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Australia’s energy rule maker hasn’t a clue about renewable energy

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The Australian Energy Market Commission is the nominally independent body that sets the rules for the country’s energy markets. You’d expect, given the importance of its role, that it would have some basic understanding about the costs of the technologies that it is dealing with.

In the case of wind and solar, it is becoming increasingly obvious that it has no idea. Over the last few days, the AEMC has released important and influential reports that simply take the breath away for the depth of its ignorance.

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This is important. The AEMC, because it sets the rules, is pivotal in the industry and has enormous influence at state and federal government levels, and holds the principal levers over the course of energy rules and outcomes.

As we reported on Tuesday, its report on the costs of the Emissions Intensity Scheme – which hit the headlines across most papers on Friday and the weekend – painted a favourable outcome for the EIS over an extended renewable energy target.

But, as we pointed out, it was based on an heroically benign forecast of gas prices from Frontier Economics, and included estimates for large-scale solar costs, in particular, that were off the planet. Without these distortions, the renewable energy target came out as the cheapest. Even their own modelling shows that, although they chose not to highlight it.

Now the AEMC has done it again, this time in its annual review of consumer electricity prices – which again hit the newspaper headlines, and, just like previous years, sought to paint renewable energy in a poor light.

It’s a report that relies on some absurd costings for large-scale renewables – again using modelling from Frontier Economics, the consultancy headed by Danny Price, the architect of Direct Action, and who teamed up with the AEMC two years ago to argue for the reduction of the RET (they won).

The basis for the cost estimate of large-scale solar stands out as an example of their ignorance.

The U.S. market will account for around 14% of installations this year, with Europe at 21% and Asia_Pacific at more than 50%, says the report. NRG Energy Read more: http://www.pv-magazine.com/news/details/beitrag/the-big-55-gw--solar-to-run-hot-this-year--says-gtm-research_100019860/#ixzz3dMji6kCG

“Our assumed capital cost of $2,305/kW and average capacity factor of 22% results in an LCOE for large-scale solar PV of approximately $135/MWh in 2016, reducing to $95/MWh by 2040,” the Frontier report says.

We’re not sure how it is they they assumed a capital cost above the ARENA costings that they quoted from. Other solar projects are already well below the ARENA costings – Sun Brilliance, for instance, has costed its 100MW solar project at around $1,600/kW.

But let’s just let that one slide because it is not really that huge in the scheme of things. The biggie is on the “capacity factor” – the amount a solar plant can produce.

Frontier assumes a capacity factor of 22 per cent. This is ancient history. Current solar projects will get at least 26 per cent, and most of the ARENA projects – because they are using single axis tracking – will get capacity factors of more than 30 per cent and up to 32 per cent.

That is probably the principal reason why Frontier – and through it, the AEMC – thinks that the cost of large-scale solar is around 50 per cent more than it actually is, and in 2040 (in their projections) will still not fall to actual current levels.

“Actually, I’m embarrassed for them,” said the head of one solar developer, who asked not to be named. “We really have to stop this nonsense.” We agree.

The AEMC, using modelling from Frontier, makes errors on wind energy too, assuming that it costs $90/MWh, when the reality is that costs for the wind farms that will be developed are way below that.

The AEMC and Frontier, however, still assume that solar is nearly 50 per cent more expensive than wind – when anyone in the renewables industry will tell you that they are pretty close to parity, if not already there.

The AEMC and Frontier, with their heads stuck firmly in their modelling, say “it is unlikely that further solar PV will be constructed to meet the LRET.”

I imagine that the 200 people or so who turned up at a solar function in Sydney last week, and the countless developers, bankers, lawyers, solar suppliers and even utilities working on such projects, would see that as a statement of such breathtaking stupidity that it is hard to figure out how it is that the AEMC wishes to put its name to it, and put it forward to ministers as a serious piece of analysis.

It’s also a surprise to Sun Brilliance, which plans to build its 100MW solar plant in WA early next year. “It’s remarkably out of touch,” says Sun Brilliance director Ray Wills. “We know some projects today are already below their 2040 predicted price!”

“It’s important for the industry to look at the projects that are being contracted today,” adds Jack Curtis, from First Solar. “The unsubsidised solar projects in Australia are currently priced at around $80-$90/MWh. Assumptions that large-scale solar will only fall to $72-$80/MWh in 2040 don’t add up.”

Wills suggests that with solar modules in 2016 already below 40c/W and with a current learning rate for solar at 26.3%, it’s likely solar modules will be below 20c/W in 2020. That could put the price of output of a new solar plant in 2020  below $A40/MWh.

But it is also the tone of the AEMC report into electricity prices that is a problem. It seeks, on all occasions, to paint renewables in as bad a light as possible: they say it is the cause of the coal-fired stations retiring, it is the cause of retail prices going up, it is the cause of instability in the grid.

There is little or no mention of the well documented surge in gas prices to record levels, or the bidding actions and price gouging by gas generators. 

Indeed, its gas price assumptions are seen by some as hopelessly optimistic, because they ignore supply constraints on the LNG gas projects in Queensland already struggling to source gas supplies, and the impact of a tight global LNG market, high net-back prices and the increasing costs of domestic production.

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The two reports reports produced by AEMC and Frontier are in such huge contrast to the review handed out in the same period by the CSIRO and the Energy Networks Australia and the separate one by the chief scientist Alan Finkel, that you actually wonder if they are talking about the same industry, or the same century.

