Australia previously benefited from some of the lowest consumer electricity prices in the industrialised world, but it now has some of the highest.
This paper shows that an electricity supply system built on a foundation of base load generation – that which provides power 24/7 to the grid to meet base energy needs – results in the lowest Total System Cost.
This invalidates claims that renewable energy is the cheapest form of energy. That may be true in particular locations at particular points in time, but at the system level a system built on renewable energy would be the most expensive – by far – of available options.
Customers pay for what they use, but far more of what we pay is required to cover the costs of the physical infrastructure, from generation to our meter, than for generating the electricity itself. To expose the full costs of providing electricity, we need to focus on Total System Cost.
For example, when a consumer installs rooftop solar panel they draw less electricity from the system, and daytime load on the system is reduced. The excess is exported into the distribution network further reducing load on the system, which forces large-scale generators to reduce output. But the large-scale generators, transmission and distribution networks, retailers and environmental costs still exist. Less energy drawn from the main system does not mean less fixed cost: in this case it means more fixed costs overall.
