We are constantly told that renewable energy is “the cheapest form of power”. The Energy Minister, Chris Bowen, triumphantly headed in a press release last year, “Renewables cheapest source of electricity.”
His claim was on the back of the CSIRO’s “GenCost” report showing that solar and wind are cheaper than coal, gas, nuclear or any other source of power.
Despite their findings the more solar and wind we install, the higher our power prices seem to climb. Power prices in regional Queensland are set to increase by an average of $429 a year, the highest increase in the nation. This is despite Australia installing solar and wind power at a rate four times that of Europe and North America in per person terms.
The reason for this paradox is that the CSIRO, and by extension Chris Bowen, use a limited measure of the cost of producing electricity. A nuclear power station costs billions of dollars to build, but almost nothing to run once built. At the other extreme, you can buy a diesel generator for just a few thousand dollars but then it costs a lot to run as you constantly need fuel.
To balance out these differences some economists developed a concept called the Levelised Cost of Electricity (or LCOE). The LCOE averages the total costs of a nuclear plant over its life so that a per megawatt hour can be produced and then compared to the costs of, say, a solar farm using the same method.
This LCOE method is the approach behind the CSIRO’s numbers. Some of the assumptions they use seem to help solar and wind, and penalise coal. For example, they assume that a coal plant only lasts 30 years (most are running for 50 years or more). And, they assume that wind farms run 44 per cent of the time, when the average Australian wind farm is on for a third less than that.
But these assumptions are not the main issue. Wind and solar energy have many clear deficiencies that confound the LCOE calculations.
Unlike coal or gas you cannot just get electricity from a solar or wind farm when you would like to. But people do want to turn on their air-conditioning whenever they would like to. This means you need to have “backup” power to fill the gaps when the sun is not shining or the wind is not blowing.
In addition, many wind and solar resources are not close to where people live so expensive transmission lines must be built. Under current plans, we need to build 10,000 kilometres of more transmission lines to integrate renewable energy. These enormous costs will all be passed on to consumers.
A study by the OECD calculated that the average cost to integrate renewable energy across a sample of developed countries would be over $75 a megawatt hour. This would then make solar and wind much more expensive than coal or gas.
So the next time you hear a politician say that renewable energy is the cheapest form of power, you know that they are not giving you the full truth. There is one way to fact-check these outlandish claims by politicians. Have a look at your next power bill.
