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Another myth busted on the road to 100% renewable electricity

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Ten years ago it was extraordinary for scientists, engineers, policy-makers and decision-makers to consider the possibility of 100 per cent renewable electricity for a country or group of countries. However, the progress of several key renewable energy technologies has been so rapid that the scene has totally changed since then.

Solar photovoltaic modules have dropped about 75 per cent in price. Current scientific and technological advances in the laboratory suggest that they will soon be so cheap that the principal cost of going solar on residential and commercial buildings will be installation. On-shore wind power is spreading over all continents and is economically competitive with fossil and nuclear power in several regions. Concentrated solar thermal power (CST) with thermal storage has moved from the demonstration stage of maturity to the limited commercial stage and still has the potential for further cost reductions of about 50 per cent.

Two countries, Denmark and Scotland, have official targets for 100% renewable electricity, Denmark by 2050 and Scotland, which already has a lot of hydro, by 2020. To meet its official greenhouse gas target of at least 80 per cent reduction in emissions by 2050, Germany will have to achieve close to 100 per cent renewable electricity too. The governments of these countries are not just talking – they are implementing policies to achieve their targets.

Hour-by-hour computer simulations of 80-100 per cent renewable electricity are an inexpensive and informative means of investigating different options and for busting some of the old myths about renewable energy. They have been performed for at least eight countries and regions. In Australia a ground-breaking single simulation was performed by the NGO Beyond Zero Emissions (BZE) and published in 2010.

Subsequently the University of New South Wales group of Ben Elliston, Iain MacGill and Mark Diesendorf performed many simulations of 100 per cent renewable electricity in the National Electricity Market (NEM). In our initial research on the technological feasibility, we found that we could change some of the expensive assumptions made in the BZE study, namely discard the hypothetical transmission link to Western Australia and greatly reduce the large proportion of CST power stations, and still meet the NEM’s reliability criterion. We could further increase the reliability by making small reductions in the winter peak demands through energy efficiency or demand reduction using ‘smart’ devices.

Together with similar studies from the USA and Europe, we busted the myth that renewable energy cannot supply base-load demand. The old myth was based on the assumption that base-load demand can only be supplied by base-load power stations, for example, coal in Australia and nuclear in France. However, the mix of renewable energy systems in our computer models easily supplies base-load demand, although they have no base-load power stations. The real challenge is to supply peaks in demand on winter evenings following overcast days when the wind is low. That’s when existing peak-load power stations, hydro and gas turbines burning biofuels, make vital contributions by filling gaps in wind and solar generation. For a predominantly renewable electricity system, base-load power stations are redundant.

What would a 100% renewable electricity system cost? Yesterday Sophie Vorrath summarised the results of our new peer-reviewed paper on the least-cost economics of 100 per cent renewable electricity in the NEM, which is in press in the international journal Energy Policy.

The model explores scenarios for 2030 in which all existing fossil-fuelled power stations have been retired. It compares the economics of two new alternative hypothetical generation systems for 2030: 100 per cent renewable electricity versus an ‘efficient’ fossil-fuelled system. Both scenarios have commercially available technologies and both satisfy the NEM reliability criterion. But the renewable energy scenario has zero greenhouse gas emissions while the efficient fossil scenario has high emissions and so would be unacceptable in environmental terms.

We used the technology costs projected to 2030 in the conservative 2012 study by the Bureau of Resources and Energy Economics (BREE). (In my personal view, the solar PV and wind costs are likely to be lower than the BREE projections and the fossil fuel costs are likely to be higher.) Then, we did thousands of hourly simulations of supply and demand over 2010, until we found the mix of renewable energy sources that gave the minimum annual cost. As mentioned in Sophie’s article, this least-cost mix has a lot of wind and moderate amounts of solar PV and CST.

We found that the total annualised cost (including capital, operation, maintenance and fuel where relevant) of the least-cost renewable energy system is $7-10 billion per year higher than that of the ‘efficient’ fossil scenario. This is for a discount (real interest) rate of 5 per cent. For comparison, the subsidies to the production and use of all fossil fuels in Australia are at least $10 billion per year. So, if we removed the fossil subsidies we could pay for the additional costs of renewable electricity.

Alternatively a carbon price of $50-65 per tonne of CO2 would make the ‘efficient’ fossil scenario more expensive than the renewable energy scenario. A higher discount rate would increase the breakeven carbon price to the range $70-100 per tonne.

The justification for the carbon price is that it simply transfers costs that we are already paying, in terms of the impacts of climate change, to the principal cause of climate change, namely the combustion of fossil fuels. It is not a new cost, but simply a means of making the polluter pay for existing costs and so it provides an economic driver for shifting to renewable energy technologies.

However, although a carbon price may be necessary, it is not sufficient. To build the clean alternatives, so that people don’t have to pay the carbon price, we need complementary policies, such as renewable energy targets; feed-in tariffs; the Clean Energy Finance Corporation; grants for research and development; regulations and standards for energy efficiency; and government funding for railways, transmission lines and bicycle paths.

An electricity generation system based on 100 per cent commercially available renewable energy technologies is technically feasible, reliable and affordable. It just needs effective policies from our federal and state governments.

