The world will need to pour trillions of dollars into the energy sector if it wants to reach the net-zero target by 2050, according to the CEO of Australia’s largest electricity operator.
Frank Calabria, managing director of Origin Energy, which operates Australia’s largest coal-fired power station, has also urged to “bring as much coal supply back into the system as soon as possible.” He said this would aid a “successful transition” to renewables over the longer term and ease pressure on the power price.
Calabria estimated that such transformation requires A$120 trillion (US$86.25 trillion) to be invested in the energy sector between now and 2050. If this cost is split among the population of the developed world (1.3 billion people), the cost would be equivalent to A$369,000 for a household of four. That’s an annual cost of $13,200 per household for the next 28 years.
Coming on top of this is the investment in additional transmission to connect solar and wind developments to the major population centres. This process, he noted, will cost A$70 billion (US$51.30 billion) in Australia only, or A$10,800 (US$7,469) for a household of four.
“Similar to the challenges with the renewable build, the risk is that these projects take longer and cost more. Costs that are ultimately borne by customers on bills,” Calabria said.
The energy boss also added that battery storage will need to grow by a factor of 170 to meet power needs “when the wind is not blowing, and the sun is not shining.”
“Balancing tighter supply and demand in the market is an increasingly complex challenge, with the back-up, or firming, of variable renewable supply met by a combination of technology.”
These factors include the cost of building, fuel, transportation, storage, back-up, emissions, recycling and space. Other non-emission issues, such as energy efficiency and the effect on animal and plant life, should also be considered.
The study author, energy economist Lars Schernikau, noted that a transition to renewables would be environmentally nonviable, as green energy sources require more material input and greater infrastructure than conventional coal and natural gas.
The study comes amid the backdrop of a national energy crisis in Australia, which saw the wholesale electricity price reaching A$400 (US$287.50) per megawatt-hour in Queensland, New South Wales and South Australia, compared with an average price of less than $70 (US$51.30) per megawatt-hour last year.
Origin Energy boss Calabria said that to tackle the energy challenge, the government and industry must increase the output from existing coal fire power stations because coal plant outages, coal supply, and price challenges have been the “main driver” of the soaring wholesale prices.
“Coal plants still supply some 65 percent (or two-thirds) of electricity and today are very important to both reliability and affordability,” he said.
“Getting coal plant back in the market will also reduce the draw on gas-fired generation, alleviating some of the supply and price pressures in the gas market.”
The energy boss also warned that if the market is not stabilised, “small, exposed retailers will go under as they grapple with the significant increase in wholesale prices this year.”
“More than a dozen retailers have stopped selling discounted market offers in the market and are only offering the mandated, regulated default tariffs,” he added.
“You would have also heard about several smaller retailers writing to their customers encouraging them to seek alternative providers to avoid near triple-digit percentage price rises.”
