Decarbonising the power sector

The issues |

Let’s be honest. If we want to decarbonise the economy it will require making some hard trade-offs.

Instead of rising to the challenge, the major parties are entertaining distractions; the LNP with nuclear and Labor with offshore wind and green hydrogen. Not only are these options hugely expensive, but Australia is a long way from having the skilled workforce and industrial capability to execute them.

The evidence indicates that expanding solar and onshore wind generation, supported by firming generation, is the most affordable and achievable way to ensure we have adequate energy supply as the ageing coal fleet reaches the end of its life.

Our plan

Incentivise battery storage for households and businesses to reduce the stress that intermittent solar puts on the grid
- Target the largest incentives towards lower-income households and small businesses with a sliding-scale where incentives are less for higher-income households
- Create a federal program to roll out distributed solar and storage at schools, social housing and other government and community properties
Require that states release long-term plans for the development of their Renewable Energy Zones (following the example set by NSW)
Re-nationalise poles and wires through a fair process, enabling government to:
- Take ownership of the transmission upgrades required to open up renewable energy zones
- Deploy batteries at strategic grid locations/substations to most effectively support the scale-up of intermittent renewable energy (noting that under current regulatory structures network owners are forbidden from building batteries because they are forbidden from owning ‘generation’ assets)
- Avoid ‘gold plating’ the power grid by doing away with rate of return regulation that incentivises private network owners to overbuild infrastructure
- Efficiently operate the transmission and distribution system and maximise the value of rooftop solar by utilising dynamic operating envelopes
Provide adequate compensation for landowners who host new transmission lines on their property or are impacted by lines nearby
Reform planning processes so that large-scale renewable energy projects are reviewed in a timely fashion and are not held up for years on end
Ensure there are adequate sources of dispatchable generation to provide reliable power as coal plants close
Invest in the deployment of new long-duration storage technologies

The evidence

The CSIRO’s annual GenCost report calculates Levelised Cost of Energy (LCOE) for different technologies. The report shows that solar PV and onshore wind are clearly the cheapest sources of energy generation.

LCOE by technology and category – 2030

These generation sources are however, variable, in that they only generate when the sun is shining or wind is blowing. It is therefore necessary to consider the cost of ‘firming’ up these sources of generation in order to compare them on a like-for-like basis with firm dispatchable sources that can generate on command.

CSIRO calculates that solar and wind with firming costs $100-140 per MWh today and this will decline to between $90-$120 per MWh by 2030 (See Figure 0-3 in the GenCost report).

In order to facilitate the scale-up of wind and solar power, reform is required to planning processes for renewable projects and transmission lines so they cannot be stalled for years on end. Landowners who host infrastructure must be fairly compensated, but they should not be empowered to hold-up the energy transition.

By putting poles and wires back under public ownership, government can command investment in transmission lines to open up renewable energy zones. Furthermore, government-owned transmission companies could invest in batteries and energy storage that will provide firming. Government-owned transmission and storage companies would be ‘infrastructure-as-a-service’ providers.

“If Australia is to have an “orderly” exit from coal, [CEO of the Clean Energy Investor Group] Mr Corbell said all governments “need to lift their game” and reckons the solution lies in a simple ‘critical infrastructure’ declaration… “we need laws that allow zero carbon electricity generation to be built, that allow energy storage to be built, that allow transmission to be built.”

Once we get the required build-out of renewables on track, the other major challenge is ensuring there is sufficient ‘firming’ generation to provide reliable power when renewables aren’t generating. The Australian Energy Market Operator (AEMO) finds in its 2024 Integrated System Plan that some amount of gas power generation capacity (either natural gas or hydrogen gas) will be required to provide backup power. However, rapid advancement in energy storage technologies may allow for these to provide the bulk of firming in the future system.

Lithium-ion battery prices have been dropping at a remarkable rate, with pack prices dropping below US$100/kWh for the first time in 2024. This makes storage increasingly cheap and affordable. The market is currently dominated by lithium iron phosphate (LFP), however new chemistries like sodium-ion are promising to lead to even more significant price reductions.

Average lithium-ion battery prices (cell + pack) – 2013 to 2023