Displacing coal with renewables more lucrative for economy

03 March 2020 Consultancy.com.au

Transitioning to a renewable-intensive power system over the next two decades is likely to create billions in benefits for the Australian GDP, significantly more than if investments continue to flow into traditional coal plants. This is according to new research by PwC and Jacobs.

The two professional service firms examined the future of energy in Australia, specifically in the lead up to 2040. A variety of conflicting opinions exist around the shift to renewables as opposed to a sturdy reliance on traditional means. For policy makers, the debate is made more complex by evolving consumer preferences and changes in the business environment.

Last year, Big Four accounting and advisory firm Deloitte highlighted how Australia’s energy sector is undergoing rapid transformation, with decarbonisation, decentralisation and digitalisation being among the factors of change. Not everyone is satisfied with this change, however.

Comparison of changes in thermal capacity

In their join report, PwC and Jacobs now added further context to the debate. The pair have created four case scenarios of Australia’s future, each with a different combination of energy investments. The cases revolve around what is to be done with existing thermal plants that are “retiring.”

The first scenario, the ‘reference case,’ is one where the retiring plants are replaced with a combination of gas and renewable plants, with a focus on minimising costs above all else. The second, the ‘renewables case,’ involves replacing a majority of the retiring plants with renewable systems. 

The ‘coal case’ refers to the scenario where retiring plants are replaced by coal, gas, and renewable plants. At the opposite end of the spectrum is the ‘accelerated renewables case,’ where retiring and existing thermal plants are closed down and replaced entirely by renewable systems.

The economic modeling found that either of the renewables cases will have a bigger economic benefit, when compared to either of the two alternatives. Provided that Australia can have an 80% renewable energy system by 2040, the GDP is set to receive a boost of more than $13 billion. In this scenario, consumption amongst Australians will also go up by more than $5 billion in the next two decades.

Comparison of changes in renewable generation and emissions reduction

On the other hand, if coal is kept in the mix while replacing retiring thermal plants, the GDP benefits will be just over $6 billion, less than half of the boost from the prior scenario. Consumption, meanwhile, will only go up by half a billion in this scenario, all while achieving a renewable percentage of just over 60%.

Leading the researchers to conclude that pushing for a greener power system is not just in the interest of the environment, but also of broader economic importance.

Commenting on the path ahead, Mark Coughlin, a partner at PwC Australia said, “Agreeing and implementing the right policy and regulatory mechanisms within the next two years will support the vital energy infrastructure investment decisions needed, putting Australia on a path towards an affordable, reliable, economically beneficial and sustainable energy future that ensures consumers, community, industry and taxpayers are positioned positively for decades to come.”

Putting its mouth where its money is, PwC recently signed a sustainability pledge in Australia to power its own operations with 100% renewable energy.


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