Wind is now cheaper than fossil fuels in producing electricity in Australia, the world’s biggest coal exporter, according to data compiled by Bloomberg.
What amazing news! So someone must have developed some amazing new technology!
Wrong…
Electricity can be supplied from a new wind farm in Australia at a cost of A$80 ($84) per megawatt hour, compared with A$143 a megawatt hour from a new coal-fired power plant or A$116 from a new station powered by natural gas when the cost of carbon emissions is included, according to a Bloomberg New Energy Finance report. Coal-fired power stations built in the 1970s and 1980s can still produce power at a lower cost than that of wind, the research shows.
Bloomberg’s omission is fairly typical of news agencies these days. We might expect people reporting on things like energy markets to be a bit less… well… activist about the way they report things. Bloomberg isn’t only attempting to report the news, it’s trying to make it:
“The fact that wind power is now cheaper than coal and gas in a country with some of the world’s best fossil fuel resources shows that clean energy is a game changer which promises to turn the economics of power systems on its head,” Michael Liebreich, chief executive officer of Bloomberg New Energy Finance, said in a statement today.
Guess what, making energy more expensive ‘turn[s] the economics of power systems on its head’.
We could, tomorrow, create a tax on bicycles. Let’s say the tax is £8,000. Car manufacturers would now be able to claim that they had produced a car that was cheaper than the bike, right?
Would Bloomberg reporters fall for it? Of course not. Yet that must be how stupid Michael Liebreich thinks Bloomberg’s readers are.
Bjorn Lomborg, however, tells a different story.
No wonder the Australians are angry. Electricity prices have shot through the roof, increasing 56% in real prices since 2006.
This is both because of green costs like the carbon tax and feed-in tariffs, but also because of aging electric infrastructure that needs to be changed.
The price is now ¢26/kWh, compared to the US paying just above 11 australian cents.
If it were possible for wind turbines to produce electricity more cheaply than coal-fired power stations, it wouldn’t be necessary to push electricity prices up to make them ‘competitive’. It is a straightforward concept that shouldn’t be beyond the brains of news agency staff.
Bloomberg appear to be making the claim that new wind is cheaper than new coal or gas even in the absence of subsidy and carbon tax:
http://about.bnef.com/2013/02/07/renewable-energy-now-cheaper-than-new-fossil-fuels-in-australia/
although without the full report it’s hard to go further in to what assumptions are made and how costs such as grid upgrades are counted.
It’s not clear that this is just about taxes, either. I thought this line was interesting:
‘New coal is made expensive by high financing costs. The study surveyed Australia’s four largest banks and found that lenders are unlikely to finance new coal without a substantial risk premium due to the reputational damage of emissions-intensive investments – if they are to finance coal at all.’
A similar problem has certainly hit nuclear. It may hit fracking, dams or even other renewables in the future. In the circles many bankers move in coal is demonized as the worst industry on earth. Tobacco and arms are also seen as unethical, but energy is a much bigger deal, so I suspect the coal question has much greater mindshare for the average investment banker.
Also this
‘“New wind is cheaper than building new coal and gas, but cannot compete with old assets that have already been paid off,” Bhavnagri said. “For that reason policy support is still needed to put megawatts in the ground today and build up the skills and experience to de-carbonise the energy system in the long-term.”’
which flags up that even if we didn’t expect any improvement in new energy technologies in the future (which I do) it would still be more expensive to close down all the old energy overnight on the Hansen / Gore timescale than to develop technologies over a longer period.
You write: “Bloomberg’s omission is fairly typical of news agencies these days.” about them not mentioning carbon taxes, but … that’s exactly what they do. For a full paragraph. Which you quote.
I fail to see how fully explaining a point for a full and detailed paragraph is an “omission” or can be taken as “activism” for an imagined renewables agenda.
The section about financing is also very interesting. It shows where the wind is blowing, doesn’t it?
Oh, also “So someone must have developed some amazing new technology!” – no, not really. There are many many factors that will effect a price reduction of a thing that are nothing to do with new technology. A rapidly expanding market drawing in greater competition are two.
But the fact of taxes *is* omitted from the analysis. You must be nitpicking.
It certainly suggests financiers have a preference for technologies guaranteed by subsidy, whose competitors are taxed. Who knew?
That’s kind of the thrust of the blog post, isn’t it?
Quite right. How dare Bloomberg highlight investment in technologies that they consider forward-looking? There may be economies of scale for renewables, but they are as you say extremist radically-motivated activists pushing for that very scaling up. And why should the Australian government also try to influence prices of things in that direction, just to encourage businesses to protect their notion of “the environment”? And as you point out, high electricity prices are of course caused by building too much generation capacity. Australia should burn all its coal, partly to protect the valuable extractive industries that it relies on, but also so it can enjoy more of the lovely weather it’s been having recently.
No amount of Cedders’ sarcasm can mask the fact that he isn’t able to read a short blog post carefully enough.
Anyone else wishing to post in the way Cedders has chosen to try to make his point should take a read of this http://www.climatespectator.com.au/commentary/are-wind-and-solar-really-cheaper-fossil-fuels first.
I bet that they used nameplate capacity for the wind, not counting the very low average delivered power, and ignored that you need backup power for every unit of wind. 100MW wind needs 100MW standby gas.
How dare Bloomberg highlight investment in technologies that they consider forward-looking?
Calling things that don’t work “forward looking” doesn’t make them viable. It merely makes them trendy ways to waste money.
Most people will know that the worst type of boss is one who wants to be “forward looking” and up with whatever is the latest thing.
The best type of boss is one that does what works best. Even if that is the oldest fashioned way.
Coal power may be old technology, but its been around a long time because it is 1) cheap, and 2) reliable. Wind power is neither.
I just learned about these crazy things called “externalities.” They refer to things having costs that aren’t factored into regular market interactions. I thought, obviously things cost what they cost, right? If there are “hidden costs,” then who is going to pay for them? How do we know if they’re being factored into market values? However, I’m still pretty suspicious of the whole idea. You seem pretty suspicious of new ideas too. I don’t know how they would complicate discussions of energy costs, and frankly, I don’t want to think about it. Maybe you could write a blog post assuaging my fears about these scary externalities?
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