The most striking aspect of Prime Minister Scott Morrison’s long-term emissions reduction plan, presented on Tuesday, isn’t the long-telegraphed promise of net-zero emission by 2050 or the promise of A$20 billion of clean energy programs (around 0.2% annually).

An unrelated technology goal is announced: solar photovoltaic electricity for A$15 per megawatt-hour ($/MWh).

This price is 1.5c per kilowatt-hour (c/kWh), a small fraction of the 20-30 (c/kWh) currently being paid by Australian households. Most of the costs households pay for transmission, distribution, and retail services.

The Australian government can’t deliver this target or even substantially obstruct it. Only Australia, acting alone, could significantly impact the global climate.

Morrison is on solid ground when he sets his sights on ultra-cheap photovoltaic electricity.

Because the world is nearly there.

Many countries have long-term solar power supply agreements at lower prices than A$0.02 per kWh, and these prices continue to fall.

A huge global industry with a turnover exceeding $A200,000,000 annually and large research and development budgets is driving reductions in the price of solar modules, inverters, and similar products.

While the programs announced today may help accelerate progress, they are only part of a greater global effort.

The global fall in real long-term interest rates is equally important and is less under government control. These rates are currently zero or negative over 30 years, which is more than the expected lifetime of a solar power plant.

Solar plants need to produce enough electricity to pay their initial installation costs. They also have a zero interest rate and near-zero operational costs.

The cost of solar electricity is very low now

Now, utility-scale solar can be installed for less than $A1/watt or $A1,000/kW.

Solar cells can provide a maximum of 2,000 hours of power per year in good areas, such as the ones found in Australia’s most populous regions. This is over 25 years. This is 50,000 kWh at the cost of A$0.02/kWh.

As the ultra-low capital cost is considered in calculations of returns, we can expect such prices to appear in contracts soon. The rest of Morrison’s goals will be met by technological progress.

This is true even if we consider the need to store energy to ensure that electricity generated in the middle of the day can be used to supply the late-night demand peak. As with solar cells, batteries’ costs are decreasing.

What does this mean for Australia’s coal industry? New coal-fired power is not economically competitive with solar and wind power. Most countries have stopped putting new generators on the market.

These exceptions, including those in China, are not due to a calculation of benefits and costs but rather the desire of provincial governments to keep capital investment moving.

However, as solar prices fall, so will the cost of existing plants unless coal prices drop dramatically.

Brutal arithmetic

This is a brutal way to do the math. A tonne of high-grade thermal coal can generate 2-3 MWh of electricity.

This would result in revenue of A$30-45/tonne in a market where solar competition sets the price at A$15/MWh. These costs include operating and maintaining an old coal-power plant and the cost of mining and shipping the coal.

Thermal coal currently costs more than US$180 per ton.

In China, a carbon price is being introduced. Morrison’s solar electricity target will bring an end to thermal coal. A similar analysis can be applied to the gas.

Cheap electrolysis could produce “green” hydrogen that can be used to coke coal. It would also reduce the price of “blue” hydrogen made from gas.

This won’t happen overnight. The growth of electricity demand in China is faster than solar and wind power installation, which means coal prices will rise in the short term.

Carbon-free steel is still a distant dream.

If the global demand for coal declines, it will be lower-quality and more expensive producers like those in Indonesia who will feel it first before Australia.

The idea that Australia will continue to export significant amounts of coal in 2040, let alone 2050, is fantasy.

Morrison’s wider story (and the right one) tells a story about optimism.

Future bright for coal, but it’s coming out of coal

Opponents of action still push the alarmist scenarios about $100 roasts or economic disaster. Instead, we are now at a point where we can confidently predict that we will have enough ultra-cheap and pollution-free electricity for homes, vehicles, and all other industrial uses.

We must accelerate the transition from coal-fired electricity to internal combustion vehicles. This should be done immediately.

Although Morrison might not have been able to announce a serious goal for emissions reductions by 2030 because of internal Coalition politics, there are no reasons we shouldn’t be able to reduce emissions by at least 50% while charting a path for a more prosperous, sustainable future.

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