The CSIRO and ENA and the Finkel reports came to a similar conclusion: The world is changing, the technologies to deal with the variable output of wind and solar are available now, storage is here and will help change everything, and renewable focused grids are going to be a much cheaper option than business as usual or focusing on coal and gas.

(Interestingly, Frontier also did some modelling for investment bank CLSA, which claimed that – in direct contrast to what the network operators say can be done – local grids can only absorb 35-40 per cent renewables. The networks – and you’d think they would know –  disagree: they laid out scenarios for near 100 per cent wind and solar.

(It also claims, hilariously, and also in direct contrast to the conclusions of the CSIRO, the networks, the chief scientist and just about everyone else, that “distributed energy” – solar and battery storage – is an expensive option, and twice the price of the grid. Recent analysis from Bruce Mountain shows solar and storage is already cheaper in some areas).

The main theme of the CSIRO, ENA and Finkel reviews – apart from the extraordinary technology changes that are and will take place – is that it’s high time Australia got on with making the rule changes and policy changes that could allow this “unstoppable transition,” as Finkel described it, to happen as efficiently as possible.

But that hasn’t happened because the AEMC has been part of the problem. It has refused to approve, or has delayed critical rule changes that smarter and more informed people have been advocating for years. At nearly every turn, it has sided with the incumbents, and buried its conclusions in fossil fuel thinking.

Little surprise, then, that at the recent COAG energy minister meetings, the focus has been on how to give the AEMC a kick up the backside and get it to move faster.

Perhaps COAG should just give it a kick up the backside and out through the door, along with its modellers, and find people with a finer grip on reality, and with a focus on the future, not the past.

Update: An ARENA spokesman later emailed RenewEconomy agreeing that the AEMC/Frontier estimates on large scale solar were out of the ball park.

“The average levalised lost of energy (LCOE) for the 12 projects earmarked for funding through ARENA’s large-scale solar competitive round was $113/MWh in September 2016,” he said. “Panel prices have fallen by another 10% since September, which could result in further reductions in LCOE.

“The most competitive Australian large-scale solar projects being built in 2017 are expected to be priced at around $95/MWh (LCOE), which is a significant drop from previously built projects such as Nyngan, Broken Hill, Moree and Barcaldine.

“ARENA expects that pricing in Australia will follow global trajectories, which are forecast (by BNEF) to experience a further 35% drop in capital costs by 2025. Assuming a 35% reduction in capital costs of the best in class current projects, we predict large-scale solar costs of $65 – $70/MWh  (LCOE) by 2025.”

That would be 30 per cent cheaper, and 15 years earlier, than AEMC/Frontier modelling.  

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  • john

    Well how about a ray of sunlight on this report
    Link to Cleantechnica Danish auction at 5.6C kWh with links to all the other international prices this year.
    https://cleantechnica.com/2016/12/13/danish-solar-auction-garners-5-4%C2%A2kwh-average-price-bid/
    I really think these people need to do just a little bit of reading outside of the myopic vision of the screen they have in front of them.

    • I agree. It seems to me that the AEMC senior management consists of personnel that have been in very cushy long term bureaucratic positions where “business as usual” was/is the easy way out. Clearly it is time for an injection of up to date enlightened and challenging management. AEMC really needs to lift its game.

      • john

        you have looked at the link i gave it really underlines AEMC is in the dark.
        It honestly makes me feel embarrassed to think we have people in positions and they really do not have a clue.
        Any idea how to fix this?

        • disqus_gF5uXVTUbL

          An election.

        • neroden

          Parliamentary investigation led by the Senate is my best suggestion.

  • Ken Dyer

    Clearly, the powers that be in the AEMC support the fossil fuelled, anti climate change policies of the Turnbull Government, giving them yet another excuse to do what they do best, nothing.

  • howardpatr

    Given the AEMC as a long established history of getting things so wrong why is it that Mark Butler, (ALP), and Adam Bandt, (Greens), have not been able to subject the AEMC to a comprehensive Parliamentary grilling?

  • David Pethick

    I’ll stick my head in the lion’s mouth on this one, and mount a bit of a defence of the AEMC.

    * Bad Modelling – some of the assumptions are certainly outdated, but go back 6 months and their assumptions about utility-scale solar and even gas prices might not have looked quite so bad. Similarly, I think the drop in battery prices in that timeframe has caught most people by surprise. There is the impression of bias in the assumptions, but I think it’s more about being conservative than driving the outcome they want. That said, it does make them look foolish and devalues the worth of their conclusions.

    * Rule Changes – I like any regulator that preferences market-based outcomes ahead of regulation. The AEMC looks to create a level playing field, without favouring one technology or business model over another. Anyone in this space that hasn’t read “box 2” of the stakeholder guide* should have a look. It’s a useful document and consistent with the way most regulatory managers will tell you the AEMC has operated for many years.

    * NEO – I think most people who visit this site would like to see the National Electricity Objective (NEO) expanded to include some reference to transitioning towards a low carbon fuel stack. If that were to be included, then I think the AEMC would have their hands untied. At the moment, they are working within the framework they have been given.

    Cheers.

    Dave P.

    *Source: http://www.aemc.gov.au/About-Us/Engaging-with-us/Decision-making-process/Applying-the-energy-market-objectives.aspx

    • We called out AEMC/Frontier on their modelling two years ago for exactly the same issue. Like the IEA, they rest on belief that nothing much will change, and if it does, only very slowly. The experience with wind, solar and battery storage over last decade has been for much larger falls than expected. This is recognised by CSIRO, Finkel and the networks, but not by our rule maker.

