UNSW UNSW Business School UNSW Business School

Yes, a switch to 100% renewable energy is viable and economically sound

September 18, 2018
Innovation


  Barriers to low-carbon generation are mostly political, institutional and cultural

Amid all the controversy about energy policy in Australia, one of the core beliefs held by proponents of fossil fuels is that the electricity market will require some degree of coal or gas-fired power well into the future.

The blackouts that afflicted South Australia in 2016 were blamed by some commentators on that state's over-reliance on wind generation, despite the report of the Australian Energy Markets Operator (AEMO) identifying major problems with conventional plants and interconnecting infrastructure.

Much of the argument against renewable energy comes back to a strong focus on dispatchable power, which delivers electricity on demand and supplies the peak periods, such as on summer evenings. 

Advocates of coal-fired power cite the variability of wind and solar in their arguments that only coal or gas can generate the dispatchable power to deliver the energy reliability Australia demands.

Partly because of this, the federal government's proposed National Energy Guarantee (NEG) is "technology agnostic" as the government seeks to navigate what has become an ideological minefield.

But UNSW academics Mark Diesendorf and Ben Elliston from the Centre for Energy and Environmental Markets challenge the ongoing place of coal-fired power in Australia in a new research paper, The Feasibility of 100% Renewable Electricity Systems:  A Response to Critics.

On to a good thing

The paper argues that 100% renewable energy is achievable in Australia and examines what the authors claim are "incorrect myths" about renewables and uses current scientific and engineering theory to refute these views, which they say are based on "factual errors, questionable assumptions, important omissions, internal inconsistencies and irrelevant arguments".

According to Diesendorf and Elliston, large-scale electricity systems that are 100% renewable, including those that are predominantly variable in generation, can be "readily designed" to meet the key requirements of reliability, security and affordability.

'It is still everybody’s perception that it is cheaper to make power from coal than it is from renewables, and it is no longer the case'

– SANJEEV GUPTA

"We show that technical and economic arguments against renewable energy all fall over, so we are left with social and political constraints," says Diesendorf, a program leader at the Cooperative Research Centre for Low Carbon Living.

He says that a strong anti-climate science lobby, combined with coal interests, some electricity generation companies and large energy users are resisting the move to renewables, despite strong global momentum and changing economics that have rapidly brought down the price of renewable generation.

"Large electricity users like the aluminium industry are on to a really good thing and they seem to be scared of any change, and worried they might have to pay more for electricity if they get off their subsidised contracts," says Diesendorf.

"Then there are the local distribution companies, who are also on to a very good thing and also don't wish to see existing structures changed.

"In most states, distributors can upgrade their systems at the expense of consumers and they get the OK to do that as a matter of course even though it may not be cheaper to upgrade, but be cheaper [instead] to encourage energy efficiency, renewables and battery storage at household and medium-scale user level."

'Path to the death spiral'

The inconsistencies of the National Energy Market (NEM) were highlighted in a July 2018 report from the Grattan Institute, which named three factors for the 130% rise in wholesale power prices between 2015 and 2017.

First, there was the close of the coal-fired power stations in Victoria and South Australia, which reduced supply and pushed prices higher.

But while this accounted for around 60% of price rises, the report says that the elderly plants faced big maintenance bills "that weren't worth paying, given low market prices as a result of historic oversupply".

A second factor was an increase in coal and gas prices, while a third was "gaming" of the system by major electricity generators who were using their power in concentrated markets "to create artificial scarcity of supply and so force prices up".

According to Diesendorf, the present structure of the energy market is a "path to the death spiral".

 "As demand on the grid increases, the suppliers increase the price and that further reduces demand and so on, and that is an unsustainable model," he says.

"Some electricity retailers and distributors are trying to delay the impact of the death spiral by increasing the daily supply charge, but this is counter-productive and we really should be looking at new business models for their operations."

Despite this gaming, the momentum for renewable energy continues to grow.

Regardless of Australia's climate policy, Bloomberg New Energy Finance published a study in July that found wind and solar generation could comprise 86% of Australia's energy mix by 2050, driven solely by economic trends.

'We are in an exciting transition where we can see where the market is going, and that is towards a renewable energy future'

– MARK DIESENDORF

UK steel executive Sanjeev Gupta, whose company GFC Alliance has purchased the former Arrium steel plant in Whyalla, South Australia, aims to power the plant from investing in 1GW of solar generation and energy storage.

"It is still everybody's perception that it is cheaper to make power from coal than it is from renewables, and it is no longer the case," Gupta said in an interview with Guardian Australia in July.

"It was the case not long ago, but it's no longer the case and we will prove it."

Strategic planning

Diesendorf's view is that if governments and regulators were to actually create a level playing field that was "technology agnostic", then a market unencumbered by ideology would move even more rapidly towards renewables.

On the issue of energy security and dispatchable power, he says that a combination of wind and solar with battery storage supplemented by pumped hydro generation could successfully supply the Australian market, without the need for coal-fired generation.

"Our NEM simulations show that the system will be reliable with up to 75% of annual electricity coming from wind and solar, providing you balance them properly with dispatchable renewables," says Diesendorf.

Battery storage, gas turbines burning renewable fuels, and using excess wind and solar capacity to pump water uphill in hydro plants to provide power during demand peaks could deliver the 25% dispatchable capacity to ensure energy security.

This is essentially the role that the proposed Snowy 2.0 project would fill, though Diesendorf's view is that by the time the project is complete "it may be almost redundant" as a result of the rapid growth of small-scale storage.

Much of this, however, would depend on "strategic planning", which would encourage developments such as the creation of 'virtual' power plants where energy from many small solar systems could be aggregated and then fed into the grid when required.

"Rooftop solar is growing rapidly, not just in households but also in the commercial building sector," says Diesendorf.

"You have major corporates investing in large-scale solar, and mining companies in remote areas using renewable energy.

"We are in an exciting transition where we can see where the market is going, and that is towards a renewable energy future despite the efforts of incumbents and vested interests," Diesendorf says.

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