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100% renewables in Australia will be cheaper than BAU

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Iain MacGill is the first to admit that there’s a good deal more research and modelling work that could be done before Australia might confidently launch itself on the path to 100 per cent renewable electricity generation.

But the main, and very positive, message from the UNSW Associate Professor, and joint director of its Centre for Energy and Environmental Markets (CEEM), is that on the basis of current research and modelling, the viability of a shift to a 100% renewable energy network looks “very promising” – in fact, when you factor in the costs of business-as-usual, it’s likely to be cheaper than continuing on the current path.

Speaking at the All-Energy Australia conference in Melbourne today, MacGill outlined some of the preliminary findings of the current UNSW project on the technical feasibility, underlying economics and possible commercial implications of 100 per cent renewable energy generation for the Australian National Electricity Market.

It’s a hugely complex task, that has had to factor in such technicalities as the NEM’s 0.002 per cent unserved energy standard, moderate energy spill, moderate total biomass, no extra hydro capacity, the need for new NEM regions, and the perennial question of whether a 100 renewables mix using highly variable and somewhat unpredictable solar and wind can reliably meet demand at all times and locations.

And then, of course, there is the all-important question of whether 100% renewables is  economically worth doing, not to mention commercially feasible: can we establish commercial frameworks that drive appropriate deployment at the speed and scale required?

The final estimates for the UNSW work are not ready for release, but when they are they will form a crucial reference point for the clean energy industry. One of the criticisms of the detailed work that the Australian Energy Market Operator is being asked to undertake into 100 per cent renewable scenarios is that it will not reference its cost estimates to business-as-usual, or to the potential savings.

As the International Energy Agency noted in its recent assessment on the effort required to transform the global energy grid to meet a 2°C global warming scenario, this may require a capital cost investment of $36 trillion over BAU – but this will likely to pay itself back by 2025 in fossil fuel savings, and generate total savings of $100 trillion by 2050.

And as MacGill today pointed out (and illustrated in the charts below), if the inevitable replacement of existing ageing fossil-fuel power plants – the majority of which would be 30 years and older in 2030 (and things look particularly grim on this front for Victoria and NSW and Queensland, as you can see in the graph below) – is factored in to the Australian equation, then the cost of 100 per cent renewables starts to look very competitive compared to that of business-as-usual.

At a carbon price of $50-$100/tonne, MacGill told the conference, if you rebuild all of those plants and then paid the carbon price, “it would cost more than replacing them with 100 per cent renewable energy sources.”

 

And while he admitted that a carbon price at such levels might seem unrealistic, considering the current state of the market, MacGill points to the IEA’s recent projections of how much higher again the carbon price would need to be in a worst-case scenario, if the world didn’t do enough, quickly enough, to cut emissions.

As the charts above reiterate, these are preliminary findings only, and the economic costs are modelled the AETA’s 2012 BREE report, which MacGill repeatedly stressed were “not right.” If you’re going to compare the costs of renewables to business as usual, he told the conference, it needs to be a fair comparison.

So 100 per cent renewables is looking promising technically (the UNSW modelling only factors in currently available resources and technologies, and no extra hydro – you can see the mix in the charts above) and economically. But what about the commercial feasibility? According to Macgill, this is where the right policy becomes all-important – and where, in Australia, “much more progress is required.”

On this point, he refers to the IEA’s view on global clean energy progress and what’s required from policy to protect the climate, as expressed in its Energy Technology Perspectives, 2012 report, which said: “Continued policy support needed to bring down costs to competitive levels and to prompt deployment to more countries with high natural resource potential.” And “Large-scale RD&D efforts to advance less mature technologies with high potential.”

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  • http://pragmatusj.blogspot.com.au/ John D

    For any 100% renewable system to provide reliable electricity supply it is crucial that the technological and geographical mix is right.
    This won’t happen if the carbon price is used to drive the process. Even if the price is high enough to justify the more expensive parts of the required mixes investors will concentrate on the more profitable technologies and locations.
    What is needed is a process that gives good control of what, where and when. The logical approach is run the conversion as a major engineering project. (Think Snowy River scheme.) This contract based approach provides the necessary controls. Competitive tendering will help keep cost down.

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      I don’t see why a high enough carbon price would not result in a carbon neutral electricity sector. With a high enough carbon price it would become profitable to burn natural gas as required and then remove the CO2 released into the atmosphere and sequester it. I can do this right now for a carbon price of about $60 a tonne, or roughly 2 or 3 cents a kilowatt-hour for gas. But hopefully it can actually be done for considerably less than that. So with a sufficiently high carbon price, which optimistically could be as low as $35 per tonne of CO2, Australia’s electricity sector should become carbon neutral.

  • http://energyinachangingclimate.info Martin Nicholson

    At a carbon price of under $40, if you rebuild all of those plants and then paid the carbon price, it would cost more than replacing them with nuclear power plants.

    http://www.energyinachangingclimate.info/eiacc%202010_009.htm

    • David Hood

      Dear Martin Nicholson,

      That is very scientific and reliable of you to include a link to some references.

      It is very unscientific and unprofessional to include references that are your own papers.

      In your many articles on your website, you fail to factor in the ‘carbon footprint’ and ultimately the carbon cost that is required to build nuclear power plants.

      You also neglect to focus on the very real issues that nuclear power presents such as the dangers of fallouts, cost of decommission and containment at end of life cycle and associated carbon costs related to this.

      There is also the massive problem relating to the radioactive waste that is generated in the mining and refinement of fuel and the disposal that spent fuel present. You could also mention other issues related to nuclear power such as that presented by the threat of weaponry and missiles produced from related technologies.

      Thank you for your contribution, but I find flaws in your logic, cost-analysis and reasoning.

      Kind Regards,
      David Hood.

  • http://Www.repowerportaugusta.org PhilippaRowland

    What could work well is a carbon price to provide drive and confidence in the overall policy framework, combined with a ‘reverse auction’ style tender process to deliver the most effective and efficient decision-making process on technology, location and scale. 
    I like the idea of reinvigorating our rusty nation building ideals. Australia needs to sequentially (if not concurrently!) bring a whole suite of renewable technologies up to scale to cement the transition to 100% Renewables. Exciting to see the science beginning to confirm the possibility. Now we just need to keep building the community support to generate the political will to act.
    Walk On!

  • wideEyedPupil

    Sequestering CO2 emissions from the atmosphere! Why didn’t someone think of that before — oh yeah it doesn’t stack up :-(

    Gas extraction of transmission and networks release fugitive emissions which are the equal to or in excess of CO2 emissions from burning coal per unit of energy. Refer you to Howarth et al, the “Cornell Paper” on conventional and shale gas fugitive emissions.