      • David Pethick

        I understand. I suppose I’m a bit more willing to take the view that their assumptions are just a bit too conservative. A different (and perhaps equally valid perspective) is that they define the desired outcome and then engineer the assumptions to fit.

        In a previous life, I used to build supply and demand models. The list of things I’ve called early/late/wrong would fill several pages. That’s probably why I cut them some slack.

        We agree on the big picture though – their assumptions look wrong in several areas, and this casts a big shadow over the conclusions they draw.

        • Chris Baker

          If they also used high gas prices your suggestion that they are conservative might wash. But to be conservative about one technology and not another suggests that they are just plain biased.

          • David Pethick

            Hi Chris – I think I’m on the record with my view on gas prices. When reading any sort of analysis of the Australian markets, I pay most attention to the “high gas” scenario because I think it’s the most likely outcome we are facing.

            I think the bias is in the method the AEMC/Frontier use to build the set of base price assumptions. Fairly clearly, they don’t take too much account of recent data points and the trend. Instead, they look at longer run averages. That’s not uncommon for regulatory agencies.

            Conversely, go and read research notes by investment bankers and you’ll often see the exact opposite – projecting every trend aggressively and mis-quoting Moore’s law at every opportunity.

            Reality probably lies somewhere between these two extremes on the spectrum.

            Cheers.

            Dave P.

          • neroden

            The solar trajectory has been on a consistent exponential curve since *1975*. Any legitimate modeling would use the known curve, unless there was a specific reason to believe that it would stall out.

            This is illegitimate modeling. It’s even worse than the EIA linear projections in the US — at least the EIA typically get *this year’s* prices right.

            Getting this year’s prices wrong is fundamentally a sign of corruption.

            Can a majority in the Senate demand a parliamentary investigation into AEMC and Frontier? Because this is going beyond mere bad behavior. This is illegitimate and smacks of corruption.

        • Matt S

          I suppose the question is whether their inaccurate assumptions are wilful or not. That may be the piece that we disagree with.

          I can perhaps understand the inaccurate starting point for pricing solar and wind, but the trajectory doesn’t align with any reasonable independent assessment or historical review, and it concerns me that Frontier use themselves as a source for this. Given this, alongside the forward gas prices are such a fundamental component of this analysis, this ‘finger in the air’ show either stunning incompetence in researching, or a wilful misrepresentation.

          The other concern I have, is this rule changing body should have a firm grip on the policy options to promote the lowest long term energy costs.The LRET has not been successful at securing low cost debt, so it unnecessarily pushes costs up. It may be a political solution, but a pretty terrible economic solution is isolation because of agency costs. It’s no accident that the State Governments are more likely to use Corbells Contract for difference reverse auctions instead of a market certificate system with an off-take requirement with a gentailer competitor. That Frontier/AEMC would ignore other options may be yet another example of wilful misrepresentation.

    • DevMac

      “The NEO states that:
      “the objective of this Law is to promote efficient investment in, and efficient
      operation and use of, electricity services for the long term interests of
      consumers of electricity with respect to:

      (a) price, quality, safety, reliability, and security of supply of electricity;

      and

      (b) the reliability, safety and security of the national electricity system.”

      It’s too open for interpretation, but I agree if it was specified to minimise carbon it would be much better / clearer. But, given that the transition towards renewables is inevitable, and the only reason renewable investment slowed down in Australia was “policy” as opposed to unsuitability (and more investment means more research which in turn drives down prices and drives up efficiency), AEMC definitely appear to be grinding someone else’s axe.

  • MrMauricio

    Its a fossil fuel market commission-with wilful blindness!!!

  • DevMac

    With all the requirements of due diligence on businesses these days, for the energy outlook of an entire (so-called advanced) country to be dependent upon the recommendations of a single economics consultancy has well and truly crossed into the realms of negligence and / or corruption.

    Questions must be asked about how all those European countries are able to do the renewables so much cheaper than Australia given our solar resources and wide open spaces in which to collect said resources.

  • BsrKr11

    this is hardly surprising…. these people are so obviously corrupt, and have been for years, it is time to advocate a complete overhaul of the process…

  • Cooma Doug

    I was with a chap today who is a senior exec in a major industrial organisation. There was a blackout briefly that delayed our lunch. So the discussion got going.
    He seemed convinced that nuclear is the solution. I almost choked on my berger.

    I suggested there is no suitable site to locate them. I asked if he would like one next to his house.

    Listenning to him was painful. He is 50 years behind the times. 12 year old child who was with us asked me on my way home if he is for real. A smart 12 year old he is but it certainly highlights one of the many problems.

    • Ken Fabian

      Very likely this same exec has consistently opposed strong climate action, especially carbon pricing, from back when nuclear really did look like the only viable low emissions option. Yet strong commitment to climate action has been and remains an essential precursor to any serious – rather than anti-renewable and commitment free rhetoric – to develop nuclear. Nuclear advocacy is so thoroughly threaded through with climate science denial and obstructionism that it is has to be in the running for title of nuclear for climate’s worst enemy.

