Australia retains one of the most coal dependent electricity supplies in the world. How can proponents of renewables and nuclear power respectively get out of our trenches and pull together for the national interest in a responsible path for decarbonisation?
Some time ago I wrote for ABC’s Environment Blog that Renewable versus nuclear is the wrong battle. With the review of Australia’s Renewable Energy Target taking up so much air time, it’s important to reflect on how far Australia has come with renewables and decarbonisation and think about where we should go next. Renewables versus nuclear may be the wrong battle, but what might the right one look like?
Much of the current commentary on the Renewable Energy Target resembles trench warfare between two fundamentally opposing sides. What we know about trench warfare is it’s a lot easier to spend all day shooting at each other if you have completely de-legitimised the opposing point of view and the evidence supporting it.
To this observer and commentator it seems that both the naysayers and boosters of renewable energy each have a lot to answer for.
Let’s start with the naysayers. There is a strong narrative from many stakeholders telling us that renewable energy has been, is, will be a disaster for Australia. The problem is that the “has been” and “is” parts of the narrative keep running up against a lack of evidence or, even more problematic, evidence to the contrary. A report by the Climate Change Authority in 2012, whose authors included those reactionary leftists Bernie Fraser (Reserve Bank Governor) and Heather Ridout (Australian Industry Group) recommended no substantive change to the RET. Having failed to get the answer they wanted, the Government sought a new review, this time headed by a climate-change denier and a former coal baron… and it still can’t come up with a bad news story on electricity prices:
The ACIL Allen modelling results indicate that under the current RET scheme, wholesale
electricity prices would fall slightly over the period 2015 to 2020 due to significant amounts of
new wind capacity entering the market. Wholesale electricity prices then rise slowly from 2025
onwards, as demand growth begins to absorb the excess generation capacity. Lower wholesale prices outweigh the direct cost of certificates over the period 2020 to 2030, meaning that retail electricity prices over this period are lower with the RET in place.
However, the cumulative impact of the RET on household bills over time appears to be small.
The ACIL Allen modelling shows (Figure 18) that repealing the RET would lead to a small increase in electricity prices over the period 2020 to 2030, but prices would remain within 1.5 per cent of current levels. The NPV of the cost of the RET to households is estimated to be $247 over the period 2015 to 2020 and one dollar over the period 2015 to 2030 (Figure 19).
Renewable Energy Target Scheme, Report of the Expert Panel, August 2014, page 37
Net present value cost of ONE DOLLAR per household over 15 years? So what’s the problem?
The ACIL Allen modelling indicates that the suppression of wholesale prices will come at the
expense of revenues of incumbent generators.
Renewable Energy Target Scheme, Report of the Expert Panel, August 2014, page 38
Ah. I think we are getting warmer. The Government needs a strong reminder that the vested interests of incumbent generators are not a proxy for national interest.
The fact is whether the naysayers like it or not, Australia is continuing to run effectively with more renewable energy, year on year, every year.
Have the incentives driven up electricity costs? Barely. The recent steep rises in electricity costs have been overwhelmingly the result of over-investment in transmission networks that was linked to a regulated rate of return to companies responsible. This needs reform, urgently, and the lack of interest from Government is telling.
Distribution network prices are the largest contributing factor to price rises in South Australia, and are primarily driven by the prevailing revenue requirements set by the Australian Energy Regulator in 2010, for the 2010-2015 regulatory period.
Is renewable energy bad for consumers? Not yet it isn’t. As two reviews have now established, the low operating costs of wind have depressed wholesale prices overall and so far that has been a net benefit to consumers. With over one million solar systems installed, the whole “rich person’s toy” notion can be put to bed. Australians across the socio-economic spectrum are enjoying lower energy bills thanks to their systems.
Is it just too expensive? Wind power is the cheapest source of new electricity in Australia today, when built-on to the existing system. At around $90 MWh-1 with scope to fall further, anyone arguing that this electricity source has no role in our energy future is clearly arguing from ideology, not economics. Solar PV has seen steep price declines. It is a virtual certainty that this will continue.
Does it fail to lower greenhouse gas emissions? No. Thanks to the clever operations of our National Electricity Market, coal-fired output is reigned in when wind and solar are producing.
Has it made the network unstable? No. The network is strong enough. It has to be to manage the potential unscheduled loss of large generating units from fossil fuels, and every year of experience makes us better at managing variable renewables.
