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Finkel says consumers driving change, and policies need to catch up

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Chief scientist Alan Finkel has outlined the case for serious and urgent market reform in Australia’s energy markets, saying the solutions for the massive and “unstoppable” transition to a grid based around wind and solar exist, but the market structures and the supporting policies do not.

finkelIn a 58-page preliminary assessment of how Australia is placed in the “biggest transition” since the electricity industry was created more than a century ago, the five-person panel headed by Finkel says consumers are at the very centre of change.

These consumers are being battered by soaring grid costs, but they also have technologies available to them to reduce their bills and help manage the transition to a grid supporting a high level of renewable energy.

These technologies, such as rooftop solar and battery storage, are the “antithesis of the centralised energy model”, Finkel notes, and are a big test for Australia’s fleet of ageing and polluting power stations, and for its policy makers and market rules.

But, in stark contrast to the myth-making and hyperbole that has dominated the national stage, particularly in the last week, the Finkel report calmly notes these changes, and the solutions, which are ready made but not yet given the go ahead.

This lack of preparedness, it suggests, is the major reason South Australia was caught short in its blackout of September 28, and why other states may also be at risk. But it need not be so, and the answer is to look forward to new technologies and system designs, not to old centralised thinking.

Most of all it highlights, as the CSIRO did earlier this week and others have previously, that the consumers and their technologies can and will need to play a critical role in the future grid if the policy settings and incentives are right.

And on this matter, Australia does not look well placed. The Finkel review, as has been previously reported, highlights the inconvenient truth that Australia’s policy settings are lacking and are not sufficient to meet Australia’s modest Paris climate targets.

On that, it provides something of a slap in the face to federal politicians. It adds to the impression that the South Australia blackout, which prompted this review, only goes to highlight Australia’s archaic grid, and the need to accelerate the transition, not slow it down.

On the policy shortfall, it notes that the Renewable Energy Target does not extend or act beyond 2020, and its effectiveness has been undermined by policy instability and uncertainty driven by numerous reviews.

The emissions reduction fund has been focused on land-sector abatement and the safeguards mechanism, and is not calibrated to drive emissions reduction, because its baseline is set well above the current level of emissions – at 198 million tonnes of CO2 equivalent compared to the current level of 178 million tonnes.

It says options to reduce emissions include the emissions intensity scheme ruled out by the government earlier this week in a spectacular backflip, extending the renewable energy target, or through legislative closures. It says reports from others suggest that the EIS is the cheapest option.

Seven key themes are identified in the report.

  1. Technology is transforming the electricity sector
  2. Consumers are driving change
  3. The transition to a low emissions economy is underway
  4. Variable renewable electricity generators, such as wind and solar PV, can be effectively integrated into the system
  5. Market design can support security and reliability
  6. Prices have risen substantially in the last five years
  7. Energy market governance is critical

The Finkel review looks at the issue of system security and reliability, particularly in the light of recent events in South Australia, Victoria and Tasmania.

It points out that high penetrations of “variable renewable energy” (wind and solar) pose challenges to the current structure of the grid, but while solutions for increased renewables are currently available they are not encouraged by the current market design.

“Solutions are available to effectively integrate variable renewable electricity generators into the electricity grid, but we will have to change the way we operate,” the report says.

“Such solutions include intelligent wind turbine controllers, batteries and synchronous condensers, all of which can contribute to system security. But the NEM does not currently encourage their adoption.

“Emerging markets for ancillary services, required to maintain system security, have not kept pace with the transition. New and updated frameworks, technical standards and rules may be required.

The Finkel report notes that the transition to a lower emissions economy “cannot be reversed”, and residential and commercial consumers are at the centre of this change, with distributed energy resources (such as solar and storage) allowing them to become investors and electricity traders – with or without the National Electricity Market.

“Solar PV located on consumers’ premises has become a partial alternative to traditional grid- supplied energy. Australians households have invested several billion dollars in such systems over the past decade,” it says.

“Rooftop solar PV combined with battery storage can save consumers money. Instead of selling excess electricity to the retailer during the day at low feed-in prices they can store the excess and avoid purchasing electricity in the evening and night at higher retail prices.

“Advances in batteries and other storage technologies are likely to make it cost-effective for increasing numbers of residential and commercial consumers to partially or even fully disconnect from the grid and operate independently, or be supplied by a micro-grid (for example, small-scale local generation and storage supporting an entire town or suburb using its own separate network).

“Digital meters, the ‘Internet of Things’ and energy management software can help consumers trade, track and control their electricity usage to manage their electricity costs.”

