Australia's coal-free grid by 2045: Projected electricity spot price of $107/MWh requires massive wind expansion
By
David Leitch
Slow-proofed and worth the wait. Worth its weight in flour.
Summary
The article analyzes projected electricity spot prices in Australia's National Electricity Market (NEM) under a coal-free scenario by 2045. The author estimates a spot price of approximately $107 per megawatt-hour, based on onshore wind costs of $3.25 m/MW and a carbon price of $305 per tonne aligned with the Australian Energy Regulator's trajectory. The analysis uses a 5.5% real pre-tax weighted average cost of capital. The key argument is that Australia can achieve globally competitive electricity prices without coal, but this requires significant expansion of wind energy capacity.
Key quotes
· 4 pulledMy estimate of the spot price for electricity in a coal-free National Electricity Market (NEM) in 2045 is about $107 per megawatt-hour (MWh).
That price assumes onshore wind costs $3.25 m/MW in real terms and that in 2045 there is a carbon price of $305 per tonne in line with the Australia Energy Regulator's (AER) carbon cost trajectory.
The 2045 long-run marginal cost (LRMC) calculation used a 5.5% real pre-tax weighted average cost of capital (WACC) which equates to a nominal return on equity of 11.5%.
Australia will have a globally competitive electricity price in a no-coal world. It just needs a lot more wind.
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