Not all electrons are created equal

All electrons look the same, so the saying goes. It only matters that the electricity comes out of the consumer’s power point when needed.

Modern economies and consumers demand reliability of electricity supply. The question modern electricity markets need to answer is, what is the most economically efficient way to meet that expectation? And that question is about value, not cost.

The new report, Realising the Potential of Concentrating Solar Power in Australia, confirms that, as much as they may all look the same, not all electrons are created equal – some are indeed more valuable than others.

Commissioned by the Australian Solar Institute (ASI) and undertaken by international renewable energy consultancy IT Power, the report is the result of an extensive 12 month collaborative review involving Australian Solar Thermal Energy Association (AUSTELA), the Clean Energy Council, the Australian Solar Energy Society, CSIRO and Boston Consulting Group.

The report confirms that assessments of the costs of concentrating solar thermal power used in Australia for many years are well and truly outdated.

Costs have reduced through international deployment since 2007 and, adopting even conservative cost reduction projections, the remaining cost gap can be closed within a few years.

But the report looks further, beyond the raw measures of LCOE and installed capital costs, to the value of CSP electricity generation. And it’s here that the report’s findings are most illuminating.

The value of a given amount of electricity depends on several factors other than cost:

– Time of day flexibility: Is the electricity produced and available for use at a time when it is in high demand, or at a time when it’s not needed?

– Dispatchability: How sure can we be that the electricity will be produced at a certain time?

– Network efficiency: Where was it produced, and does its delivery to consumers improve or impede electricity network efficiency?

– Environmental and resource efficiency: What are the consequences of the production of the electricity – does production consume resources, create waste or damage human health or the environment?

In a market that effectively allocates value, generation technology scoring positively on all four criteria should command a higher than average price for its output – that output is of higher than average value.

Using market data, the review tested this logic and found that a significant value premium is warranted for solar power generation, and a further premium warranted for solar thermal power with energy storage – a value factor of as much as 2 times on the energy value alone.

Accessing this value – monetising it – is the challenge for developers and owners of solar thermal power assets. Market practices in the NEM in relation to power purchase agreements, concentration of market power, continued regional constraints in the NEM and a system weighted towards incumbents are some of the barriers to be overcome.

As to network impacts, the report finds that there is technical capacity for up to 15GW of CSP in Australia, before considering major network augmentation.

The report also points to international research showing solar thermal power has potential to help improve network efficiency, particularly in grids with high proportions of more variable wind and PV generation.

Solar thermal power is a complementary technology. It can smooth the peaks and troughs of more variable generation and help address the grid stability challenges that emerge with increasing capacity of PV and wind. Gas and diesel generation can do this too, but obviously with fuel and environmental costs CSP does not have.

Appropriately located solar thermal generation, with energy storage or hybridised with gas or biomass, could defer or eliminate the need for a portion of the massive network investment – estimated with the draft Energy White Paper as over $120 billion – forecast to 2030. The Australian Solar Thermal Energy Association, working with the Institute for Sustainable Futures and UNSW, will shortly commence a detailed study into the network benefits of solar thermal generation and the value this represents.

The right incentive structures for transmission and distribution network service providers could liberate this value and deliver overall system cost benefits.

This could generate additional revenue for solar thermal and shorten the path to commercial competitiveness.

Add environmental and resource efficiency, and the value of solar thermal power increases further. Again, market mechanisms are a long way from recognising and rewarding the full value of CSP – 100 per cent renewable, zero carbon, zero waste, dispatchable power – as compared with incumbent coal, gas and diesel.

As Australia considers how to gain best advantage from the huge investment we will make in our electricity system in the coming 20 years, the evidence points to solar thermal power as having very significant value for Australia – value our markets are not currently reflecting.

But even so, there is currently a cost gap and this has to be closed – having demonstrated significant cost improvements since the acceleration of solar thermal deployment around 2007, continued CSP development is the key to continued cost reduction.

Modest Australian investment in local CSP development, both to help retire local perceptions of technology risk and to support international deployment, will help the cost reductions to flow through faster and will position Australia to be a major participant in the still-forming global CSP industry. This is a window of opportunity Australia still has open to it, at least for now.

And beyond our own electricity needs, solar thermal power offers the prospect – in a future not at all far away – of large-scale renewable energy exports to markets in Asia and beyond, using technologies such as solar-to-gas storage.

Who would doubt that Australia could – and should – be a major player in the global solar power export industry just over the horizon.

Australia needs a portfolio of electricity generation systems that provide, overall, the best fit to meet the needs of our future domestic market – a portfolio that is tailored to meet our economy’s electricity demands at the lowest overall cost, with an eye for the clean energy needs of our major trading partners.

To achieve this goal requires that we measure available options according to their value in the system, not just their cost, and their value in the longer term, not just today.

The ‘Realising the Potential of CSP’ Report provides an authoritative reference for other studies investigating the value of electricity generation alternatives for Australia’s energy system.

It is especially timely in the context of current studies by the Australian Energy Market Operator (AEMO) and the Bureau of Resource and Energy Economics (BREE) investigating relative value and benefits of alternative power generation options in the development of Australia’s energy networks and for the Australian economy.

Debate about Australia’s electricity system is moving – slowly but with gaining pace – away from a simplistic notion of lowest cost per hour of power, towards a more nuanced appreciation of the value of different generation types in modern electricity systems.

We need our market mechanisms to evolve much more quickly in that same direction. With the right market incentives in place, and a modest near-term investment, concentrating solar thermal power can deliver very significant value for Australia.

Andrew Want is the CEO of Australian solar thermal developer Vast Solar, and is the Chair of the Australian Solar Thermal Energy Association – www.austela.com.au. Andrew is a member of the Review Reference Group for the report ‘Realising the Potential for CSP in Australia.’

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