Solar vs Coal: Australia’s Changing Energy Profile

Almost 80% of Australia’s energy is presently sourced from burning coal. This won’t be the case forever, and although the carbon tax repeal alleviates some of the coal industry’s concerns, even tougher hurdles lie ahead. Reduced electricity consumption across the country has transformed our current energy profile, and solar power is emerging as a potent and very disruptive force.

On a typical day our power consumption reaches its peak during business hours. This is when electricity companies earn their bread and butter by charging premium rates. However, during those same hours millions of solar panels on homes and business rooftops are also generating cheap, renewable power and increasingly energy operators are finding it difficult to generate profit from coal.

So, what does the future hold for Australia’s energy production?

 

“Solar has won. Even if coal were free to burn, power stations couldn’t compete”

Recently The Guardian published an article by Giles Parkinson boasting solar’s triumphant victory over coal. But how is solar so competitive compared to traditional energy sources?

Parkinson’s article outlines the clear benefit of generating energy from the sun. Utilising a limitless, renewable energy source like sunlight means that electricity can be produced at a drastically reduced cost, with the price falling somewhere between 12c and 18c per kilowatt.

Currently network and retailer charges contribute at least 19c per kilowatt to the retail price of electricity, and from this Parkinson is able to confidently claim that even if coal were free it is still less viable than solar power as an energy source.

This doesn’t augur well for our national energy resource, but there’s always Plan B: increase coal exports.

On his recent trip to the US, Australian Prime Minister Tony Abbott positioned Australia as an affordable energy super-power and a major coal-exporter. On the coattails of the Prime Minister’s announcement Greg Hunt, Australia’s Minister for Environment, approved construction of what will be Australia’s largest mine in coal-rich north-Queensland.

It was a vote of confidence for the coal industry, however it flies in the face of global trends away from coal with emissions reduction schemes gaining traction.

In June US President Barack Obama announced an emissions cap and trading scheme for the US, encouraging the uptake of large-scale solar and wind power. It’s thought that his pro-renewables stance will also encourage some of the world’s largest polluters – specifically India and China – to speed up their emissions reduction programs.

Despite this, Environment Minister Hunt believes the new Carmichael Mine will contribute $2.97 billion in coal exports to the state economy annually for the next 60 years.

Analysts at the Institute for Energy Economics and Financial Analysis (IEEFA) see things very differently. “Our analysis forecasts that [increased coal supply] would drive down thermal coal export prices a further 10-20%, thereby squeezing coal sector profit margins which are already down to zero,” said IEEFA analyst Tim Buckley.

It’s hard to see a vibrant future for the coal industry when it is unable to compete in both domestic or international markets.

 

Solar boosts employment and lowers electricity prices (for everyone!)

Recently Richard Denniss, Executive Director of The Australia Institute, introduced a report suggesting solar panels are simultaneously reducing the cost of electricity while promoting employment in the clean energy sector.

“The solar PV industry in Australia now employs more than 13,000 people, far more than the number of people employed by coal fired power stations,” said Denniss.

“The Australian energy market is undergoing rapid structural change. The rapid decline in the cost of renewable energy, combined with the expectation that the wholesale price of gas will double or treble when gas export facilities are completed, has fundamentally changed the underlying economics of the Australian energy system.”

Previously solar power has proven cost-prohibitive for many, but with the price of PV panels falling by 50% in the last five years a groundswell of support is building. The industry is already preparing for the “next big thing” with battery storage allowing customers to utilise their solar power during nighttime.

With 1.2 million Australian rooftops now sporting solar panels it’s clear the energy source for the twenty-first century has arrived.