June 5th, 2013

Yet another study has come out, this one for Australia, concluding that all-renewable electricity is feasible while maintaining current standards for reliability. The difference here is the authors, the Australian Energy Market Operator (AEMO). These are conservative professional engineers not green activists. They prepared the report (technically still in draft) because their political masters told them to do it, not out of enthusiasm. As John Quiggin points out :

The AEMO is the body that manages the electricity market on a minute-to-minute basis, so it has the expertise to assess this claim, unlike the many amateurs who have tried their hands. And, since it might have to do the job, it has no reason to understate the difficulties of a renewables-based system.

The extra costs are significant but not absurd. Quiggin again:

Second, the estimated cost of $111 to $133 per megawatt-hour represents an increase of $60-80/MwH on current wholesale prices, or 6-8c/Kwh on retail prices. That’s much less than the increase we’ve seen thanks to the mishandling of electricity market reform.

AEMO modelled two scenarios: slow demand growth and rapid technological progress, and higher demand and slower progress.
The resulting generating mixes are these:
CST means concentrating solar power with storage (example). The capacity numbers are in Tables 15 and 16 in the report.

It’s striking how much despatchable capacity you need (CST, pumped hydro, geothermal, bio) to ensure reliability with majority intermittent sources (PV solar and wind). In the conservative Scenario 2, in 2050:

Solar PV and wind capacity    74 GW    58%
Despatchables                          53 GW    42% (of which 18 GW CST and 15 GW biogas)
          Total                              127 GW

The optimistic Scenario 1 has similar proportions within a smaller total, but CST is largely replaced by geothermal. AEMO assumes successful development of EGS, but not of large-scale battery storage.

The more useful scenario to me is the conservative, little-progress one. It represents a solid worst case. But there are many ways in which things could go better, that is cheaper, which are incompletely handled by the models.

The modelling excluded nuclear by design. This is just as well, as AEMO used a cost database from another government agency (BREE) which is completely out of date on nuclear. To quote commenter Nick on Quiggin’s post:

Unfortunately, on nuclear, BREE’s estimates were in fantasy land, estimating that nuclear plants could be built now for as little as $55-$60/MWh in the low cost scenario – about one quarter of the price quoted to the UK government by the world’s leading nuclear developers.

I would add that the UK has a much longer history with nuclear power than Australia, and hence a far deeper pool of expertise. The likelihood is very remote that real nuclear costs could come down enough to displace any of the other technologies, all of which have normal rather than perverse learning curves.

AEMO did not carry out a sensitivity analysis for say 95% renewable, with the remaining 5% fossil gas. This must make a big difference to the costs. Electricity grids must keep a large reserve of capacity (20% or so) to meet exceptional peak loads and breakdowns, a reserve which is hardly ever used. Gas generators are very cheap. In the pursuit of overall carbon neutrality, it may be much cheaper to offset some gas generation by sequestration, fleets of electric buses, or something than to ensure virgin-pure electricity generation.

The selection of good news in Scenario 1 looks arbitrary. Is working EGS really more likely than cheap grid batteries? A lot more effort and money is going into the latter. (The new US Energy Secretary, Ernest Moniz, recently went out of his way to be nice about geothermal, which his predecessor neglected, so research funding is likely to shift in the US.)

Technical progress in wind and solar, a pretty sure thing, is more or less irrelevant to the capacity mix. Look at this graph from a utility spokesman of the dramatic impact of solar PV on daily load curves in subtropical Queensland in the last four years:
Click for clearer image.
A similar projection for cloudy Germany. It’s clear that solar PV will eat up the midday load pretty well everywhere at $1 a watt, just with incremental improvements along the supply chain. But it can’t do more without storage. 50c a watt with plastic panels or nanotubes just lowers the cost, without changing the result. You still have to buy the same amount of expensive despatchables in some form.

Most countries will face the same problem, but the solution will vary; Japan has poor conditions for CSP, but geothermal resources and mountains for pumped storage; the USA could follow the Australian pattern, with long-distance transmission from the Southwest; Denmark already draws on Norway’s ample hydro. God knows what we Brits can do.

A generating mix that looks anything like AEMO’s models has another implication. They include a very large amount of capacity lying idle most of the time with zero marginal cost: around 25 GW on average in the most challenging week of the year in Scenario 2. Marginal cost pricing will therefore break down, probably long before we reach 100% renewables – the pressures are already evident in conflicts between utilities and solar householders. Electricity pricing will have to shift largely to a capacity basis.

This immense idle capacity will be available at no marginal cost (as long as it’s fully interruptible) for large-scale sequestration or atmospheric synfuel. We don’t yet quite have the technology for these, but will surely need both. Moniz could fund the research by taking money away from the now strategically irrelevant solar and nuclear labs.

6 Responses to “Green Australia coming to a grid near you”

  1. RichardC says:

    I think the optimal solution, which I’m not sure was considered by this study, would involve
    a smarter grid allowing better management of demand – once we have cheap solar producing
    lots of power in the middle of the day, we should do as much as possible with a smart grid and
    smart appliances to time-shift all non-time-sensitive power uses into that timeslot.

    Combine that with other demand-side efficiency improvements, such as LED lighting, better
    insulation, more efficient refrigeration/AC, and microcontroller/DSP-optimized electric
    motors, and I suspect that the need for expensive dispatchable power can be greatly reduced.

  2. RichardC says:

    … From a quick read, it looks as though they do allow for demand-side
    management, but only for up to 10% of the load. That might well be a
    reasonable estimate of what you can influence by different tariffs for different
    times of day, but I would hope that an investment in smart grid technologies
    could allow you to time-shift a much higher percentage of the load.

  3. paul says:

    Large-scale efficient storage has been just around the corner for 30 years or so, but it’s never really been needed. On the smaller scale, even residences seem to be able to manage decent cost numbers for storage with just a pinch of backup.

  4. RichardC says:

    Lots of stuff about demand-side management here:


    … and that report suggests that 20% reduction in peak load is possible.

    Though I’m actually even more optimistic than that: smart thermostats,
    LED lighting, and cheap solar panels are here now. Combine those with
    a smart grid infrastructure which allows you to save money by time-shifting
    your energy use, and it seems a whole lot of good things could happen
    really quickly.

  5. Ken Rhodes says:

    James, I had to chuckle when I red “The extra costs are significant but not absurd.”

    I’m not at all sure where “significant” crosses a line and becomes “absurd.” But I know how to do arithmetic. “The estimated cost of $111 to $133 per megawatt-hour represents an increase of $60-80/MwH on current wholesale prices.”

    Ummm … that’s a 140% increase.

    It may be good policy, for a variety of important reasons, but I still had to chuckle.

    • James Wimberley says:

      Germans have so far accepted a surcharge of 5.2 c€ per kwh for the EEG, on top of a baseline price of about 20c€ per kwh, so Quiggin is is right to think this sort of increase may be OK in Australia over three decades. The current residential rate is 23cA$/kwh, so Quiggin’s's upper price increase of 8cA$ is 34%, not 140%.

      The analysts’ mandate was to assess technical feasibility. This is now proven, so the remaining question is costs and optimisation. As I wrote, and other commenters have confirmed, the AEMO technology assumptions are conservative. My 95% suggestion also lowers costs a great deal: you could replace 20GW or so of CSP, geothermal, etc with cheap gas generators.

      What’s wrong with Americans? Is keeping your 10c/kwh electricity worth the planet?

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