CSIRO's annual GenCost report, released today as a draft for public consultation, shows that technology costs for new-build electricity generation in Australia have risen by an average of 20%. However, renewables, including onshore wind and solar PV, remain the lowest cost technologies.
GenCost is an annual collaboration between the national science agency CSIRO and the Australian Energy Market Operator (AEMO), with input from industry stakeholders, to update the costs of electricity generation, storage and hydrogen production.
The report examines a range of future scenarios to analyse global technology deployment and associated costs for each pathway. The modelling published today found that global supply chain constraints and inflation put upward pressure on technology costs following the COVID-19 pandemic.
The increases have been uneven, ranging from 9% for solar PV to 35% for wind, due to variations in material inputs and exposure to freight prices. Modelling suggests that the inflationary cycle is likely to peak in 2022 and 2023, with a return to normal cost levels by 2027.
According to CSIRO chief energy economist Paul Graham, innovation in power generation technology is a global effort that's closely linked to climate change policy ambitions. The cost of technology is one piece of the puzzle and is a critical input to the analysis of the electricity sector. To limit emissions, our energy system needs to evolve and become more diverse.
The consultation draft for 2022-23 shows that renewables, led by wind and solar, are the fastest growing source of energy globally. It also suggests that the role of electricity is expected to increase significantly over the next 30 years, with electricity technologies offering some of the lowest-cost abatement opportunities.
The report also highlights that batteries will play an important role in the future to support variable renewables, alongside other storage and flexible generation options, and in the growing use of electric vehicles. In addition, cost projections for nuclear small modular reactors (SMRs) begin in 2030, as there is no prospect of a plant being deployed in Australia before then. As the global deployment of nuclear SMRs increases, significant cost reductions are expected. However, based on current projections, renewables, including onshore wind and solar PV, remain the lowest cost technologies.
According to AEMO's Executive General Manager System Design, Merryn York, the annual process of updating the cost trajectories of electricity generation, storage and hydrogen technologies is incredibly valuable as we plan for an accelerated transformation of the national electricity market. The GenCost project helps us and industry stakeholders to work together to identify the assets needed to efficiently deliver secure, reliable and, importantly, affordable electricity for consumers in the future.
The final GenCost report will be delivered in mid-2023.