    • Michael Gunter

      “Nook-U-ler, it’s pronounced Nook-U-ler” — Homer Simpson. Yep the best safest nuclear reactor rises in the east every morning, just add storage. Nuclear fusion burns hydrogen, sol still has lots to burn for the next several billion years, long after humans have trashed this planet I fear…. 1.5 x 10^11m is about the right distance, but sadly by adding excess CO2 we are effectively drawing Earth’s orbit 1 or 2 million kilometres closer to the Sun. #RadiativeForcing Where is Icarus’ dad, Dedaelus, when we need him? our wings are melting!

  • John Saint-Smith

    “in direct contrast to what the network operators say can be done – local grids can only absorb 35-40 per cent renewables.”
    If we were to assume, for the sake of the AMEC argument, then that would be a ‘global truth’. Therefore, all hope of a 100% non-fossil fuelled energy system without the dangers, cost, complexity and delay of nuclear power, is doomed. We will continue to add vast quantities of CO2 to the atmosphere, past a few tipping points.
    Under which circumstances, so is the planet we currently call home.

    • Mike Dill

      Obviously this cannot happen till the end of time, so they will (and have in some places) figure out how to go 100% renewable and storage.

    • Miles Harding

      I think this is a result of crooked assumptions on the part of AMEC.
      The energy source mixes in their scenarios give the game away: OCGT is a very small part, but it is the best suited to rapid response, with Coal and CCGT the majority, so the grid’s ramping capacity would be severely limited and hence 30% renewables is likely the limit.
      Shame on you AMEC.

      All the credible studies indicate that 80 or 90 % is the real limit before the (slightly more expensive) last 10% strategies are needed. This may involve keeping the OCGT, but running them from biodiesel on those few occasions when all the battery and pumped bydro is exhausted and as many loads as possible have been curtailed.

  • Richard

    Are the figures for levelised costs of solar including battery storage. If they aren’t then they are extremely misleading when comparing with base load.

    • Alen T

      They do not and it would be wrong to say they are “extremely misleading”.

      Although LCOE has its drawbacks, it has nevertheless been an accepted method for a long time to compare genation technologies.
      I assume your issue lies with its variable output or inability to generate at night. However, it is inappropriate to change the definition of LCOE or change the boundaries, which is what you are doing by raising this point. Just like coal does not include negative spillovers (social or environmental cost) solar PV should also not include its negative attributes in the LCOE.

      • Richard

        I don’t buy your analysis. I agree we should have a carbon tax but we don’t have one. the LCOE for PV/wind should include the necessary infrastructure cost that will be needed to turn it into a usable supply when base load coal generators close down.
        Ultimately the cost to the customer is the real cost. The figures for LCOE are misleading . It deosn’t do the renewable industry any favors to miss lead the public in this way. And it ultimately leaves it open to attack for being untruthful on the real costs.
        We shouldn’t descend to the level of the fossil fuel industry to sell the message.

        • Nick Thiwerspoon

          No, because with a grid diversified with regard to both supply and geographies, much less storage is needed than for an island grid. As this article discusses:
          http://reneweconomy.com.au/much-storage-needed-solar-wind-powered-grid-47605/

          We can easily achieve 50% from renewables without needing storage, at least in the eastern states. That’s still at least 5 years away. Battery storage costs have halved over the last year. They are likely to halve again over the next 3 or 4. At that point, most individuals and businesses with rooftop solar will have one day’s behind the meter storage, and the grid will have some utility scale storage. Storage can be compared to gas peaking power plants in that you don’t add it to the costs of the underlying generation method, and in fact their costs are now comparable. Though batteries will soon dominate that market.

          • disqus_gF5uXVTUbL

            This analysis merely considers increasing RE, and storage can be added as an afterthought. Local, targeted, integrated design of RE/storage will produce a cheaper distribution network with thinner links instead of traditional centralised transmission infrastructure. Your position is already being attacked and undermined by political conflict and your strategy attempts to proceed as before, much like the AEMC. No cultural or social development considered in your approach, merely got to whack up RE and can be done now without storage. This is why your critiqued as an ideologue and your premise of add RE based purely on environmental values, is about as narrow. No wonder people with your basic premise cannot secure broader support for your goals. No, skilful integrated design of RE/storage will be a knowledge base that will take time and practice – that includes politically and with regulator confidence in RE.

          • Nick Thiwerspoon

            The Tesla powerpack’s LCOE is now US$117/MWh. (all costings US) So if we add one day’s storage to the grid, wind/solar will cost $US147, About the same as coal. But we don’t need 24 hours of storage. The CSIRO’s modelling suggests “half a day’s” storage is needed to allow 100% renewables. That suggests a cost of $90/MWh for wind and solar with storage. And battery costs are still plummeting, while wind and solar continue to decline year by year. And then there’s CSP with storage which is already down to below $80/MWh for *dispatchable* 24/7 power. The grid of the future will have wind, solar, batteries and CSP, and in high latitudes (Denmark/Canada/etc) power to gas for the winter dark, with HVDC lines to connect different geographically varied generation sources with demand.

            No one–certainly not me–believes that VRE can be increased much above 50% without storage.

            AS I pointed out, consumers will be installing Tesla Powerwalls, because their price point is not the wholesale price but the retail, and the LCOE in A$ (19.6 AU cents per kWh including GST) is already less than the retail price of electricity. Imagine the demand when battery costs halve again, as they surely will! Each Powerwall can provide close to a day’s demand for an average house–14 kWh vs daily demand of 16 kWh. And it will be routine for households and small businesses to install solar plus one or more powerwalls. This will in time back up 25% of demand — and supply. That’s *without* CSP or grid-level storage.