On this, its conclusions are similar, and indeed incorporate, the findings of the CSIRO and Energy Networks Australia report, which suggested up to half of all generation could come from consumers by 2050, and could deliver significant cost savings if managed properly. But that process has to start now.

Finkel notes that how the NEM adjusts to these forces will be critical and a whole of system review is also required to identify where there are gaps or blind spots in the program.

And it warns that consumers face rising grid costs: Wholesale markets prices are going to rise because of increased reliance on gas, and the fact that most gas is now used for export market; network costs had soared, partly because of peak demand was forecast to rise, but didn’t. And it raised concerns about the lack of transparency on the retail component of the bill and of retail operating costs and margins.

The report also looks at South Australia, and suggests it was a failure of preparation that was the principal cause of the September blackout.

“While the September 2016 blackout was not directly triggered by an increased presence of renewable energy, the response of the power system demonstrated its reliance on services traditionally provided by synchronous generators, and a failure to fully integrate new non-synchronous technology.”

One of the issues in the blackout was the fault right through mechanisms of wind farms, which caused them to reduce output or disconnect after a series of faults.

But it included advice from the International Energy Agency that this problem had been identified and resolved 10 years ago in Europe, and in Spain the occurrences of VRE (wind and solar) generators disconnecting after a voltage dip have been reduced to zero.

finkel shareThe IEA advice also notes that several countries as well as the Nordic market, the EU, Texas and New Zealand have demonstrated that it is possible to manage the challenge of integrating a rising share of VRE generation into their electricity networks.

The biggest challenge came in countries with very high shares of renewables. Ireland, another isolated grid, had managed this by limiting the combined share of wind power and HVDC connector to 50 per cent of power demand, but is now looking to lift this limit to 75 per cent.

The UK has a new market for enhanced frequency response to mitigate the operational impact of lower levels of synchronous inertia.

Of the solutions to more wind and solar it said these could include:

  • Synchronous condensers. These are spinning synchronous motors whose shafts are not connected to a mechanical load. They consume very little real energy (machine losses), and in addition to providing inertia, they can generate or absorb reactive power to help to stabilise the system voltage and supply fault current contributions to the network. They can be purchased as new, or reconfigured from decommissioned synchronous generators. For example, at Huntington Beach in California two natural gas-fired generator units (which had been closed since 1995) were converted into synchronous condensers in 2013.
  • Synthetic inertia. New controllers are available that will transiently convert the non-synchronous mechanical inertia of a wind turbine into ‘synthetic inertia’. These are compulsory, for example, for all new wind turbines installed in Québec, Canada..
  • Power conversion systems. These allow the stored energy in large batteries to be used for a variety of power system tasks including the synthesis of inertia, reactive power control and system restart. Battery connected power conversion facilities are currently being installed in England and Wales.
  • Fast interruption of loads to correct demand and supply imbalances.

  

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  • Tim Forcey

    HEAT PUMPS FOR SPACE HEATING

    Like solar PV, using heat pumps (aka reverse-cycle air conditioners) for space heating is another way that consumers can harvest renewable energy at their own home. Cheaper than using gas for heating…

    See “My Efficient Electric Home” for tips and tricks. https://www.facebook.com/groups/996387660405677/

  • john

    No doubt this report will be given very little coverage.
    I do not expect its recommendations will be followed other than a further implementation study kicking it under the table effectively.
    I am not surprised at its findings as they follow the expected outcome.

  • Geoff

    I like Finkel, however what is the point in having him when the loony bin is just going to reject what he advises?

    • Chris Fraser

      At the very least it highlights the attitude of the loonies ?

      • Barri Mundee

        And it also highlights just who the loonies are- in case of any remaining doubt.

        • trackdaze

          Feel sorry for turnbul and friedenburger who have the fringe of the liberals to appease.

  • Rob G

    I await Barnaby Joyce’s reaction. It will go something like this “We’ve got to stop this green madness … we cannot afford the insecurity of unreliable renewables…or the cost…higher power bills…blah…blah” For a man who leads a party that will not accept science, we shouldn’t expect anything other than ignorance.

  • lin

    Fantastic that our chief scientist is a truth-teller, and has not softened the message to provide comfort to the idiots infesting our government.

    • trackdaze

      Lets presume this is due to coag’s involvement that somehow manage to balance out the extreme righties influence over the federal govt.

  • Rod

    Does the report have a title?

    I suggest “A very inconvenient truth”

    Also point 6 should be at the top of the list
    6 – Prices have risen substantially in the last five years

    • bedlam bay

      Electricity up over 75% and gas over 50% over the last ten years. Of course collusion between AER and States.

