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Gas shortfall presents huge opportunities for “cheaper” battery storage

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The Australian domestic gas industry is facing a crisis point, with a shortage of supply projected for two years time, and battery storage and renewable energy ready to provide a cheaper alternative.

The Australian Market Operator on Thursday admitted that shortages over the 2018/19 summer, which it said were likely to hit the electricity sector hardest, and South Australia and NSW in particular, would present huge opportunities for new technologies such as battery storage and demand management.

The warning of shortages was enough to generate big headlines in the media warning of an energy catastrophe, and the Coalition energy minister Josh Frydenberg used it to again put pressure on Labor governments to wind back renewable energy targets, and drill for more gas.

But first a little bit of context. The AEMO report makes clear that Australia actually has a lot of gas, it is just choosing to export 70 per cent of that supply to customers overseas, because it can get more money.

Keeping just 5 per cent of those LNG exports would alleviate the domestic gas shortage, but that is unlikely to happen, AEMO says, because of the nature of the contracts. “The nature of those contracts means they are not reversible,” AEMO’s Mike Cleary told RenewEconomy.

The other key point is that there is actually enough gas in existing gas fields – but according to the gas producers, it can’t be extracted at a cheap enough price to make it worthwhile. What they are looking for is extra subsidies and price signals to make that worthwhile.

But why pay more subsidies when cheaper alternatives are available?

gas prices aemoIndeed, AEMO makes clear that the price of gas, which has largely driven the huge increase in wholesale electricity prices in Australia over the last two years, see the graph above, will not be coming down.

“The increased cost of sourcing new gas supply means additional gas in the market may not translate to lower prices,” it says. It is this that presents the opportunities for other techologies, because their costs are coming down, and quickly.

And it seems those technologies are ready to compete. Tesla’s Lyndon Rive claimed on Thursday that Tesla could solve South Australia’s problems by building a 100-300MWh of plug and play grid-connected battery storage in under 100 days.

And in a separate report also released on Thursday, industry analysts Reputex said the cost of renewables and storage had surpassed gas as the ‘least cost’ source of energy supply – even if the sun is not shining and the wind not blowing.

repute storage

“Advancements in the cost of energy storage technology, coupled with significant rises in the domestic gas price, have now made wind and solar – with storage – competitive with gas in providing system reliability in the form of instantaneous peaking or load-following generation,” says Bret Harper, head of research at RepuTex.

“This means new renewable facilities, with storage, are the least cost source of firm power, and able to provide energy supply even if the sun is not shining, or the wind not blowing.

“Traditionally, gas-fired generators have been the least cost technology that could provide energy security, such as load-following and peaking services, however the rising price of gas has increased the levelised cost of any new gas build in Australia.

When we consider the ‘full cost’ of renewables to supply dispatchable power – including storage costs to ensure supply even when the wind is not blowing or the sun not shining – we find that renewables have overtaken gas as the least cost source of new firm supply,” he says.

As Reputex notes, the analysis is significant for the federal debate on energy security, and the shortage warnings for AEMO, not to mention the pressure on Victoria in particular to open up farming lands for coal seam gas.

It also supports research by the CSIRO, Energy Networks Australia and the ANU – and many other reports before that – that Australia can have a grid with extremely high renewable energy penetration, and at no higher cost. In all reports, it is likely to be cheaper, the CSIRO and ENA says $100 billion cheaper by 2050.

“As older coal and gas-fired generation leave the market, new dispatchable renewables will be able to provide energy during daily peaks, adjust as demand changes throughout the day, or provide reserve peaking generation capacity to alleviate critical situations such as those in South Australia and New South Wales,” Harper says.

“Moreover, they can now provide that service at ‘least cost’, surpassing gas”.

“Our view is that this will create a decreasing need for baseload-only facilities, with potential for states to rely on new storage technologies to provide affordable, clean, and secure energy, while improving system reliability.”

And the Reputex research is not good for the Coaliton government’s favourite technology of “clean coal”. Reputex says it is too expensive, will not be able to compete with other technologies until well after 2030, and even then will not have the flexibility required for a future grid.

“That is not good news for coal generation, irrespective of how clean it is,” Harper says.  

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  • Chris Fraser

    Mr Frydenberg cannot be sane, surely. In the fretful midst of his thought bubble, he wants to reduce renewable targets and drill for more gas because the overseas contracts are locked.I would be proposing that the gas shortage among domestic customers is a non-starter if some of the smaller consumers could, for a small hardware incentive, convert to solar and storage. See, it’s a less environmentally intrusive solution, arrived at through a slightly different thought process.Clearly, the thought this would also expand the RET is anathema to him and he wisely resorted to the usual LNP method of solving it.

    • Miles Harding

      Not insane, but fully owned by the coal lobby.

      That little black rock is working Its magic.

    • MrMauricio

      He’s sane!!!Just “owned”!!

    • MrMauricio

      He’s sane!!!Just “owned”!!

    • trackdaze

      That im afraid makes too much sense for fed government.

      Similarly if i was a massive energy user i would be looking at making my own power and storing it.