            I really don’t see the problem.

          • disqus_gF5uXVTUbL

            I don’t see a problem either. The paradigm of choice is RE/storage and promoting it now for residential, commercial and industrial sectors builds confidence in the paradigm. This confidence will flow into the grid and the regulators will dance with us. So lets stop singing the praises of RE generation and move on to integrated design which is so much more interesting and inspiring of confidence and comfortable feelings of security of supply.

          • Richard

            I’m playing devils advocate.

            I realise battery is sinking like a stone in price, it’s just that it isn’t included in the cost of renewable generation in the LCOE figures. Neither is the cost of tying all the the different renewable energy sources into a reliable grid network, there is so much investment required. I understand that it is probably impossible to calculate with so many variables that are changing every week. But we should try. At the moment all we get is bogus figures that downplay the true cost of going renewable

            We should look to Europe to understand the true cost of transforming our energy system and how to manage it. They are well ahead of us. Bearing in mind we did have one of the cheapest power generation systems on the planet, back in the day, when fossil was king. This cheap electricity supply underpinned a lot of growth in manufacturing and general standard of living. It was a buffer against the disadvantages of distance in a remote economy.

            Imagine if you were a manufacturer that required a large electricity supply. The way things stand at the moment you would have no idea what your costs would be going forward. This is not some hypothetical situation, this is the real world. It’s going to kill business investment and jobs.

            I recognize that this problem is at the feet of the government who are doing an absolutely appalling job of trying to resolve it. In fact they have abandoned any pretense of resolving it and are now just using it as a political club.

            This is why I implore like minded renewable energy nuts, like me, to stop bandying around meaningless figures on the cost of renewables. We need a clear eyed view on the real cost to consumers and business and how that cost will come down.

          • CSIRO and the networks did the work for us last week – they costed a high renewables grid (90% wind and solar) and said it was cheaper than BAU and coal and gas. so yes, investment required, but less than in BaU again, which involves repeating network build and upgrading. Storage has multiple value points – not just smoothing out renewables, but also as grid replacement. so it is not as easy as just banging that on to the cost of renewables.

          • neroden

            Batteries compete with peaker plants or with T&D upgrades, not with regular energy generation. They have to be compared separately.

        • Alen T

          I have to strongly reject your claim that it is being untruthful or even misleading. It is entirely playing within the rule book, not bending the truth even slightly. LCOE does not take time of generation, ability to dispatch on time…etc. into account, but this is not a method that is promoted or created by the solar/wind industry. The wider energy industry, analysts…etc. are those you should blame not wind/solar.

          I’m not proposing to have a grid run entirely by that combo either, but am just starring that on an LCOE measure they are now the cheapest new-built form of generation.

          On the carbon tax, this has nothing to do with the LCOE in this case. I was simply trying to make the point that the boundary for what included in the LCOE has been established long ago, and including any extra conditions (such as the limitation of one technology while ignoring those of another) is inappropriate.

          • riley222

            Loveit, as a bozo I luv to hear you guys arguing semantics. Shows its all getting closer, which is my main aim.

          • disqus_gF5uXVTUbL

            Being semantic, seems a discussion about historical conventions and definitions… even though the regulator is obviously not happy with how RE is packaged and wrapped in low generation costs and tied in a bow of reduced emissions.

          • Richard

            Well then, the terms need to be updated if you want people to have confidence in renewable energy. The costs that are bandied around on numerous sites comparing renewable with fossil are totally misleading.
            The LCOE has no relevance to the actual cost of delivered electricity from renewable sources
            once the variability has been ironed out. And that’s all that matters.
            And I’m a big supporter of renewable energy.
            People aren’t totally stupid and we shouldn’t treat them as such.

          • So, LCOE is the absolute standard and has been used as such by IEA, DoE, NREL etc etc. Variability, as the network and CSIRO study showed, imposes no impacts or additional costs until their share gets to around 50%, apart from on the revenue of coal and gas plants. Nuclear and large coal generators also need back up plants to be built, and those costs are not factored into their LCOE – renewables are simply making use of all that back up already built for fossil fuels.

          • disqus_gF5uXVTUbL

            Well why did you install RE/storage at your property?

          • Richard

            Thanks for your responses. I should have a closer look at the studies.
            Did the CSIRO factor on dramatic improvements in battery tech within the next few years?

          • Michael Gunter

            if only *anybody* bothered to do levelized cost of NEGAWATTS, call it LCON. We must stop regarding system demand for electricity and/or gas at any time of the day or night as an inflexible quantum (e.g. the average Tasmanian demand on a clear windless winter night, or the typical peak NSW demand during a 5-day heatwave). If we had 8million solar water heater retrofits; mandatory draught-proofing retrofits of all Oz housing stock to best German practice; subsidized evaporative cooling in all non-tropical locations, and CVR 220volts AC RMS 10pm-6am every night across NEM we could make really significant inroads on “baseload” and peak demand. It’s energy services we should be thinking about: hot showers and cold beers, not obsessing too much about how to strengthen the stranglehold of DNSPs now that gas is on the nose.