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  • Chris Fraser

    Thanks to Mark for another in-depth analysis. Though the clean prognosis is extremely good, it may be sad that the WA link would be left out. The link conjures the image of the NEM surviving until 8pm mostly on innocuous PV panels in vast WA spaces. The link seems to provide a benefit of improving access to generators, markets, and competition.

  • Peter

    There remains two separate government controlled largesse issues that cause societal damage.
    The annual fossil fuel subsidies distort their true costs: the playing field for non-fossil fuel solutions is not level, which includes non-fuel solutions. Critical mass is denied to those developing the alternatives.
    The current and historic failure to properly charge for CO²-e is a significant cost avoidance subsidy; that often is even more insidious in outcomes. The current price significantly under charges the damage consequences. Costs are again distorted; and add to the denial of market opportunities for alternatives.
    The harm wrecked by asbestos could be viewed as case study; although for the ubiquitous effects, tobacco might also be another case study.

  • Jonathan Prendergast

    Very interesting.
    I wonder if you have also included the benefits of distributed generation (PV for detached residential, Trigeneration for more dense urban centres) and the benefits this has for avoiding Electricity Distribution Network augmentation costs. iGrid have done this with their ‘Dynamic Avoidable Network Cost Evaluation
    (DANCE)Model’ http://igrid.net.au/resources/downloads/project4/4-4%20DANCE%20Working%20Paper_Final.pdf.

    I think that the intermittence of demand (ie. peak demand in peak summer and winter afternoons/mornings) is much more of a challenge that the intermittency of the renewable technologies to provide baseload. A challenge that can be met mind you.

    I also wonder if it is a bit of the 80/20 rule. Getting to 80% is easy, but the last 20% is more expensive. Would it be easier to get to, say, 150%, and export (or store as renewable energy gas) the excess during times of excess supply? This more relevant for continental nations (eg Europe, Asia) than Australia.

  • Louise

    Renewable energy produced in Portugal accounted for 70% of the consumption in the first quarter of 2013, according to data released yesterday by domestic electricity grid operator REN. http://www.ren.pt

    http://energy.seenews.com/news/portugal-renewable-energy-output-meets-70-of-q1-2013-consumption-344564

  • Louise

    German wholesale electricity prices are 32% lower than in France. So much for cheap nuclear power.
    http://www.iwr.de/news.php?id=23360
    (Original in German)
    Deutscher Börsen-Strom 32 Prozent günstiger als französischer

  • Concerned

    Peter ,I left this topic alone for a while, however groupthink is back.
    What subsidies are there on coal powered generation in Australia?
    Basically none.

    And if anyone mentions the IMF study, please look at the major flaws staring you in the face.

    The major subsidies at the moment follow renewables.
    Which is not a problem if we admit same and agree that we wish that those subsidies are acceptable. Transparency.

    • Jonathan Maddox

      There are no subsidies to coal in Australia EXCEPT

      * full tax rebate for the entire cost of diesel fuel consumed off-road by mining activities — that’s $1.9 BILLION worth of FREE FUEL to the mining industry as a whole, a little less than half of it going to coal miners.
      * tax deductions for all exploration expenses and capital works
      * long-term coal supply contracts at a fraction of the current market price for coal, locked in decades ago when mines and power stations alike were state-owned
      * publicly funded health care taking care of major negative externalities caused by coal mining and burning
      * free carbon emissions permits to most major baseload electricity generators

      There was also “contracts for closure” but that never happened.

  • JHM

    It would be interesting to see electricity spot price curves for these simulations. Intermittent renewable energy (wind and solar) should drive the spot price down to zero when available, while stored energy (fossil fuel, bioenergy, hydroelectric, and pure storage) will compete to provide back up energy when wind and sun are not enough. Also on the demand side, some demand is time flexible while other demand is not. For example, perhaps an irrigation system could reserve most of its pumping demand for periods of low spot prices (when the sun shines and winds blow). Uneven spot prices present an arbitrage opportunity to anyone who has the flexibility to buy when low, sell when high, or both. Thus, in an efficient market we should see uniformly low spot prices throughout the day, on a typical. So I am wondering if simmulations show any sort of transition to level spot prices. The early morning and evening price spikes in Germany’s spot prices suggests disequillibrium and economic inefficiency at this moment in it transition. Market participants have not yet learned how to arb these predictable price variations. So I would want to know that a simulation leads to an arbritrage free equilibrium in the spot market. Otherwise, the simulation may be missing something important. Also we should not recommend that society accepts a system that does not allow the spot market to work out obvious arbritrage opportunities–it means we’re all paying too much for stored energy.

  • Frosty Wooldridge

    If you give any country endless energy supplies, it’s like giving a mad teenager who loves video war games a machine gun in the middle of a 100,000 spectator soccer game. He will mow down everyone without realizing his own folly. To give Australia endless renewable energy means Australia will continue growing beyond its arable land capacity, its water capacity, its quality of life, its standard of living, its connection to the natural world, and worst, it will overwhelm every other creature. Endless energy insures endless growth, which, in the end guarantees collapse. Ask any 450 pound obese person how he or she likes their endless growth. Frosty Wooldridge, 6 continent world bicycle traveler

    If we don’t halt population growth with justice and compassion, it will be done for us by nature, brutally and without pity – and will leave a ravaged world. ~Nobel Laureate Dr. Henry W. Kendall