Share article

Print article

Building a solar farm in Australia is getting about 8% cheaper each year as panel prices fall and technology improves, according to an official new report. Battery storage costs are falling even more sharply, dropping 20% over the past year alone.

But the same can't be said for wind farms, the second-largest source of renewable energy in Australia. Onshore wind costs actually rose about 8% in 2023-24 and another 6% in 2024-25.

The findings are contained in the GenCost 2024-25 report by CSIRO and the Australian Energy Market Operator, released this week.

Rising costs are putting real pressure on the wind industry, undermining investor confidence. Developers of offshore wind projects are walking away, and even cheaper on-shore wind projects are under strain. Even as wind energy becomes a mainstay in China, the United States and Germany, the industry faces real headwinds in Australia.

This is surprising. Wind, like solar, was projected to get steadily cheaper. The fuel is free and turbines are getting better and better. Instead, wind in Australia has remained stubbornly expensive. Solving the problem will be challenging. But solutions have to be found fast if Australia is to reach the goal of 82% renewable power in the grid by 2030 - now less than five years away.

Here's what's going on:

1. Global supply chains have been disrupted

The cost of steel, copper, fibreglass and other materials vital for wind turbines shot up during the pandemic. As a result, turbine prices rose almost 40% between 2020 and 2022. While input costs have fallen, turbine prices remain high. Solar panels can be churned out in factories, but modern wind turbines are massive, complex structures that require specialised manufacturing and logistics. That makes them more sensitive to global price fluctuations.

2. Good wind is often in remote places

Australia's best wind resources are typically far from cities and existing grid infrastructure. Connecting far-flung wind farms such as Tasmania's Robbins Island to the grid can require new and very expensive transmission lines. Remote sites mean extra costs such as temporary worker accommodation. The GenCost report notes this has added about 4% to wind project budgets in 2024-25 compared with the year before.

Many other countries rely heavily on offshore wind, because wind blows more strongly and reliably over oceans. Unfortunately, spiking costs are likely to further delay the arrival of offshore wind in Australia. GenCost projects the first offshore wind projects in Australia will face even steeper costs.

3. Local construction and labour costs have soared

Australia faces a shortage of workers with the skills to build and maintain wind farms, resulting in higher wages and recruitment costs. Wind developers say construction costs have become a real issue. Wind farms are more labour-intensive than solar.

4. Interest rates have raised financing costs

Wind farms require large upfront investments and lengthy construction periods. Even a small increase in interest rates can make them unviable - and interest rates have been high for some time.

5. Reliability concerns, regulatory delay and community opposition

According to US researchers, technical issues have emerged for some new wind turbines, creating unexpected costs for developers. The long, complex process of getting permits, carrying out environmental assessments and building community support is pushing out project timelines, increasing costs and uncertainty for developers.

Solar faces far fewer challenges. Solar panels are mass-produced, meaning costs are steadily driven down through economies of scale. Panels can be deployed quickly and solar farms tend to face less community opposition.

Wind turbines have to spin to function, while solar panels have no moving parts (though systems that track the Sun do). As a result, solar farms require less maintenance and are more reliable.

It's no surprise large-scale solar has been on a record-breaking run, growing 20-fold between 2018 and 2023.

Solar panels make electricity during daylight hours, especially in summer. By contrast, wind tends to produce more power at night and during winter months. This is why wind is so useful to a green grid.

Generating power from both wind and sunshine can slash how much storage is needed to ensure grid reliability, lowering overall system costs. A balanced mix of wind, solar and storage will meet Australia's electricity needs more efficiently and reliably than just solar and storage, according to the International Renewable Energy Agency and independent researchers.

Making wind more viable will take work. Potential solutions do exist, such as expanding the skilled workforce and investing in specialised ships and equipment to install turbines offshore.

Shipping large turbines from Denmark or China is expensive. To avoid these costs, it could make sense to encourage local manufacturing of large and heavy parts such as the main tower.

Other options include finding lower-cost turbine suppliers and streamlining regulatory processes.

The newly announced expansion of the government's Capacity Investment Scheme could help reduce risks and give certainty, alongside public investment in new transmission lines.

If nothing is done or if new measures don't help, wind is likely to stall while solar and storage race ahead.

That's not the worst outcome. Australia could get a long way by relying on batteries and pumped hydro to store power from solar during the day and release it in the evenings, as California is doing. But this strategy involves trade offs, such as higher storage-capacity needs and the risk of insufficient power during long cloudy periods.

For Australia to optimise its mix of renewables and storage, policymakers will have to tackle wind's cost challenges. Effective action could lower costs, accelerate project timelines and bolster flagging investor confidence.