Feed aggregator

With the right mix, the grid can go fully renewable for the same cost and reliability as fossil fuels. Pixabay/Wikimedia Commons

In a speech to the National Press Club yesterday, Prime Minister Malcolm Turnbull declared that the key requirements for Australia’s electricity system are that it should be affordable, reliable, and able to help meet national emissions-reduction targets. He also stressed that efforts to pursue these goals should be “technology agnostic” – that is, the best solutions should be chosen on merit, regardless of whether they are based on fossil fuels, renewable energy or other technologies.

As it happens, modern wind, solar photovoltaics (PV) and off-river pumped hydro energy storage (PHES) can meet these requirements without heroic assumptions, at a cost that is competitive with fossil fuel power stations.

Turnbull and his government have also correctly identified energy storage as key to supporting high system reliability. Wind and solar are intermittent sources of generation, and while we are getting better at forecasting wind and sunshine on time scales from seconds to weeks, storage is nevertheless necessary to deliver the right balance between supply and demand for high penetration of wind and PV.

Storage becomes important once the variable renewable energy component of electricity production rises above 50%. Australia currently sources about 18% of its electricity from renewables – hydroelectricity in the Snowy Mountains and Tasmania, wind energy and the ever-growing number of rooftop PV installations.

Meanwhile, in South Australia renewable energy is already at around 50% - mostly wind and PV – and so this state now has a potential economic opportunity to add energy storage to the grid.

Pushing storage

To help realise this potential, in South Australia and elsewhere, the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) will spend A$20 million of public funds on helping flexible capacity and large-scale energy storage projects become commercially viable, including pumped hydro and batteries.

PHES constitutes 97% of worldwide electricity storage. The retail market for household storage batteries such as Tesla’s Powerwall is growing, but large-scale storage batteries are still much more expensive than PHES. “Off-river” pumped hydro has a bright future in Australia and many other countries, because there are very many suitable sites.

Wind and PV are the overwhelming winners in terms of new low-emissions electricity generation because they cost less than the alternatives. Indeed, PV and wind constituted half of the world’s new generation capacity installed in 2015 and nearly all new generation capacity installed in Australia.

Recently, we modelled the National Electricity Market (NEM) for a 100% renewable energy scenario. In this scenario wind and PV provide 90% of annual electricity, with existing hydro and bioenergy providing the balance. In our modelling, we avoid heroic assumptions about future technology development, by only including technology that has already been deployed in quantities greater than 100 gigawatts – namely wind, PV and PHES.

Reliable, up-to-date pricing is available for these technologies, and our cost estimates are more robust than for models that utilise technology deployment and cost reduction projections that are far different from today’s reality.

In our modelling, we use historical data for wind, sun and demand for every hour of the years 2006-10. Very wide distribution of PV and wind across the network reduces supply shortfalls by taking advantage of different weather systems. Energy balance between supply and demand is maintained by adding sufficient PHES, high-voltage transmission capacity and excess wind and PV capacity.

Not an expensive job

The key outcome of our work is that the extra cost of balancing renewable energy supply with demand on an hourly, rather than annual, basis is modest: A$25-30 per megawatt-hour (MWh). Importantly, this cost is an upper bound, because we have not factored in the use of demand management or batteries to smooth out supply and demand even more.

What’s more, a large fraction of this estimated cost relates to periods of several successive days of overcast and windless weather, which occur only once every few years. We could make substantial further reductions through contractual load shedding, the occasional use of legacy coal and gas generators to charge PHES reservoirs, and managing the charging times of batteries in electric cars.

Using 2016 prices prevailing in Australia, we estimate that the levelised cost of energy in a 100% renewable energy future, including the cost of hourly balancing, is A$93 per MWh. The cost of wind and PV continues to fall rapidly, and so after 2020 this price is likely to be around AU$75 per MWh.

Crucially, this is comparable with the corresponding estimated figure for a new supercritical black coal power station in Australia, which has been put at A$80 per MWh.

