Spot prices along the journey to a competitively-priced coal-free grid. But we still need a lot of wind

My estimate of the spot price for electricity in a coal-free National Electricity Market (NEM) in 2045 is about $107 per megawatt-hour (MWh).

That price assumes onshore wind costs $3.25 m/MW in real terms and that in 2045 there is a carbon price of $305 per tonne in line with the Australia Energy Regulator’s (AER) carbon cost trajectory.

The 2045 long-run marginal cost (LRMC) calculation used a 5.5% real pre-tax weighted average cost of capital (WACC) which equates to a nominal return on equity of 11.5%.

Even using $3.5 m/MW cost of wind right through to 2045 a system that achieves LRMC in 2045 (my chosen end point) has about 50 gigawatts (GW) of wind.

This is a key outcome of the modelling. Even with wind at much higher cost than assumed in CSIRO’s GenCost, the best outcome for consumers is when we build plenty of onshore wind.