  • CaresAboutHealth

    Didn’t the gas companies commit to contracts linking the price they receive for gas to price to the price of oil, so that the fall in oil prices has dramatically affected profitability? I thought that was partly why in October 2013, Santos’ share price was over $13; yesterday it was $3.66.

    As well as the substantial cost, new research suggests that methane releases from fracking can cause a great deal more global warming than conventional gas wells, so let’s hope that Josh Frydenberg won’t use the gas shortage to “again put pressure on Labor governments to wind back renewable energy targets, and drill for more gas”.
    http://www.abc.net.au/news/2017-02-28/methane-emissions-from-coal-seam-gas-climate-change/8310932

    One of the best solutions is to switch to from gas efficient reverse cycle heating. To quote the Melb. Age ‘Heat pump’ tech could save Victorian homes up to $658 a year’, a win-win situation allowing households to save money as well as doing their bit to reduce global warming http://www.theage.com.au/victoria/heat-pump-tech-could-save-victorian-homes-up-to-658-a-year-on-gas-report-20150825-gj7gzt.html

    • Andy Saunders

      Fracking is pretty much irrelevant in this context. Most CSG wells (and indeed other gas wells in Australia) aren’t fracked.

  • phred01

    Malcolm Josh & Barnaby must be having nightmares right now Maybe they could buy Hazelwood

    • Ren Stimpy

      Yes and run it themselves…..

  • Tim Forcey

    Want to get your home or small business off gas?

    Free advice re getting your home off gas at our Facebook Group:

    “My Efficient Electric Home”.

    https://www.facebook.com/groups/996387660405677/

  • Miles Harding

    It’s amazing what that little black rock can do!

    In this case, cause an entire nation to dither, fall into a hole and then fail to see the obvious cheap and clean solutions.

  • Cooma Doug

    In future years, in most nations and perhaps here, electric cars will be the residential poles and wires. Your energy management computer will control your energy needs. This would be your car, auto pilot and perhaps nick named ” the boss”?.
    If your car is away it matters not as there is a battery at home and solar and perhaps another car. The boss is still in charge no matter where it is parked or driving.
    When your car is parked and plugged into the infrustructure town grid, it can buy sell and swap energy

    If you live in a high density unit complex your car, where ever it is 24/7, will manage your energy at home and coordinate energy sharing with the other units and their energy managers.
    There will be no blackout. Talk about blackouts in 2045 and the teenager will say WTF.
    It was in 1988 that a major energy organisation decided that a hugely expensive main frame computer was the way to go. They started the process and before they finished the project to a 20% stage, the internet science was emerging and there were PCs landing on our desks.
    The big computer main frame idea went teall sour. People we asking…whos idea was this? Via emails that took a few second on the net but 25 minutes plus on the mainframe.

    • Ian

      In the future, cars, homes , places of employment, education, shopping, entertainment and holidaying will be integrated into one device – the solar powered electric mobile home. Not only will Grey Nomads roam the countryside but also families and masses of artisans , white collar workers, seasonal farm workers and university students.

      The mobile home will be self-powered, fully connected to high-speed wireless internet and have a GPS- enabled address for delivery of goods and services. These vehicles/ home devices will be highly motorised with the interior space changing from lounge to bedroom to gym room to dining room with the swipe of a finger on the mobile phone or a simple voice command. People will be mobile enough to take job opportunities anywhere as they arise, from seasonal agricultural work in one state to a building contract in another. University study will be online and accessible anywhere, with many courses short and geared for short-term job opportunities, often integrated with the contract at hand. Cities will spring up in one place overnight only to dissolve the next as huge numbers of people shift from one gathering to the next.

      There will be no locked in contracts or poles and wires to serve this energy -independent mobile system, there may still be a grid but people will access it in random ways to exchange energy. This may appear daunting to the grid operators at first but the shear number of random energy exchanges will smooth out grid electricity movements.

  • Malcolm M

    Missing from the Coalition’s response is anything about development time. For investments decided now, it would probably be 3-5 years before additional unconventional gas became available to the market, and at least 5 years before a new coal-fired power station would be generating. Compare that with renewables of perhaps 3 months for small-scale solar, 6 months for batteries, 18 months for large-scale solar, and 2 years for wind. Furthermore, while a coal-fired power station were being built, the cost for competing renewable sources would drop by at least 20%.

    The scale of investment required to replace our aging fleet dwarfs the level of incentives that the Federal government is likely to be able to offer. Our most recent coal-fired power station was the relatively small Kogan Creek station (750 MW), which was built over a 3-year period from 2004 to 2007 for $1.2 billion, or at least $1.7 billion now. If the Clean Energy Finance Corporation were directed to invest $200/year over 5 years in a “clean coal” plant, and at least $0.7 billion could be raised from other sources, we would have one new relatively small coal-fired plant by 2022, which is the year the Liddell power station (2000 MW) is due for closure. Meanwhile there are several other coal-fired power stations of a similar era also due for closure shortly afterward.

    The electorate are quick to punish governments that just blame others without solving problems.

  • Brunel

    I do not see the point of installing 300 MWh of storage in the one building.

    Why not install 1 MWh per postcode to avoid transmission losses.

