Economic Analysis and Policy 68 (2020) 363–378 Contents lists available at ScienceDirect Economic Analysis and Policy journal homepage: www.elsevier.com/locate/eap Policy debates and controversies The future of coal and renewable power generation in Australia: A review of market trends Jeremy Webb a,∗ , H. Nadeeka de Silva a,b , Clevo Wilson a a School of Economics and Finance, Queensland University of Technology, Brisbane QLD 4000, Australia b Department Economics, Faculty of Humanities and Social Sciences, University of Ruhuna, Matara, Sri Lanka article info Article history: Received 10 July 2020 Received in revised form 9 October 2020 Accepted 9 October 2020 Available online 16 October 2020 Keywords: Coal and renewable energy Cost of electricity generation: Market trends Future of electricity generation Australia abstract Recent estimates of the levelized cost of energy (LCOE) indicate a watershed moment where market forces have become the foremost driver in the replacement of coal by renewable sources. Current studies indicate an energy market is emerging in which not only new renewable plants are more cost effective than new coal fired power plants (CFPPs), but also the former is becoming more cost effective than existing CFPPS on a levelized cost of energy (LCOE) basis. However, an accelerated retirement of existing CFPPs depends both on the price received by power plants on a time weighted basis and on the total cost of energy which, in addition to the LCOE, takes into account costs of distribution and storage needed to overcome intermittent supply. We use Australia – which is undergoing the world’s most rapid decarbonisation of power consumption – as a case study to analyse the economics of this transition and to identify its key drivers. In doing so, we provide an updated estimate of the LCOE for renewable and non-renewable power sources for Australia. We confirm that, currently, the LCOE of both solar PV and wind are substantially below that of coal. It is pointed out that LCOEs are an imperfect metric to gauge the rate of transition which will equally depend on total costs of energy and the prices received by energy providers. However, accounting for total costs (most importantly the cost of intermit- tency and distribution) we show that, combined with other types of non CFPP storage, the time weighted average price received for renewable power is now above that of CFPPs. In Australia, that is being reflected in purchasing power agreements and auction prices for current and future commercial solar and wind projects. Taking into account the strong and continuing downward trajectory of renewables’ total costs we find that a market forces driven further acceleration of the retirement of Australian CFPPs could occur if Government policy does not intervene. © 2020 Published by Elsevier B.V. on behalf of Economic Society of Australia, Queensland. 1. Introduction There is a mounting and at times highly charged debate over the future of what has, and still is, the world’s largest energy resource — coal. With the continued fall in the LCOE of renewable energy and a flatlining of that of coal its future as a power generation is now the subject of intense scrutiny. 1 There are growing number of studies projecting coal’s ∗ Corresponding author. E-mail addresses: j11.webb@qut.edu.au (J. Webb), hasthimuninadeeka.desilva@hdr.qut.edu.au (H.N. de Silva), clevo.wilson@qut.edu.au (C. Wilson). 1 For the purpose of this study reference to coal is on its thermal (power generating) usage. The future of coking coal is an issue for a separate study. https://doi.org/10.1016/j.eap.2020.10.003 0313-5926/© 2020 Published by Elsevier B.V. on behalf of Economic Society of Australia, Queensland.