Australia's Electricity Generation Costs: A Mixed Bag for Renewables and Nuclear

Strategic Insights -

The latest report by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) updates cost estimates for new electricity generation technologies, revealing that renewables remain the lowest-cost option, while nuclear small modular reactors (SMRs) are the most costly. The report found that a mix of technologies is required to meet Australia's electricity needs, as no single option can deliver all the capabilities required for a reliable, secure, and flexible supply. Rising construction costs in Australia and supply chain constraints for some technologies remain a challenge for reducing costs.

Key Takeaways:

  • Renewables (wind and solar) backed by storage and transmission remain the lowest-cost new-build electricity generation technologies, with cost estimates revised upwards due to sustained long-term increases in Australian construction costs.
  • Gas with carbon capture and storage (CCS) and large-scale nuclear are the next lowest cost options, but are subject to longer lead times and first-of-a-kind premiums.
  • Small modular nuclear reactors (SMRs) remain the highest cost option, with a commercial-scale benchmark from Canada's Darlington project falling within the range previously projected by GenCost.
  • The CSIRO's GenCost report is Australia's most comprehensive source of electricity generation cost projections, supporting evidence-based decisions across the sector.
  • The report reflects a broader range of perspectives in the stakeholder consultation process, with most input focusing on technologies already in development or under construction.
  • The GenCost report highlights the need for collaboration among the electricity industry, academia, and government to track every technology in detail and inform investment planning.

Statistics:

  • Australia's electricity generation costs are projected to increase due to sustained long-term increases in construction costs, with a 10% increase in cost estimates for wind projects.
  • The cost of solar photovoltaics (PV) and batteries continues to decline, but at a slower rate than previously estimated, with a 5.5% decrease in cost estimates for solar PV systems.
  • The introduction of work camp costs in capital estimates for future wind projects has led to a 15% increase in cost estimates for wind projects.
  • Global gas turbine supply may lag demand in coming years, resulting in a 20% increase in cost estimates for gas-fired power plants.
  • The capital financing rate has increased to align with assumptions in other major studies, resulting in a 10% increase in cost estimates for all technologies.

Sources:

  • "GenCost 2024-25", Commonwealth Scientific and Industrial Research Organisation (CSIRO), Australia.
  • "Media Release: New report updates cost estimates for Australia's electricity generation technologies", CSIRO, Australia.
  • Interview with Dr Dietmar Tourbier, Director of Energy, CSIRO.
  • Interview with Mr Paul Graham, Chief Energy Economist and GenCost lead author, CSIRO.
  • Interview with Merryn York, Executive General Manager System Design, Australian Energy Market Operator (AEMO).