This paper argues that the belief that Australia can decarbonise its economy by relying on the wind and the sun rests on a misplaced conviction about what the renewables rollout will entail. The intrinsic nature of uncontrollable, weather-dependent energy introduces faster growth in costs at higher penetrations, which mean the rollout gets harder as it proceeds, rather than easier. It suggests that Australian politicians and renewables advocates must confront the inevitable: the honeymoon is over and, from here on, things will only get harder. 

The paper explores the nature of these challenges in three different ways.

1. It examines the international evidence of the relationship between electricity prices and weather-dependent generation.
2. It undertakes a first-principles exploration of what drives higher integration costs for uncontrollable wind and solar electricity generation.
3. It outlines the evidence in Australia that additional costs are already being encountered, at renewable energy penetration levels at or below 30%.

Key findings

• Once wind and solar push beyond roughly one-fifth of total energy supply, costs and grid difficulties begin to rise sharply.
• No country has reached wind and solar penetration levels above 90%, and those that come closest have some of the highest electricity costs in the world.
• Very few countries have exceeded around 40%, and those that do end up with elevated electricity prices.
• The demand for massively expanded transmission networks, battery storage and high levels of constrained generation demonstrate that increasingly more energy must be either moved or wasted, and the costs associated with these additional systems to move energy will only continue to mount.
• As falling capture prices lead to declining private investment in renewables, governments are now attempting to prolong the honeymoon period through subsidies and taxpayer underwriting, which will increase the tax burden on Australians and will not lower electricity prices in the long term.