            “HOW LONG IS A PIECE OF STRING?” 3 weeks ago on Insiders, Bill Shorten fell into the baited trap on renewables costing: it’s basically a deep bear pit unless all the negawatts, all the low hanging fruit are harvested first. Given the #ClimateEmergency, courageous elected leaders should be picking winners to deal with whatever greatly reduced electricity demand remains after the negawatts revolution of “economically efficient market bypass” has given a very bloody nose to the #GreenhouseMafia incumbents. OK OK tell me I’m dreamin’ because the same industry heavies make big donations to Tweedledum and Tweedledee political parties. 🙁

    • trackdaze

      Solar has been providing baseload for years.

      The NEM does not discriminate where the power comes from. You bid into the market if your is the cheapest you get the lollies.

      Solar and wind have got coals lollies. Boohoohoo.

      Now battery?nthis is where it gets interesting. The gas guys have just wet themselves on account of battery being so easy to deploy that can eat into their Wizz fizz $14G per MW when supply is tight. Again near zero marginal cost.

  • Robin_Harrison

    Don’t underestimate the lengths the fossil fool industry will go to trying to avoid its inevitable demise. Expect desperate, dirty and cunning as shithouse rats. Don’t expect logic or reason to make any difference but the economics will not be denied, and probably sooner than they think.

    • riley222

      Hope you’re right.
      Liked the ‘cunning as shithouse rats’ bit. My thoughts exactly.

  • Jon Sibley

    I think you might be missing the point Giles which is that a technology neutral approach, one that prescribes the outcome but not the method, will necessarily be more efficient than one that prescribes the outcome and method. Remember that the goal is not to promote renewables for their own sake. The goal is to reduce emissions. If this principle can be accepted then the modelling assumptions don’t really matter.

    • Ah, technology-neutral, the latest refuge of those seeking to protect the status quo. Indeed, as others have pointed out, the emissions reduction estimates of AEMC/Frontier in that other piece of research, apart from its absurd costings of wind and solar and benign costs of gas, assume no benefits post 2030 (when paid for wind and solar farms will continue to emit zero emissions) or for longer term targets. So their estimates are bogus. It is simply a ruse to try and protect the market design which is specifically for fossil fuels and commodity fuels. The idea of zero marginal cost suppliers of energy makes their heads spin and their economic models redundant.

      • Jon Sibley

        Its the opposite Giles, the AEMC is saying lets get the regulatory settings and price signals right and let the technology and the market rip. It would be weird, in the face of the massive disruption by new technologies over the past decade, for us to now think we can know what technologies are going to be the most efficient in 10 or 20 years from now. That’s why I see being technology neutral is pro-innovation.

        • trackdaze

          Trouble is they go out of their way to suggest solar wont be able to rip till 2040, no?

        • So to do that you need to set a level playing field. They have been asked to do just that, to allow demand response and 5-minute rule just an example, but have decided to erect road blocks instead. You have to do more than just say “technology neutral”, you have to allow it to happen.

          • David Pethick

            Sorry Giles, but 5 minute settlements is NOT technology neutral – it aggressively promotes the interests of a few participants in the market (batteries and possibly fast-start hydro) over all others.

            The battery lobby has jumped on this rule change to try and make their service economic. Good on them – it’s exactly what I’d do if I were selling batteries. It’s the way the game is played. It also comes at a *massive* cost to the industry, compared to a few tweaks to the good faith rebidding rules.

            Cheers.

            Dave P.

            PS Awesome thread of comments on this post! You’ve built a great community here at RenewEconomy. Congrat’s.

          • You say: “it aggressively promotes the interests of a few participants in the market (batteries and possibly fast-start hydro) over all others.”
            Actually, it mostly promotes the interests of the consumers over vested interests, and I say that is a good thing.
            Both the AER and the AEMO agree that 30 min settlement distorts the market, and we have seen how the gas and diesel brigade have been screwing everyone with their bidding patterns.
            So, yes, a change of the rules may force a few peaking plants out of business. Good. Because the result will be cheaper and cleaner for everyone as a result.
            For goodness sake, don’t pretend that 30 minute rule is technology neutral. I think that this is the big problem here – everyone wants to protect the status quo, i.e. the incumbents, over the consumer.

          • Jon Sibley

            The 5 minute rule change will underpin the development of ‘NEM 2.0’ as Finkle (somewhat lamely) calls it 😉

          • David Pethick

            C’mon Giles – I’m working full time on a startup that promotes sub-utility scale renewable energy through people power. Do you really think I support the status quo?

            I will defend the 30 minute rule. It allows the largest possible group of consumers and technologies to respond to a price event. The 5 minute rule change would discourage a response from lots of those alternatives (e.g. C&I demand response, gas-fired power stations) and shift value to batteries.

            I might support the rule change when batteries have already been widely adopted, because it would be more efficient. Right now it would cause chaos in our spot markets and that flows through to everything else. Thankfully, it has little chance of getting up.

            Cheers.

            Dave P.

          • Richard

            This is why we need an intelligent government that is prepared to regulate the change.
            This is about bringing down emissions in the electricity sector.
            Unfortunately the current mob is at war with itself at this most basic level. And the other mob isn’t much better.

            Clearly batteries are the future and costs are plummeting while Gas prices are out of control and leave us at the whim of the international fossil fuel markets. – Thanks IPA and the neo cons. How free is the trade in fossil fuels? NOT

            If we want to escape the controlling system then we need democratization of energy.

            That can only be achieved with renewable energy plus battery/storage.

            It’s coming and no state or institution is going to control it. It will be like an “internet of energy”

          • David Pethick

            Hi Richard – I think we might come at this from two different angles.

