Australian report reveals a start of the switch from coal to renewables

Australian report reveals a start of the switch from coal to renewables

The latest Bureau of Resources and Energy Economics’ (BREE) annual publication, Major Electricity Generation Projects, released today (16 November 2011) shows the transformation of Australia’s energy mix has begun, with 36 per cent of the committed new investment in gas and 41 per cent in wind.

This is still behind the average world-wide investment in renewable energy which accounted for approximately half of the estimated 194 gigawatts (GW) of new electricity generation capacity added globally during the year.
How quickly can things change in Australia?

Look at a natural market change not influenced by pressing climate issues of climate change. Less than 30 years ago 65% of Western Australia’s on-grid electricity generation was coal, now in 2011 65% is gas. This shows a market can quite simply swap the majority share of any generation in the space of 30 years.

Coal-fired power generation, which currently accounts for around 75% of Australia’s total electricity generation, was only 17% of the committed new investment in power stations for the 12 months to October 2011.

If this figure held for the next few years, this potentially means that in 30 years time, less than 20% of Australia’s energy use will be from coal. Thirty years is perfectly logical timeframe because capital markets generally amortise large investments in plant over 15 years, and generally consider retiring and replacing old operations through new investments after 25-30 years.

Incentives to build coal-fired power are continuously diminishing – policy settings for lower emissions energy sources, prices on carbon and community opposition manifest in the market as increasing investment risk and financial institutions are increasingly unlikely to even consider funding a coal-fired power station.

This is reflected in reality – in 2008 the forecast build for coal globally was 64 gigawatts, the actual build in 2010 was 14 GW! The suggestion the world is building coal is myth based – the world is actually building less and less coal, not more and more.

Based simplistically on 2011 numbers, in 30 years time, the retirement of generation plant will be 36% gas, 41% wind, and 17% coal.

‘The journey for Australia has begun,’ says Professor Ray Wills, CEO of the Sustainable Energy Association of Australia (SEA).

‘While Australia is lagging the rate of investment in renewables in other parts of the world, the market is now starting to change.’

‘We know from studies on all forms of markets that transition from a particular technology to another, that once the transition starts, it is not slow – horse-drawn carriages to cars, steam trains to diesel trains, VCR to DVD, landlines to mobile phones – these are just a few examples of technology transitions most commonly achieved in around or decade or two,’

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