Australia’s biggest integrated energy company has officially punctured the long-standing myth that natural gas is a transitional “bridge” to a renewable energy future, delivering reliable baseload generation until renewables can shoulder that heavy lift.
That day has come for the venerable, 180-year-old Australian Gas Light Company, now known as AGL, RenewEconomy reports. “The combination of wind and solar and battery storage is already cheaper than new gas generators,” CFO Brett Redman told a conference in Sydney.
In other words, the door is open for utilities to leapfrog right past the somewhat-less-dirty gas “transition” phase for baseload energy delivery and move directly on to zero-carbon wind and solar, backed by increasingly affordable battery storage.
“The energy transition we have all been anticipating will skip ‘big baseload gas’ as a major component of the NEM’s [National Energy Market’s] baseload generation,” Redman said, “and instead largely be a case of moving from ‘big coal’ to ‘big renewables.’”
“The frank prediction,” RenewEconomy writes, “which flies in the face of Prime Minister Malcolm Turnbull’s plan to subsidize the delivery of more gas into Australia’s electricity market, is based on the now fairly well accepted economic view that gas power will continue up the cost curve, making it less and less competitive with large-scale solar and wind.”
According to Redman, Australia now generates electricity from wind and solar at levelized costs of about $A65 and A$75/MWh. New baseload gas costs between A$100 and A$130/MWh—and “that’s not including a carbon cost,” he noted.
“On these numbers, in an environment where the cost of renewables is falling and the gas price is high, it’s easy to see how a long-term investment case for baseload gas might not stack up,” Redman told the conference. “In Australia, this points to gas having a near-term role to continue to firm renewables via gas peakers—but not being the lowest-cost replacement for baseload coal.”
“The market already demonstrates this view,” he added.