Private investment in coal-fired power plants is highly unlikely due to poor investment returns.
That’s the verdict of financial analysis giant S&P Global in a new report. The credit ratings agency says the worldwide push for lower carbon emissions is making coal less attractive.
Reported in the Sydney Morning Herald, S&P says renewable energy backed by battery storage or gas offers the most prudent investment for the future.
Forcing old coal-fired plants to stay open could make them unsafe, the agency warns. Rising maintenance costs would then make them uneconomical.
Lack of energy policy could drive energy prices up
S&P Global also criticises the Australian government’s threats to intervene in the energy market.
Intervention may initially cut power bills, but S&P Global says the benefits would be short-lived. It could, in fact, result in higher costs.
This is because national energy policy is needed to regulate market players and power prices over the long-term.
Current uncertainty bad for business
As a result of ongoing political bickering, Australia’s energy market is now in a state of flux.
According to S&P Global, the lack of a confirmed emissions target beyond 2020 could affect the long-term development of renewables like solar power and energy storage batteries. The Renewable Energy Target (RET) only covers emissions as far as 2020.
Any direct intervention in the market could also undermine investor confidence. This would consequently limit investment in new generation capacity.
Regulatory measures could also limit incentives for market participants, the report claims. It would also negatively affect credit quality in the sector.
Smaller players could see themselves priced out of the market. This would reduce competition and potentially push power prices up.
Deloitte report agrees: coal-fired power is out
Meanwhile, according to a recent Deloitte report, wind and solar installations are booming in Australia despite the absence of an energy policy.
This is because local governments, businesses and community groups have stepped up to plug the national energy policy gap.
According to the report, wind and solar are the cheapest sources of new clean energy. Wind costs $42-$84 per megawatt hour, and solar $60-$74.
