies were cheaper than the Australian government’s estimates. And the revised estimates are still not perfect: the future cost estimate for solar thermal is probably still too high, and the estimate for nuclear seems unrealistically low. However, the AETA report does represent a significant turnaround in the government’s beliefs.

Similarly, in June the government admitted for the first time that renewable energy can reduce electricity prices (because solar PV removes demand from the grid, and because renewable generators have no fuel costs). Just 12 months ago, the government dismissed these facts about renewables as the ravings of irrational green ideologues. Could the government be backing away from its fossil fuel addiction?

Replacing fossil fuels with renewable energy will lead to cheaper energy in the long run. While the costs of fossil fuels will ultimately rise because they are nonrenewable resources, the costs of renewables are falling rapidly as they are deployed, and – crucially – can be further reduced by scaling up deployment.

To the extent that fossil fuel technologies still appear cheap, it is only because current policies fail to fully account for their climate costs. The true cost of CO2 emissions could be up to US$893/tonne (AU$852/tonne). In other words, there is a significant risk the damage is so high that practically any measures to move to a zero-carbon economy are worth taking.

The revised cost estimates are yet more reason for Australia to stop planning for a fossil-fuelled future and start planning for a 100% renewable one.

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