So frankly, efforts to kill advances in renewable energy at the present time are nothing to do with national interest, and everything to do with vested interest.
Variable renewable energy sources are highly disruptive to the electricity market. Disruption is not inherently bad for the national interest, nor inherently good. The role of Government in free markets is to monitor and understand the disruption that is taking place, and provide supporting infrastructure and systems to maximise national interest. That may mean acting to constrain the disruption, or it may mean acting to allow it to happen with the most benefit.
Simply preserving the status quo at all costs, and despite evidence relating to national interest, is poor governance. Just telling Australia “renewables are bad” is beginning to sound exactly as simplistic as it is. It’s time for the renewable energy naysayers to lick a few ideological wounds and come back to the argument with some evidence-based propositions.
But then, why should they? When the renewable boosters do the same thing, putting ideology above analysis and national interest, the naysayers are scarcely under pressure to lift their game. So what case do the boosters have to answer? A big one.
Is wind cheap? Sure, I have just said so. But only as small additions on a very large and mature system of dispatchable generators. At a higher level of penetration, masses of correlated supply that are uncorrelated with demand will make further additions of wind escalate rapidly in cost and decline rapidly in market value. Looking at that from the other direction, would it be cheap to run Australia only on wind? Of course not. It would be horrifically expensive, were it even possible. So every time a renewable booster says “wind is cheaper than coal” they tell a big lie of omission to the rest of Australia by neglecting to say “as long as coal and gas are there to manage the variability”. These commentators spend much of their time slagging-off the energy sources upon which the successful uptake of wind has depended. Maybe those incumbent generators need a little respect, after all.
Does solar power help with peak demand? Barely. Australian peak demand is at 5-6 pm in summer where output from solar systems is well down from the midday peak, and the peak day for a year may well be both very hot and overcast. Winter peak is the same time of the day but, you know, in winter…The network benefit from PV in managing peak demand is modest at best. This is another little lie boosters seem happy to either tell or let fly past them.
Are renewables dramatically remaking Australian electricity for the better? Give me a break. In percentage terms we have gone backwards since 1960 for renewables. Wind and solar might now be providing 4-5% nationally on top of a monolithic fossil dependence.
Is baseload a myth? Of course it isn’t, and every time a renewable booster/climate activist makes that short-sighted and self-serving argument, stakeholders in government, industry, commerce harden themselves further against taking action in the name of clean energy.
Is South Australia 30 % renewable, providing an example to the nation? This is the worst of all because the answer is neither “yes” nor “no”. The answer is that South Australia has accommodated that much wind supply because (a) it is connected to a massively larger market from which to buy and sell and (b) because the other jurisdictions in that market have not built a similar supply. If Victoria had built a similar percentage quantity of wind supply then guess what? South Australian wind would often be correlated with Victorian wind, competing for the same space in the market, and wind would be well on the way to finding its own economic upper-limit. Do renewable boosters help other Australians to understand this? The hell they do. It ruins a good story.
I contend that we now have enough empirical evidence and system understanding to plot and plan optimal decarbonisation of Australian electricity using renewables in an efficient way. It is evident that, with good governance, the lower-cost variable renewable sources of wind and solar PV can be deployed in Australia to the benefit of consumers up to a far greater penetration that currently exists in the National Electricity Market. For the sake of argument let’s put that level at 20-25% of total supply, consistent with the bulk of literature on the topic, before the system costs of further penetration begin their rapid escalation.
That represents a four-to-five fold increase on current levels. As such it should be viewed as nothing but good news by those industries. Achieving such a level in the next few decades would be boom times. So why, oh why, do the voices of those industries not take that line? They could firmly occupy the middle ground and demonstrate to Australians that they are honest about both the potentials and limitations of their technologies. It is this position, more than any other, that would show-up the ideological naysayers for what they are.
I’m going to venture an answer to my rhetorical question. Taking this position requires a firm acknowledgment of the vital nature of a base of fully dispatchable supply upon which to effectively operate the variable supplies. It’s in that segment of the market that renewables fall over in the decarbonisation task and nuclear power rises up.
Geothermal in Australia has been written-off, both literally and figuratively, leaving solar thermal with storage to carry the all-renewable hopes. Here though, the economics/national interest case is nowhere in sight. It’s very expensive for a system that does not resemble, in any compelling way, the reliability of fossil fuels without dramatic over-sizing that will drive costs up ever more. It will often be remotely located, even compared to wind power, meaning far more substantial costs in transmission upgrades. It’s far from loads, the complete opposite of rooftop solar PV that lives on top of loads.