Meanwhile, a system developed around wind, PV and PHES and existing hydro can deliver the same reliability as today’s network. PHES can also deliver many of the services that enable a reliable energy system today: excellent inertial energy, spinning reserve, rapid start, black start capability, voltage regulation and frequency control.

Ageing system

Australia’s fossil fuel fleet is ageing. A good example is the pending closure of the 49-year-old Hazelwood brown coal power station in Victoria’s Latrobe Valley. An ACIL Allen report to the Australian Government lists the technical lifetime of each power station, and shows that two-thirds of Australia’s fossil fuel generation capacity will reach the end of its technical lifetime over the next two decades.

The practical choices for replacing these plants are fossil fuels (coal and gas) or existing large-scale renewables (wind and PV). Renewables are already economically competitive, and will be clearly cheaper by 2030.

Energy-related greenhouse gas emissions constitute about 84% of Australia’s total. Electricity generation, land transport, and heating in urban areas comprise 55% of total emissions. Conversion of these three energy functions to renewable energy is easier than for other components of the energy system.

Transport and urban heating can be electrified by deploying electric vehicles and heat pumps, respectively. Electric heat pumps are already providing strong competition for natural gas in the space and water heating markets. Importantly, these devices have large-scale storage in the form of batteries in vehicles, and thermal inertia in water and buildings. Well-integrated adoption of these technology changes will help reduce electricity prices further.

So wind, PV and PHES together yield reliability and affordability to match the current electricity system. In addition, they facilitate deep cuts to emissions at low cost that can go far beyond Australia’s existing climate target.

Andrew Blakers receives funding from the Australian Renewable Energy Agency.

Matthew Stocks receives funding from the Australian Renewable Energy Agency.

Bin Lu does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

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After reading your article (Weighing in to fight waste in the kitchen with a measuring spoon – and an app, 28 January) I felt so guilty I went and dug out from the compost bin two very brown soggy bananas I had thrown away earlier and made them into a banana loaf. Apart from the satisfaction of the loaf, I was also able to knock 252g/9oz off my somewhat nerdy tally of food wasted in January. I decided at new year to record how much food we wasted in an effort to reduce it – a paper version of the app in the article. It’s made us really conscious about not wasting food, because we hate to be the one who has to “put it in the book”. I thought the bananas were beyond hope – but I’ve just had a delicious slice and will live to tell the tale. Now for the sugar angst.
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Better managing how we use electricity in our homes will reduce pressure on the grid, and reduce the need for more power stations. Power line image from www.shutterstock.com

As Prime Minister Malcolm Turnbull noted in his National Press Club address yesterday, energy policy is all about balancing the trifecta of affordability, reliability and sustainability. More commonly known as the “energy tri-lemma”, it can often seem impossible to achieve all three objectives at the same time.

For instance, in Australia’s current energy debate, fossil fuel advocates claim that only coal and natural gas can deliver reliable and affordable power.

In the opposite corner, renewable power is synonymous with sustainability, but many governments remain unconvinced that it can also guarantee reliable, low-cost energy. Until renewable energy overcomes this scepticism, calls from the likes of former prime minister Tony Abbott to limit its growth will find a receptive audience.

However, there is a powerful solution to the energy tri-lemma and, after decades of neglect, Australia may be about to give it a serious try.

The missing link

The missing link is “demand management”. This is where energy utilities support consumers to save energy and shift demand, instead of building expensive new energy supply.

The greatest volatility in the current electricity system is not solar and wind generation, but the peaks and troughs in demand. And it is generally peak demand that drives investment in expensive new electricity infrastructure like poles, wires and power stations. Managing the amount of electricity we use and when we use it can save money, for both utilities and consumers, and reduce our impact on the environment.

Demand management has long been a smart strategy, but recent developments mean its value is increasing. For instance, the rapid growth in rooftop solar generation has led to a reduction in net power demand in the middle of the day, followed by a rapid spike in demand in the early evening, particularly in summer as we come home and turn on our air conditioners.

