Picking winners: understanding the future cost of electricity generation in Australia

Abstract

With liberalised electricity markets, investment in Australia's future energy mix will be greatly dependent on the expected generation cost of alternative energy sources. The implicit capital, operating and fuel costs of major electricity generation technologies, including the cost of carbon dioxide emissions, are compared using a levelised cost of energy approach. This relatively simple analytical tool allows investors to directly compare alternative technologies which have different scales of operation and investment horizons. This analysis shows that fossil fuels continue to remain competitive relative to nuclear, hydro and wind generation sources over the long term.