    • Mike Dill

      300 MWh distributed with the load makes sense. My guess is that 60% of the load for SA is within 30km of Adelade, and 80% is in the ten largest cities. While transmission losses are large for long wires, total losses are more for larger loads.

      • Tom

        “10 largest cities”

        If you can count 10 “cities” in SA then the definition of “city” is getting pretty loose.

        Which only further supports your argument, by the way.

        • Ian

          300MWH/14KWH=21 400 houses

          Subsidise these by 1/3 ie $3000 per house total cost to government $64 million for 300MWH fully distributed, zero transmission losses. The rest of the cost is leveraged from the householder”s own pockets.

          • Ian

            Here’s another option: set up a 300MWH storage facility for $64 million of government money with the rest provided by citizens with the plant designed to bid into the dispatchable market. Use the earnings to buy each investor a 14 KWH home battery storage system. This could be done after a 6 month to 2 year period depending on the income stream of the peaking plant.

            Here is how it would work: general wholesale price of electricity is close to 5c/KWH this can rise to 400c/KWH or more . Say this plant earns $2/KWH daily in one year the earnings would be $219 million. Ok maybe a bit much. Try $50c/KWH earnings $55million a year. This could service a loan at 5% interest paid off over 7 years of $300million – enough to buy each one of the investors a 14KWH home battery unit.

          • Brunel

            Ah, no way should government give money to houses to buy imported batteries while doing nothing for the homeless.

            It would be like the private school funding rort that Mark Latham was against in 2004.

            Just require every 457 visa worker to bring a 13kWh battery with them.

        • Brunel

          I thought in Vic they started saying village to describe settlements that have less than 1000 people in them – or whatever the figure is.

  • Tim Forcey

    The biggest renewable competitor for gas? Isn’t solar PV…

    It’s heat pumps.

    Or as they are known on mainland Australia, reverse-cycle air conditioners.

    Heat your home for 1/3rd of the cost of using gas. We do.

    Suck free renewable ambient heat out of the “thin air” outside your home, why not.

    https://theconversation.com/the-cheapest-way-to-heat-your-home-with-renewable-energy-just-flick-a-switch-47087

    • Don McMillan

      Natural gas is used to make plastics, fertiliser, many chemicals we use day to day. I do not think you can make a battery with out it.

      • Brunel

        Um, the Tesla gigafactory has no natural gas supply. Tesla wanted to force itself to be more sustainable.

        As for fertilizer, we should be feeding organic food to kids.

        • Don McMillan

          Tesla = is an assembly plant its the materials anything plastic or long chain carbons + whatever is mined & processed e.g Li, Mg, Al.
          Fertilizer a must due to size of the worlds population. Please try an convince the farmers to change.

          • Brunel

            I need not convince the farmers to change. One state in India decided to go organic 10 years ago. Synthetic fertilizers are banned in that state. Very cool. We should not be mucking around with nature.

            Maybe we can reforest Qatar or try vertical farming.

          • Don McMillan

            Become a doer – Action Action Action
            Start a protest movement against Agricultural companies that use fertilizers – Coles and Woollies forcing farmers to increase yields etc. Action speaks louder than words.

          • Brunel

            Maybe I should try to get a job despite the tsunami of 457 visas.

  • Ken Fabian

    I expect this “shortfall” to be used politically by our good old LNP and Labor probably too, in support of expansion of coal seam gas, not the diversion of existing gas supply to domestic users and especially not to support greater use of storage in aid of more renewables.

    Let’s be clear – in climate terms gas is HIGH emissions. Just because coal is EXTREMELY high emissions doesn’t change that. The only “good” use of gas I can see is as a stop gap backup to support greater use of renewables, to be shut down whenever the lower emissions alternatives are available, but for the fossil fuelers and their mouthpieces gas (CSG being a way to use coal that otherwise wouldn’t be usable) will be in a race to get that capacity up and running before that gap gets stopped by storage (and demand management and efficiency and appropriate grid upgrades).

    • Tim Forcey
      • Don McMillan

        Thousands of studies are written every year but only a few get publicity. e.g. living near gas wells increases chances of birth defects, living near plants found carcinogenics in blood and the classic gas & chemicals in aquifers. Then the report disappears, no followup by the media or anyone. Reason the accusations are proven wrong.
        The issue that puzzles me is that Giles and supporters of the website are passionately against gas exploration but show no objection to the importation of natural gas. NSWelshmen are classic I have suffered abuse from them regarding exploring for gas and now the same people demand gas supply from my state [QLD].
        AGL is planning building LNG terminals in NSW, Vic & SA to import natural gas [20 year plus commitment] from the USA. Do anyone oppose this? – Giles seems happy with it. Go Figure…

  • Sal20111

    While battery storage must be vigorously pursued, and it is, centralized energy storage like pumped hydro and compressed air is badly neglected. These two types of projects, with existing technology and financial means, can easily complement solar and wind for a 100% clean energy economy.

    And when it comes to gas, shouldn’t be excacavating at all. We generate plenty of waste to create biomethane, again totally feasible with existing anaerobic digestion technology at an affordable price curve.