            I believe the last thing we need is more government regulation and intervention. Already, the market is pricing out fossil fuels as a source of electricity for Australia. Coal is too risky and gas is too valuable. On current trends, renewables + batteries + transmission capacity will be the foundation of NEM 2.0.

            A period of regulatory stability would be of the greatest value to the market right now, rather than yet another divisive political argument about different forms of carbon pricing.

            That’s just my $0.02/kWh worth…

            Cheers.

            Dave P.

          • Richard

            Hi David,
            Thanks for your comment. I understand your point of view.
            It must be an interesting space right now being an investor in the energy system in Australia.
            Lets get a few facts straight to start with.

            Government regulation and intervention is at the heart of why coal is on the way out(although it will still be a big player for awhile yet). Otherwise we would just rebuild the coal plants with new more efficient ones and carry on.

            The global government regulation/intervention has been the key driver
            in the development of renewable technology. It never would have happened left up to the free market.
            So when it comes to saving the planet the market must be controlled.
            You might say that is a different argument but that is what has driven this change, action on climate.

            Incredibly and against most market predictions that transformation has been phenomenally fast. To the point where it is no longer viable to invest in fossil fuel plants going forward. Unless they are guaranteed a specific return on investment(more regulation).

            To manage this huge disruption and ensure that lights are kept on. We not only need smart regulation we need a government that hasn’t got it’s head in the sand on climate change and continues to use energy policy as a political club.

            This is too important to just leave completely to the market, at least while the change is taking place. We have to maintain affordable electricity for those who can’t afford solar panels for instance, in the short/med term. And provide stable pricing for business.

          • David Pethick

            Well made points Richard. You are absolutely right about government intervention being a critical catalyst for the start of the renewable energy industry.

            My (perhaps poorly made) point is that we are now at the stage in the cycle where regulatory stability has greater value than further intervention. If there were no further policy changes and the AER/AEMC/AEMO were all just left to do their jobs, I think renewables wins out over the next decade.

            Your point about controlling some of the less desirable outcomes (e.g. energy poverty) is well made, but one I’ll respectfully disagree with. I think it’s dangerous to look at every disruption to an existing market through the lens of social equity. It’s how we end up with something as simple as a switch from analogue to digital television resulting in $300m* being spent assisting pensioners to “keep the TV’s on”.

            Cheers.

            Dave P.

            *Source: http://www.goodgearguide.com.au/article/385921/government_308_8m_digital_tv_package_explained/

          • Richard

            Will the market be able to keep the price down for grid only people, flat dwellers etc? Electricity is an essential service. It seems unfair and unreasonable if the people least able to afford it are gouged so the utilities can maintain profits from a falling market share position.
            The problem is a lot of these people don’t check the value on their bills and just stay with the same company.
            I know the market deosn’t care if a sucker gets an uneven break. But governments need to protect vulnerable people, or at least try to. I know they usually stuff it up!

          • Richard

            Also David, another important point I forgot. We are living in a world where the disparity in wealth keeps growing. Energy policy needs to be bear that in mind.
            Cheers

          • Michael Gunter

            Aussie battlers, say living in public housing, need their total energy SERVICES spend to flatline of fall. This can happen e.g. with a doubling of the electric energy price and a halving of kWh purchased. More widespread public action to fully embrace negawatts (market bypass anti-monopolist actions to provide self-serve energy services) can shrink the electricity market and — accepting the tenets of economic theory — should delay, mitigate or prevent price hikes to end-of-the-line consumers, residential and small business.

          • Jon Sibley

            The AEMC will support the 5 minute rule change – that’s my bet anyway! The delay in that is due to the need to develop a stronger base of evidence/analysis to combat the resources the incumbents are putting into it.

          • I think you are right! But that wasn’t their original intention!!!! ( i suspect we may have had some influence there).

          • Jon Sibley

            Yes, Dean from Reposit has also been a key influencer. Go Dean!!

      • solarguy

        Well said!

      • Mark Duffett

        “post 2030 (when paid for wind and solar farms will continue to emit zero emissions)”

        Will they? How many? Post 2030, most of the current fleet will be within a few years of decommissioning. https://www.cleanenergycouncil.org.au/dam/cec/technologies/wind/fact-sheets/Wind-Energy-Fact-Sheet-4-Decommissioning-Wind-Turbines.pdf

        • Good question. Let’s look at their numbers. Under their high RET scenario, they expect 26,000MW of new wind and solar to be built, mostly in the second half of the decade. Which means they have only factored in one, two, three, four or five years output from the emissions free wind and solar for the bulk of the renewable capacity. That means they have forgotten about 20 years at least of output. Thanks for pointing it out.

          • Mark Duffett

            No worries, Giles, any time. It was just that I read your initial comment as implying already built solar and wind would produce indefinitely.

        • Mike Shackleton

          Will they be decommissioned though? I would have thought a more appropriate term would be refurbishment. The towers themselves, the foundations and the transmission lines would all still be viable. The blades and nacelles might be swapped out, but the changeout time would be nothing compared to the original construction. Maybe all that would need to be changed are the bearings/mechanical components.

        • neroden

          Solar panels are practically never decommissioned for technical reasons. Sometimes they’re taken down to be replaced with higher-powered solar panels. Sometimes they’re taken down because the building they’re on is taken down. Usually they just get installed somewhere else!

