New modelling shows renewable-based system cheaper than fossil fuels

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New modelling from a group of engineers, energy analysts and IT experts in Western Australia shows that a high penetration renewable energy system would be cheaper based around existing fossil fuel generation.

The modelling, known as SIREN, looks at the West Australian grid, known as the South West Interconnected System, and shows that an electricity system with 85 per cent renewable energy will be cheaper than “business as usual” – an average of $124/MWh compared to $127/MWh – and around the same price as current costs.

Fig 1: Power Generation Capacity – Comparative Scenarios

Fig 1: Power Generation Capacity – Comparative Scenarios

A system with 91 per cent renewable energy penetration would be slightly higher ($136/MWh), while three separate scenarios for 100 per cent renewable energy would be more expensive (ranging from $157/MWh to $164/MWh).

The modelling assumed that there will be 6,000MW of wind and 3,000MW of solar PV in the high renewables scenarios, and 5,000MW of wind and 2,000MW of solar PV in the 100 per cent renewable energy scenarios. The difference in the 100 per cent renewables scenario is the addition of 1.2GW of solar thermal and storage.

The SIREN modelling template will soon be used for an updated assessment and costing of the main grid in Australia, the National Electricity Market. “We intend to use this to lobby government and show (utilities) Western power and Synergy what we have found, and what they can do,” says Ben Rose, one of the authors.

Some may quibble with the fact that it compares new investment in each scenario, but the fact remains that most of the current generation in W.A., particularly its coal assets – and indeed the rest of Australia – is reaching its used-by date and will need to be replaced by 2030. Yet, says Rose, few politicians are addressing this issue.

The results are also based on relatively conservative technology cost assessments included in the AETA survey done by the Bureau of Resource and Energy Economics.

Many of these costs, particularly the solar thermal costs used in the 100 per cent renewable energy scenarios, are expected to come down quickly, and well below the 2025 forecasts included by AETA. Most of the technologies are already cheaper than those forecasts.

The main difference between the high penetration and 100 per cent renewable energy scenarios was the use of open cycle gas turbines to provide the “balance” in the former, and solar thermal technology with storage in the 100 per cent renewable energy scenario. One scenario looked at biomass.

Rose says it is the last 10 per cent – meeting full demand – that is the most expensive. That is true of fossil fuel based systems now, where peak demand is met with expensive peaking gas plants.

A 100 per cent renewable scenario may use this technology, solar thermal with molten salt storage, or other forms of storage. The chances are that storage may already be cheaper than peaking gas plants, given the huge costs of gas in Tasmania to meet its own energy crisis.

The modelling will be released in detail at the end of the month, and made available so that people can test with their own inputs (estimated costs of technologies, demand etc).

But some of the interesting conclusions that the study came up included:

Fig 3: Effect of behind the meter batteries in ‘flattening’ demand profiles

Fig 3: Effect of behind the meter batteries in ‘flattening’ demand profiles

‘Behind the meter’ battery storage is likely to be a cost effective option for both consumers with rooftop PV and without rooftop solar. This will ‘flatten’ the demand profile, reducing the amount of expensive open cycle gas generation required.

The study also indicates that a dispersed wind and solar based system with battery storage would reduce network charges, and greatly reduce reserve capacity payments (CP) and tariff adjustment (TAP) costs – both of which are significant burdens for energy consumers in WA now.

“With hundreds of wind generators, thousands of PV installations and over thirty OCGT generators, the risk of failure of one large generator will be removed,” the authors say. “The expensive large capacity generators currently kept in reserve can be closed down and this will greatly reduce CP costs.”

Indeed, the wholesale component of consumer bills now nearly matches the forecasts under the SIREN scenarios for 2030. The basic wholesale price is about 9.8c/kWh (equivalent to $98/MWh), while reserve capacity payments (about 0.6c) and TAP for rural customers (1.6c/kWh) take the total cost to around $120/MWh.

Micro-grids with batteries will also reduce the current need for thousands of kilometres of poles and wires (and hundreds of transformers) for remote connections and new subdivisions, reducing network and TAP costs.

Fig 2: Summary of Scenario Costs and Carbon Emissions

Fig 2: Summary of Scenario Costs and Carbon Emissions

The modelling includes the following assumptions:

  1. Carbon price $30/tonne of CO2
  2. All scenarios include:
    • New-build cost of the entire electricity generation and storage components.
    • New-build costs only for transmission lines & substations additional to existing.
    • No difference in costs of distribution system (poles & wires).
  3. Cost of capital: 10% for all generation; Government low risk rate of 6% for transmission and pump hydro storage projects; 5% savings rate for ‘behind the meter’ PV and battery.
  4. There is a single load source – the Perth Metropolitan Area.
  5. Wind and solar energy costed is the energy transmitted to the major load source = (generated energy) – (transmission losses).
  6. All wind and solar energy generated is costed at the following average LCOEs (sources from BREE/AETA Model estimate for 2025 in 2015 net present value): Wind $85/MWh; Utility-scale fixed PV $110/MWh; Concentrated solar thermal (CST) with 6 hours storage: $165/MWh.
  7. LCOE for rooftop PV is costed at $65/MWh (Solar Choice website, 2015)
  8. Dispatchable (balancing) power and storage are costed differently: a fixed annual cost per MW capacity installed plus variable costs (including fuel) for each MWh of energy generated.
  9. Wind and solar generation surplus to load is still fully costed in the LCOE, even though in reality it may be curtailed or sold more cheaply.
  10. All wind turbines are onshore (land-based).
Table 1: Summary of scenario costs and carbon emissions

Table 1: Summary of scenario costs and carbon emissions

A nuclear option was not been included as it is not available in the required timeframe and has significant unresolved safety, environmental and cost issues.

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