  • Ray Miller

    What a dangerous thing to do commissioning a report using a scientist at the top of his game.
    Finally the language is changing to Variable Renewable Energy VRE everyone please take note if you use “intermittent” it has a negative implications and is not descriptive of the technology and has not been used in Europe for quite some time. I also note the comments about the NEM as I have previously noted we are at least a decade behind in our little backwater pond. Maybe we should stop paying for incompetence?

    The way forward is to call all the political lies out, this week we are all drowning in the lies, how can so many Federal Ministers break their oath of office and not be held accountable?
    Thanks Allan Finkel for your fine work and courage, many Australians appreciate your efforts.

  • DevMac

    Prediction for late-breaking news on Dec 24th: Alan Finkel replaced by Alan Jones as Australia’s Chief Scientist.

    • nakedChimp

      They probably take that Lomborg dude..

  • permaculture utopia

    Finkel and team have accomplished the impossible and have put forward a range of options for integration into existing traditional assets, as well as encouraging new technologies and new money. This preliminary report is a fantastic effort of political and economic diplomacy and inclusiveness, while stepping us forward with adaptive technologies for traditional and new network assets. With the exception of the most extreme kinds of self interest and atavism, most stakeholders in the community will find themselves included and provided for.

  • david_fta

    Here’s the policy I’d suggest to Finkel (better than an emissions intensity trading scheme)

    Charge a levy ($50 per tonne of CO2 produced) on every tonne of coal used, and put the moneys from that levy into a Clean Energy Fund. Then, you give that money away by reverse-auctioning it to whoever tenders to supply lowest-cost baseload renewable power

    The money being paid into the fund would come from all the coal-burning generators, and it would go to whichever company tenders to produce the lowest-cost renewable power.

    So why set the levy at $50? Well, according to Newcastle U’s Bonnie McBain (‘The Conversation’ article “Renewables are getting cheaper all the time – here’s why”), total cost per MWh from coal-fired power currently stands at $28.70, and the cost of concentrated solar power with 15 hours’ storage is $67.20 per MWh.

    Now, if burning black coal emits about 800 kg of CO2 per MWh, then a coal levy of $50 per tonne CO2 would increase the cost of producing a MWh of power by $40 to $68.70, and $68.70 > $67.20.

    So whoever wins the reverse auction to get all that money paid by the coal burners can use it to build a solar thermal station that will outcompete its black coal burning competition.

    Competition – you’ve gotta love it.

  • Ian

    Giles, you crafty reporter you. You’ve taken this expert Finkel’s words and reported on them when actually they perfectly echo your own! You and this site have drummed exactly this message for absolutely bl**dy ages. Nothing new that this Dude is saying, but a nice summary, nevertheless.

    Our Australian situation is a little more complex than the 7 key themes summary suggests.

    For one, we have a number of remote towns with excellent solar resources, and many with reasonable wind and even geothermal resources. Up to now the power supply to these places has been expensive and paid for by the collective.

    Secondly, we have very good hydro resources in Tasmania and the snowy hydroscheme that, on their own, are not capable of supplying a decent year round continuous output, but are eminently suitable as dispatchable power. Wind farms, and solar can very easily extend the water resource simply by substituting generation capacity whilst these resources are available allowing hydro to take up the slack at other times. The rub, though, is that a decent network of high transmission lines is needed to tie all these renewable resources together. This leads to the third point, renewables like wind and large scale solar farms need space and countryside for their development, tying them together is advantageous to allow differing weather conditions over a wide geographic area to compliment each renewables development. Fortunately the 4 major cities in the South East corner, Adelaide, Melbourne , Sydney and Canberra and the major regional cities, all lie in a big triangle. Daisy chaining these together with renewable projects would create a solid foundation for a renewables electricity supply. Just count the number of wind farms that lie between Adelaide and Melbourne!

    Fourthly, batteries are always just around the corner, electric vehicles almost making their debut for years, the whole world is relying on one man to usher in an epoch of battery storage. On the one hand, this promises to disrupt the transport and energy sector, but on the other it stifles development of a healthy, renewables orchestra of wind, solar and hydro all linked together – who in their right mind would develop a pumped storage scheme in South Australia, when the mighty battery will ‘soon’ make this obsolete, the same goes for solar thermal with storage, there is the niggling question at the back of the mind. Would you spend millions on this technology when EV, distributed storage and extended solar roof tops will undercut any advantage you might have in the ‘very near future’? Maybe stick with the decrepit gas plants in the mean time!

    • permaculture utopia

      This article is excerpts from a preliminary report which gives us Finkel’s teams orientation to their research. I didn’t anticipate the preliminary report would go into into any particular generation technology in any detail. Although with your Point 1, I reckon that fits under the point Giles has listed in Point 3: “Power Conversion Systems – Battery connected power conversion facilities” e.g. RE like wind and solar integrated with storage/inverters to supply the loads. With your points about storage, I think you’ve raised some important questions around the mix of storage and what types of storage are cost effective for different applications.