          Reminder: solar panels from the 1970s are still running. That means a minimum 40-year lifespan. Probably 50 or more.

          • Mark Duffett

            They are still running, yes, but their efficiency degrades steadily with time. Though quite variable (i.e. there are outliers at either end such as the examples you mention), 0.5% loss per year is typical, according to a large study http://www.nrel.gov/docs/fy12osti/51664.pdf. That will mean decommissioning eventually, one way or another.

    • disqus_gF5uXVTUbL

      Models change like the wind rustling in a political party. Models are as fickle as politicians and their advisors who create them.

  • disqus_gF5uXVTUbL

    I’ve created a new policy platform for governing the country. It’s called “trickle up economics”. Imagine a lake with a rising water level, where the water is the increasing wealth of a community. The more the poor and middle classes exchange money and splash the wealth around, the more it appears to rain and the water trickles up the hill to where the filthy rich reside. The AEMC needs to realign it’s modelling to produce an abundance of electricity, so the wealthy take a little share of the profit for distributing the collective wealth of the planet and the sun.

  • disqus_gF5uXVTUbL

    The meta of this whole process:
    Giles has written an article incredulous the AEMC have procured reports with conclusions based upon manipulating data. So there seems to be a model underpinning the purpose of the models. The Coalition changes the surface model when it doesn’t serve the original antecedent blueprint model. This model doesn’t appear to serve the community and appears to serve the incumbents, so the model appears more based upon maintaining a status quo of trickle down economics, and is correlated with the data showing trends in the wealth distribution of the country…
    http://theconversation.com/land-of-the-fair-go-no-more-wealth-in-australia-is-becoming-more-unequal-63327
    If we accept the AEMC is procuring reports not based upon data of renewable energy projects in the field, but on actualising a political platform, trickle down economics, and we have different values, this proves we need to beat the grid into submission and make it truly begin to serve communities. The way to do this is not advocating strategies that will further promote gold plating big centralised infrastructure but moving more towards more curtailed infrastructure of a truly distributed grid, by primarily promoting the distributed paradigm with targeted local RE/storage. The time is not ripe for macro level policy change and no one hanging off the grid can get a financial winner without focusing upon integrated design of co-located RE/storage on our properties, in our agriculture and our commercial and industrial enterprises. We the community need to subdue the grid by getting stronger and better at implementing our own resources, creating a bit of load defection and teaching the AEMC we’re a significant stakeholder. Then the AEMC, like the AEMO, will accept networks are to be re-visioned from enterprises trickling down wealth from traditional centralised big business interests, to instead work for us sharing our distributed energy. This could be a painful birthing process for grids if they don’t flow with this evolutionary life giving process, though all in all it is necessary for our communities to have access to abundant energy and begin to restore ecological balance.

  • solarguy

    Question.
    Is the price of 40c/w for PV modules a bulk buy price direct from the manufacturer for utility scale projects? Can anyone confirm?

  • Bonadoochi

    Thanks for your commentary Giles. You provide a valuable journalistic voice of enquiry as we chart this energy transition. However I must say that I do not share you disdain for the AEMC and would suggest that they make every effort to be technology neutral in their determinations. There is always room for improvement in modelling so I am sure the AEMC’s future consultations would benefit from your formal involvement by way of submissions on draft determinations to help guide policy development.

  • Phil

    I think a considerable portion of the consumer market will Divest of up to 90% of the grid consumption starting in 2018 when the Tesla Powerwall 3 is likely to be released

    The Powerwall 2 is almost revenue neutral over 10 years funded at 5% for a 20kwh per day household in NSW with a 5KW solar array

    If TOU ( time of use) at Sydney metro rates is taken into account it IS revenue neutral now for families where no one is home weekdays.

    If Tesla are able to decrease the Powerwall cost per kwh by say 30-50% the uptake will be quite simply ENORMOUS

    This will lead to significant stranded Grid Assets by 2020.

    Quite frankly someone will have to pay , so who knows how the grid costs (and profits) will be funded.

    It will most certainly be the politicians and voters that elect them that determine
    this.

    • neroden

      Tesla is likely to reduce the Powerwall cost by 30% by 2020 (that’s basically what they said they thought they’d be able to do)

  • neroden

    What the hell is going on over there? The AEMC/Frontier report
    is balderdash and there’s no way government should have paid for it. This smells like corruption, and even if it isn’t, it’s misuse of government resources on a grand scale… I’m not sure what the correct approach is.

    Perhaps the Green Party members of the Australian Senate should be contacted. They could demand a formal Parliamentary investigation into the incompetence, and possible corruption, of the AEMC, perhaps? Bet you could get Nick Xenophon to back the demand too. And probably Labor would go along eventually. It could be a way of massively embarassing the Turnbull government… *or forcing them to appoint new AEMC members who know what they’re doing*.

  • Bill Evans

    COAG might shake the AEMC cage at the zoo and see how many monkey’s fall out, but sometimes, in order to see real change, you need to replace all of the monkey’s at the same time. This is one of those times.

  • It is true that the National Electricity Rules need to change.

    In addition to solar and storage, local electricity trading will also help to make energy supply more economical. Read, sign and share this petition to change the national electricity objective (NEO) to consider environmental impact and reconsider the change request to allow Local Generation Network Credits or otherwise facilitate local electricity trading.

    https://secure.avaaz.org/en/petition/The_AEMC_Reconsider_the_change_request_for_local_electricity_trading/edit