Renewables remain cheapest option: GenCost report

This week, CSIRO released the final GenCost Report for 2024–25 together with the Australian Energy Market Operator (AEMO).

Informed by industry consultation, the annual independent report provides cost data for a range of new-build electricity generation technologies to support electricity system modelling and planning.

According to the report’s latest findings, renewables (wind and solar) backed by storage and transmission remain the lowest-cost option for new low-emission electricity generation, for the seventh year in a row. However, while some technologies are more cost-effective than others, a mix of technologies will be required to ensure system reliability and flexibility over the long term, the report stated.

Following renewables, gas with carbon capture and storage (CCS) and large-scale nuclear are the next-lowest cost options, but as neither is currently deployed for electricity generation in Australia, they could be subject to longer lead times and first-of-a-kind premiums.

The highest-cost option continues to be small modular nuclear reactors (SMRs), even with new data coming out of Canada’s Darlington project, which provides the first commercial-scale benchmark from a western country. The Darlington project falls within the range previously projected by GenCost.

CSIRO’s Director of Energy, Dr Dietmar Tourbier, said GenCost is Australia’s most comprehensive source of electricity generation cost projections, supporting evidence-based decisions across the sector.

“GenCost delivers transparent, independent cost estimates that feed directly into electricity system modelling and investment planning,” Tourbier said.

“We refresh forecasts annually using the best available data at the time to ensure GenCost reflects current market conditions and remains a trusted benchmark,” he added.

“By drawing on expert input from across the electricity sector, GenCost reinforces CSIRO’s role as a neutral source of scientific insight to help guide Australia’s energy transition.”

GenCost lead author Paul Graham, CSIRO’s Chief Energy Economist, said fewer submissions were received in the stakeholder consultation process than in previous cycles, but they reflected a broader range of perspectives.

“Most input we received focused on technologies already in development or under construction, such as pumped hydro, wind, solar photovoltaics (PV), gas, solar thermal and electrolysers,” he said.

Graham emphasised that the strength of GenCost lay in collaboration. “We depend on the deep expertise of the electricity industry because no single organisation can track every technology in detail.”

Following consultation, cost projections for most technologies have been revised upwards, despite continued declines in solar PV and battery costs. Key reasons for these changes include:

• new data indicating sustained long-term increases in Australian construction costs;
• inclusion of work camp costs in capital estimates for future wind projects;
• market intelligence suggesting global gas turbine supply may lag behind demand in coming years;
• an increase in capital financing rates to align with assumptions in other major studies.
   

AEMO’s Executive General Manager System Design, Merryn York, said GenCost is one of several key reports that help support Australia’s energy system planning.

“AEMO supports the CSIRO, as the author of the GenCost report, by commissioning current generator capital cost estimates,” York said. “We’ll use the capital costs for generation and storage from GenCost in the upcoming Draft Integrated System Plan in December.”

Updated every two years, AEMO’s Integrated System Plan (ISP) outlines the lowest-cost path to reliable, secure and affordable electricity, while supporting national emission targets and planning for the transition from aging coal-fired power.

To access the GenCost 2024–25 Final Report and background resources, visit the CSIRO website.

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