The emergence of this solar-driven “duck-shaped” demand curve has led to calls for us to “behead the duck” or, in more humane symbolism, teach the duck to fly.

We’re already using it

While unfamiliar to many, demand management has been around for decades. It includes off-peak water heating, which started here in the 1930s. It is already reducing peak electricity demand by hundreds of megawatts. That’s a saving to Australian electricity consumers of hundreds of millions of dollars in avoided electricity supply costs.

If you have an off-peak water heater or pool pump, or a time-of-use power tariff, you are already part of a demand-management program. If you are saving money with efficient LED lights or a five-star refrigerator, you are benefiting from technology developed by demand-management efforts overseas.

As the controversy raged in 2012 about skyrocketing power prices, the Australian Energy Market Commission (AEMC) concluded that demand management could save between A$4.3 billion and A$11.8 billion over the next ten years.

One of the key reforms the AEMC proposed to unlock these savings was incentives for poles and wires businesses to encourage demand management that would save consumers money.

Better late than never

After much to-ing and fro-ing, the Australian Energy Regulator (AER) is preparing to implement this recommendation.

It recently published a consultation paper on a new Demand Management Incentive Scheme to apply in New South Wales and the ACT in 2019, and then roll out across the National Electricity Market.

The paper focuses on the distribution networks, such as United Energy in Victoria and Ausgrid in NSW, which connect our homes to the electricity grid. It suggests a range of incentives for these businesses to help their customers reduce and shift electricity demand.

An example of the sort of project that would be stimulated is the recently announced Community Grids Project between United Energy and the smart energy startup GreenSync (supported by the Victorian government). This project will encourage households, businesses and community organisations on the lower Mornington Peninsula to voluntarily reduce and/or shift their electricity usage by using solar PV and battery storage systems. In the process, this will defer the need for around A$30 million of investment in new poles and wires.

Network businesses have long been supposed to choose demand management when it costs less than network upgrades, but regulations have discouraged them from doing so. Recent reforms have reduced this bias, but without an effective incentive scheme, demand management is very unlikely to fulfil its potential to cut costs and facilitate renewable energy.

At the Institute for Sustainable Futures (with support from the Australian Renewable Energy Agency) we’re undertaking a detailed study of the regulatory bias against demand management.

It’s not just about networks

While the focus of the scheme is on saving networks money by avoiding or delaying spending on infrastructure, its impact will likely be much more profound.

Network costs make up just under half of total electricity supply costs.

The network demand management incentives will bring forth energy efficiency, load management and local storage and generation resources. These resources can also then be tapped at low extra cost to help balance variations in generation output (for instance, from wind and solar generators) and consumer demand across the whole electricity market.

This will also reduce wholesale energy charges, the need for gas-fired power stations and new transmission links to back up variable wind and solar generators. And by encouraging energy efficiency, demand management will save money while cutting carbon emissions.

Clean energy’s quiet achiever

As global temperature records topple on a monthly basis and the Paris climate agreement bites, the demand for sustainable power becomes irresistible. But as the share of renewable energy rises, the need for flexible resources to balance the variable output of solar and wind power increases.

Even with dramatically falling battery costs, energy storage alone is unlikely to be a viable solution (as highlighted in our study of 100% renewable energy for Kangaroo Island).

It is a little ironic that the missing link for cheap and reliable electricity, which has been staring us in the face for so long, may ultimately also be the key to achieving sustainable power.

Submissions on the AER’s Demand Management Incentive Scheme Consultation Paper close on February 24 2017.

Chris Dunstan is a Research Director at the Institute for Sustainable Futures (ISF) at the University of Technology Sydney. ISF undertakes paid sustainability research for various government, corporate and NGO clients. The Demand Management Incentives Review study was is funded by the Australian Renewable Energy Agency (ARENA), with in kind support from a range of other stakeholders.

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