The cost element of what I have described above has to change a lot before even coming close to what nuclear power can offer right now. It’s inexcusable that we would sit back and wait for it rather than planning decarbonisation based on what we know now.
So renewable and nuclear advocates need to come together with a shared vision that puts national interest first in the path to decarbonisation. Here’s how I think that could work:
- Overhaul the Renewable Energy Target in favour of a Clean Energy Target (CET) that includes nuclear energy. Since modern nuclear energy provides superior capacity and reliability to our old fossil fuels, there is no technical reason this target, including existing hydro, could not be set at 95 % by 2050 from the very outset (allowing for the economic use of peaking gas). Not one single stakeholder could claim concern about reliable supply and predictable pricing.
- Differentiate the target to provide incentives for (a) quantity of electricity provided and (b) firm capacity added to the network. The lower-marginal cost wind would continue to expand in early stages on payments from (a) with small payments from (b). The higher cost nuclear would enter the market later, getting over the line with strong payments from both (a) and (b). As for the argument that nuclear is “too expensive”, letting it succeed or fail under this type of target would be the best way to test that.
- Monitor the network and market outcomes with national interest in mind. As and when negative outcomes from variable supply are arising, make regulatory or infrastructure changes to manage that so long as a net-benefit remains. For example, if South Australia remains the friendly home of wind in Australia, so be it: build better interconnection to accommodate that. The long-term value will surely be there as better interconnection aids all players.
- As the net-benefit of new variable supply diminishes, adjust the CET (as required) to weight payments away from (a) (quantity of electricity) toward (b) (amount of firm capacity). Meanwhile undertake an accelerated program of introduction of nuclear power to Australia. Based on the actions above, first power from nuclear could be generated as we approach near-optimal exploitation of wind and solar PV. With the CET based increasingly on the need for further clean energy to have high firm capacity, investment will solidly shift away from the variable renewables and toward the nuclear, permitting the permanent exit of coal and then gas generation from the market, never to return.
- Vary our emphasis on solar PV away from electricity supply and toward network management, especially management of peak demand. The coming of cost effective home energy storage should be emphatically embraced as a potential network service. Consumers should be encouraged to take up small amounts of storage and remain grid connected into the future. An appropriate financial reward should be provided for residents to use and sell their solar power late in the day in response to peak times rather than as –and-when it is generated. This will hold down network costs for each and every consumer, instead of raising them as solar PV does now. The “death spiral” of retail electricity will be averted.
- Accelerate the introduction of electric vehicles to the Australian market. The new, large overnight demand will provide greater utilisation of wind, greater utilisation of nuclear, greater utilisation of networks, and greater sales for retailers, improving financial outcomes for nearly all major players.
An approach like this calls for national interest to trump all. As I have said that requires good governance. Everyone has a role to play in making the path of good governance as easy and logical as possible for those in power. Since I tend to favour emphasising the responsibility that is closest to home I will close by saying this.
Nuclear power supporters who double as renewable energy naysayers need to spend more time reading our better renewable energy commentators (Tristan Edis) principle among them, to continually check their opinions against our evolving evidence and experience with variable renewable energy sources. Demands for evidence-based opinions and policies cut both ways. The way forward for everyone in the clean energy area begins with better mutual understanding and respect.
Climate and renewable energy activists need to demonstrate far greater understanding that the concerns of many Australian’s regarding the role of renewables in our network are entirely fair and reasonable. They must:
- Raise the quality of their rhetoric by informing Australians about the whole energy picture, not just the parts that suit them
- Acknowledge the critical importance of baseload supply
- Be the first to highlight where the advantages of variable renewables end and the disadvantages begin
- Speak positively of the potential for nuclear power and renewables to deliver a dramatically better Australia
As for the hardened climate change deniers? As I have argued before, we don’t beat them by beating them. We beat them by making them irrelevant. It’s time for all of us to take more responsibility on that front by making adherence to national interest our guiding principle in charting a decarbonisation pathway.
Epilogue: If this represents the renewable answer to nuclear, we have to wake up and get moving with sensible policy. It pays to keep an open mind, but not so open our brains fall out.
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