  • permaculture utopia

    What I think is most needed for the chief scientists report to identify, is ways the regulatory environment can be changed to support a more distributed grid, where areas of this grid on our vast continent can stand alone – in states, regional areas, city councils, cities, remote rural areas. This is what is chiefly letting us down as a country. Outages are becoming too common and widespread, and the recent cascading systems failures of the centralised paradigm are unacceptable for service reliability, safety and even for our national security. The new grid needs to have autonomous and independent nodes, as well as remaining connected as a NEM whenever possible. A regulatory environment needs to be created to support this.

  • disqus_gF5uXVTUbL

    Benchmark for Report:
    What I think is really needed, is for the chief scientist’s report to focus primarily upon creating a regulatory environment that will enable the grid/s to evolve to overcome the recent cascading system outages. The outages appear to be more widespread than ever and increasing in number and severity.

  • DJR96

    Alan Finkel is entirely correct with his observations so far.

    All the leadership within the energy industry and the Ministers in Parliament ALL need to be fully supportive of this report. They must acknowledge the problems, even when they are of their own doing, and implement the regulations to see this transition to completion. If they aren’t prepared to do this, they need to be shunted out and let people in that will. It’s that simple.

  • disqus_gF5uXVTUbL

    In terms of the right and left wing political divide, generator technology needs to transition progressively to low carbon sources and no new renewable energy should be added to the grid without being collocated with storage. States, regions, cities and rural areas need to be capable of standing alone when needed and connecting to the NEM when networks are restored.

    • trackdaze

      There ought to be some things that arent left and right.

      This report seems to be in the middle.

  • Phil

    There are 8 reasons i went 100% off grid.We use , as always , wood for heating , lpgas for cooking and Hot water and live on a half acre block.

    1) The electricity meter reader arrived each quarter in an unmarked , never washed 20 year old car in clothing with no Identification and reluctantly showed I.D when challenged

    2) The GOC provider of that service , when i complained – twice in 2 quarters , stated finally “there is nothing we can do , they are subcontractors ” In other worlds tell someone who cares , we don’t

    3) The uptime in 2011 due flooding was 93% and we were never flooded.In any major storm the power goes out due trees not being pruned near powerlines. So in ANY normal non flood year the uptime is 97%

    4) The voltage used to rise beyond 253 volts AC rms and take out 1 appliance per annum

    5) The distortion and fluctuations on the grid were quite simply appalling. All those on grid solar inverter distortions are cumulative you know !

    6) The cost was going up way beyond inflation / CPI

    7) The floods in 2011 meant an “ESTIMATE BILL” that was 300% greater than the normal bill. They dropped it when challlenged to 50% more than normal , but more om MY TIME WASTED.

    8) I wanted a reduced Co2 Emission

    I came to the conclusion THIS IS TOO HARD AND THERE HAS TO BE A BETTER WAY.I’m off grid for water , greywater and sewer , why not power?

    SO I DID , and it’s 99.9999% uptime with triple redundancy and fully funded with 7,10 and 25 year refresh cycles of hardware at 5% per annum interest included . And that totals 12 cents a kilowatt hour for 10kwh per day average if you allow $1 per day as a network fee. So that’s $2.20 per day all up fully funded DIY

    There are some limits .If i need to do some heavy welding i start the genset and you cant run too many appliances at once.

    Life is much better now ……and NO DIRTY METER READERS WHO COULD BE ANYBODY ON YOUR PROPERTY

  • Robert Comerford

    I can’t help but think this was ‘very brave’ of a minister to commission a report without knowing what would be the result first.
    I can’t understand why they even did it, did they think the report would tell them something different?
    Meanwhile back on earth the de-carbonisation we need will never take place with these morons in charge. I thought the states might have enough guts to pull Malcolm into line but only WA and SA were in the fight.

    • trackdaze

      Cory bananas has already come out frothing about how smart people thought it wise to allow enough scope to enable a cost effective solution.

  • Analitik

    Another key point from the report (including the misspelling)

    wind and solar supress wholesale prices when they are producing. They rely on subsidies under the Renewable Energy Target through the sale of large-scale generation certificates to make up their fixed costs

    Here’s the report if you want to read it in full – http://apo.org.au/files/Resource/a_finkel_independent-review-national-elec-market-prelim_dec_2016.pdf

    • disqus_gF5uXVTUbL

      There’s fossil fuel subsidies. You’re the person who thinks renewables are limited to 15% of the mix.