By TOM KENYON, Chairman of the Family First Federal Executive

We are constantly told that renewable energy is the cheapest form of energy but I’ve spent a lot of time trying to work out how they can be and it doesn’t make sense to me.
If we are determined to move away from coal, which without Carbon Capture and Storage (CCS), is still the cheapest form of electricity, to a source that does not emit carbon dioxide (CO2) then I can’t see how renewables are the solution.

Let’s look at the capital cost of a one gigawatt (GW) power plant and try to get an idea of the relative cost to build.

So first a few caveats.

1. I am not an electrical engineer or even an energy expert.
2. I have taken costs from the CSIRO Gencost Report with the exception of the cost of constructing interconnection which I have taken from Australian Renewable Energy Agency (ARENA).
3. This is a back of the envelope calculation only. As I said, I’m not an expert in this area and there are a lot of ways I could be wrong.
4. This is only capital cost. I haven’t included the cost of fuel for nuclear or gas, nor the cost of maintenance for any of them. This is only the cost to build them.

Second, there are a few political pre-conditions that I believe will shape the way we approach energy in the next few years.

1. A system has to be reliable. Power has to be there when you flick the light switch. A system that doesn’t work because there’s not enough wind or sun will not be forgiven. This means that governments will have to build in a lot of storage or backup.
2. Once a system is reliable, it has to be as cheap as possible. The more expensive power is, the more we will damage our economy, especially manufacturing but also the information economy.

So how much will it cost to build a 1GW powerplant that doesn’t emit CO2?

Gencost says:

• Nuclear $8.66b
• Black Coal (with CCS) $11.4b ($5.6b without)
• Gas (with CCS) $5.08b ($1.06b without)
• Solar $1.52b
• Wind $3.3b

So solar and wind are looking great aren’t they?

Not so fast.

A nuclear plant will easily last for 60 years. Solar panels and windmills? Closer to 20. Some coal and nuclear plants can last longer than 60 years but let’s take that as a good number. Wind and solar plants might last longer than 20 years but let’s take that as a rough number as well.

So for every GW of nuclear generation you need to re-build a solar or wind plant twice for a total of three builds.

The Gencost report estimates that real prices of solar and wind plants will decrease significantly but I’m not convinced.

Construction and land costs will increase enough in my view to offset technology price reductions but I’ll use the 2053 number for the second two builds to average them out as the projected costs don’t go out to 2063.

• Nuclear $8.66b
• Black Coal $11.4b
• Gas $5.08b
• Solar $2.66b
• Wind $6.51b

Wind is now looking like it’s getting close to nuclear but still cheaper but solar still looks good. Yeah? Nah.

We need to make sure the power is reliable and that means we need to add in storage for renewables.

The cost of storage depends on how much power you want to store. One hour? Two? Eight hours? One day?

I’ve taken 24 hours. This year there have been plenty of times when wind and solar have been contributing almost nothing to the generation mix – mostly windless autumn and winter nights.

Twenty-four hours of storage would provide a better backstop than say eight or twelve hours. Remember the lights have to come on when you flick the switch.

Batteries cost a lot and they don’t last very long. For the sake of this calculation I have assumed they last 20 years but I seriously doubt that they can last this long.

Ten years is far more likely. Think about your phone battery. It deteriorates in performance after 12 – 24 months.

Now these batteries won’t be cycled empty and full as much as your phone so they’ll last longer but 20 years? Not a chance. Anyway, I’ve put in 20 years because you wouldn’t believe the numbers if I used 10.

I used the Gencost 2023 price for the first build and the 2053 estimate for the next two.

The costs don’t go out much past 2053 so using that number twice is a fair average between 2043 and 2063.

I don’t believe that cost but I’ve used it. The capital cost to build three sets of batteries to store and deliver 1GW of electricity for 24 hours over 60 years is $13.5b.

There are other options. You could try pumped hydro but I don’t think there’s enough valleys with rivers in Australia to store all the power we will need.

Are we really going to contemplate flooding hundreds of valleys around the country just to store power?

We can’t even build dams for drinking water at the moment. Alternatively you could have a 1GW gas plant on standby but that sort of defeats the point.

You may as well just build the gas plant and forget about the solar and batteries so I’ll assume batteries for the sake of this exercise.

Remember, if you have anything less than 100% storage, you need gas and that plant needs to be paid for even when it’s not producing electricity. So where does that leave us?

• Nuclear $8.66b
• Black Coal $11.4b
• Gas $5.08b
• Solar $18.06b
• Wind $20.01b

You could double the coast of a nuclear plant and it would still be cheaper than either a solar or wind plant!!

Are we done yet? Nope.

The Australian Renewable Energy Agency (ARENA) estimates that the cost to build the extra transmission lines that renewables will need is $12.7b on top of the cost of the generation and storage.

Nuclear, Gas and Coal don’t have that cost because they can just fit in with the current grid. I won’t add that cost in here because those costs are spread across the whole system not just one power plant but that still has to be paid for by all electricity users.

Happily, these powerlines generally last a long time.

So you can see why I am having trouble coming to grips with the idea that renewables are the cheapest option.

Again, there are lots of ways that I could be wrong and there are a lot of areas where I could have added cost (batteries or the capacity factor of renewables for example) but I have tried to be reasonable and it’s a good starting point.

The thing that really annoys me about the whole energy debate is that at no time has anyone sat down and designed the energy system that we need if we are going to go to a renewable grid.

How much generation do we need? Where should it be located? How much storage do we need? What type? For how long should it store?

Once you can answer those questions you can start to design and engineer the project and only then can you get a reasonable idea of what the final price to consumers will be.

Our grid needs a Front End Engineering and Design (FEED) study before we go any further down the renewable road and it’s ridiculous that we haven’t done one.

These are common in the mining industry before a project is given the go ahead for projects that will cost far less than we can see here so why haven’t done one for our power grid?

There’s been too much headlong rush down the renewables rabbit hole and not enough rational debate and thoughtful consideration. We need to hasten slowly.

Tom Kenyon is a former minister in the Weatherill Labor Government in South Australia. This article is adapted from Tom's speech at the recent Family First National Conference in Sydney.