20 July 2020
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Finding the best options to meet Australia’s future electricity
requirements remains a source of debate and controversy, often framed in terms
of fossil fuels versus renewables. Electricity generation in Australia produces
more greenhouse gas emissions than any other individual sector and so the issue
of emissions is a major factor in the debate over future power generation. This
series of publications, ‘Australian electricity options’, examines
various alternatives for electricity generation, each considered with its own
advantages and disadvantages.
This is timely because the Minister for Energy and Emissions
Reduction (the Hon Angus Taylor MP) recently released the Technology
Investment Roadmap, a discussion paper around a framework to accelerate low
emissions technologies across all sectors (not just electricity generation).
As Figure 1 shows, electricity accounts for about
one-third of Australia’s emissions, although its share has declined in the last
decade. The other two biggest sectors responsible for Australia’s emissions are
‘stationary energy excluding electricity’ (which means the direct combustion of
other fuels such as natural gas for uses such as heating and industrial
processes), and ‘transport’. Together, these two sectors account for more
emissions than electricity generation. These publications do not address the
major energy sources for these other sectors.
Australia’s electricity system can be considered to have
four elements: the energy source or fuel (for example coal or wind); the
generation site (where the source energy is converted into electricity);
energy storage (such as pumped hydro or batteries); and the transmission
and distribution systems (grids) connecting these elements with the
In this series of publications we provide short overviews of
five main sources of electricity and one of the main storage options. Each paper
briefly explains the relevant technologies, international trends, and some of
the opportunities and constraints that apply to their use in Australia.
Figure 1: Share of total emissions, by sector, for the year to December 2019
Source: Department of Industry, Science, Energy and Resources, Quarterly
Update of Australia’s National Greenhouse Gas Inventory: December 2019, p.
As the Finkel
review discussed, any solution to reduce emissions must also consider the
need for the security, reliability, affordability and convenience of
electricity supply. In addition, total electricity generation must be balanced with
total electricity usage or consumption to maintain frequency and
grid stability. This balance is dynamic
as demand varies continuously and must be managed in real-time. A rapid shift
towards variable energy sources—such as solar or wind—where output may not be
as predictable as traditional generation, has important implications for grid
Australia does not have a single electricity grid. Over
time, the production and distribution of electricity has evolved. The largest
grid is operated through the National
Electricity Market (NEM), which covers much of Queensland, New South Wales
(including the ACT), Victoria, South Australia, and Tasmania. The Northern
Territory and Western Australia are not connected to the NEM. The Wholesale
Electricity Market (WEM) covers the South West Interconnected System (SWIS)
in Western Australia. Both the NEM and WEM are operated by the Australian
Energy Market Operator (AEMO).
Along with many other sectors, the energy sector is
undergoing significant disruption as a result of the COVID-19 pandemic. The
International Energy Agency (IEA) has examined the impact of the
pandemic on global energy and carbon dioxide emissions and on
electricity. Readers of the ‘Australian electricity options’ papers
should note that some statements and projections about future demand and
pricing may no longer be reliable as a result of impacts of the pandemic on
energy demand and markets.
Debate around electricity generation in Australia has largely
focused on five energy sources:
The contribution of each of these in Australia’s total electricity
generation since 1990 is shown in Figure 2.
Figure 2: Fuel sources of Australian electricity generation, 1990–2018
Source: International Energy Agency, Statistics, Australia
Several other energy options are canvassed in public debate
but are either not generally considered viable for large scale energy
production in Australia at the moment or have not shown the same levels of
significant growth as other options. These include:
- solar thermal (collecting and concentrating sunlight to produce
the high temperature heat needed to generate electricity) and
- biomass (burning of material from forestry, agriculture or from
waste from other human activities, such as municipal waste)
In these papers, we focus on the Australian context and recognise
that the various energy sources have different characteristics, strengths and
weaknesses which can make them more or less suitable in different parts of
The capacity to store energy is necessary for safeguarding
the grid against unexpected shutdowns, surges in demand, and frequency
Several methods of storing energy at the generating plant are
part of conventional energy systems, including:
- rotating kinetic energy in heavy turbines and generators
- high pressure steam stored in boilers and
- high pressure water in penstocks (applicable to both
hydroelectric dams and pumped hydro energy storage, or PHES).
