A mixture of onshore wind and solar, with a variable renewable energy share of up to 90%, remains the most affordable source of power in Australia in 2022-23 after the Covid-19 pandemic and global supply chain constraints raised the capital cost of technologies across the board, a joint report by the Commonwealth Scientific and Industrial Research Organization (CSIRO) and the Australian Energy Market Operator (AEMO) found.

Fig: Levelized cost of energy by technology

Even as the capital costs for all power-centric technologies surged 20% on average worldwide during 2021-22, it remained comparatively lower for solar photovoltaic (PV) at 9%, even though it rose to 35% for wind technologies in Australia, the report said.

By 2030, the costs to support a combination of solar PV and wind generation to produce power would range between $16 and $25/MWh, depending on the variable renewable energy (VRE) share. Transmission, energy storage, and rising gas capacity will be the key cost drivers to support uninterrupted power supply under high shares of VRE.

The report added that the inflationary cycle was already at its peak and will further transcend into 2023. It is projected that the global markets will be impacted by inflation until 2027, only after which electricity technology costs will normalize.

The report said that compared to other technologies, onshore wind and solar PV would stand out as the cheapest options for building new capacities or producing electricity in the coming years.

In the battery storage segment, the annual update report assessed that the current battery costs comprising battery and balance of plant have cumulatively shot up by 13% for one-hour duration batteries compared with 2021-22.

The cost for batteries with an eight-hour duration peaked by 28%. Compared to inverters or any other balance of plant components, the competitive prices of battery packs have led to an increase in demand for long-duration batteries.

The current costs for pumped hydro energy storage have increased by 17% based on the consumer price rise approach and project that such a rate of increase is not likely to vary during the period.

According to another report released by the AEMO in September last year, Australia’s NEM states could have ample clean energy in 2025 to meet the total electricity demand of consumers in specific periods.