As noted earlier, there are some challenges with integrating more
variable (intermittent) renewable technologies, such as wind and solar PV, into
large-scale power systems. The difficulties arise from the variability in
supply from solar and wind. Previously, demand was often most variable. Supply
was usually successfully kept at a constant baseload, being augmented by fast
start-up generators to cover unpredicted peaks or outages. When supply suddenly
changes, there can be excess production (too much electricity in the system) or
sudden reductions so that demand is not being met. Juggling variabilities in
both supply and demand can be met in a variety of ways, including using
flexible, dispatchable generation options such as gas-fired power, as well as
building more integrated networks to enable greater geographical spread of
renewables, and for electricity to be shifted between regions. In addition,
greater demand side management and enhanced storage capability can play
Currently, the most widespread storage technology in use
globally is pumped hydro, providing almost all power storage, with a total
capacity of around 150 GW (total global power capacity is around 6700 GW). PHES
is discussed in a separate paper.
More recent developments concern batteries, notably lithium-ion
systems, which accounted for almost all utility-scale battery installations in
2016. Battery-based systems have the advantages of quite low losses, and very
rapid response times. Rapid cost declines in these systems have been observed
recently, while performance has increased markedly. Over the last decade,
battery costs have fallen from around $US 1000/kWh to below $US 200/kWh, with
even bigger improvements in energy density. However, the total energy
availability in a battery tends to be less than pumped hydro, and is measured
only in minutes or a few hours. These cost improvements have seen a rapid surge
in both large-scale and vehicle applications, albeit from a low base.
An important part of any discussion of generation systems
and their emissions characteristics involves a comparison of costs. Changes to
the generation mix can aim to achieve maximum emissions reduction at minimum
cost, without compromising reliability or causing grid destabilisation. Cost
and emissions comparisons can also vary considerably according to the time
horizon assumed in any calculation.
A comprehensive whole-of-life analysis takes into account
emissions and costs associated with the extraction, purification and transport
of a fuel (in the case of coal, gas or uranium), the construction of facilities
(whether it be solar panels, wind turbines or power plants), the running of the
facility, and decommissioning, removal and safe disposal of all components at
the end of its working life. For some technologies with a long life, such as solar
panels, the latter part of the life cycle is only just being reached on a
Some relevant costs, such as those associated with upgrades to
the transmission network or storage options required to support different
technologies, can sometimes be excluded from an analysis—particularly where
different stakeholders are responsible for different components of the
system—which adds to the challenge of fully quantifying and comparing the costs
associated with different options.
In this series, we briefly touch on some costs but because
this is more about the technology, economic aspects are not investigated in
One measure to broadly compare the relative competitiveness
of different electricity generation technologies is the levelised cost of
electricity (LCOE). LCOE analyses typically factor in lifetime costs associated
with establishing, operating and maintaining new, utility-scale electricity
generation—however they are not a detailed comparison between specific projects
and the assumptions and factors including in the LCOE often vary between
The CSIRO and AEMO are collaborating to produce an annual GenCost
report on electricity generation and storage costs, which feeds into other AEMO
activities—and provides analysis and projections of selected generation
options in the Australian context. Their latest report, GenCost
2019-20, includes the LCOE for a variety of technologies and combinations
(such as variable renewables with different types of storage) each decade until
2050—Figure 3 below shows the LCOE for 2020.
Figure 3: Calculated levelised cost of electricity (LCOE) by technology and
category for 2020
Source: P Graham, J Hayward, J Foster and L Havas, GenCost 2019-20, 2020,
Energy resources: a quick guide, Parliamentary
Library, December 2017.
Energy challenges, Parliamentary Library
Briefing Book, July 2019.
LULUCF means ‘Land Use, Land Use Change and Forestry: defined
by the United Nations Climate Change Secretariat as a ‘greenhouse gas inventory
sector that covers emissions and removals of greenhouse gases resulting from
direct human-induced land use such as settlements and commercial uses, land-use
change, and forestry activities’.
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