Australia’s political class is wrestling with the issue of how big a share renewable energy should hold in Australia’s grid. At around 20 per cent now, energy minister Angus Taylor already thinks there is too much wind and solar in the network.
Labor wants a 50 per cent share by 2030, while the Greens suggest 100 per cent by the same date. The Australian Energy Market Operator is contemplating scenarios that could see the grid largely decarbonised before 2050. Private researchers suggest Australia should be aiming for 200 per cent renewables, and use the surplus for storage and the nascent hydrogen economy.
But about 700 per cent renewables – or around 700 gigawatt of wind and solar (compared to our current installation of around 10GW of large scale wind and solar by the end of 2020?
That’s the estimate that could be put forward by chief scientist Alan Finkel in his upcoming national hydrogen strategy, and it is one that has the support of Darren Miller, the CEO of the Australian Renewable Energy Agency, which has targeted hydrogen as one of its core investment themes for its remaining funds, along with grid integration, and injecting renewables into industrial processes.
“The key input into renewable hydrogen is low cost electricity,” Miller says in an interview with RenewEconomy’s Energy Insiders podcast.
“For the first time now with solar and wind prices being so low and still going down, we can see a pathway to very low cost electricity.”
And with huge Asian economies such as Japan and Korea hungry for green electricity, and without the resources to provide it themselves, Australia had a fantastic opportunity to develop an export market in renewable hydrogen that would match the current LNG market.
“If we try to make of hydrogen the same kind of opportunity as we have now for LNG, we probably need 700GW of wind and solar to produce that amount of hydrogen,” Miller says.
And, if that is grid connected, as he thinks it should be: “We will have a giant system, where cheap electricity is just a bi-product of that system.
“This idea of not having enough renewable energy will just be a weird concept that we had in the 2010s … 200% renewables is too small. It could be 6-7 times what we have in the NEM.”
Miller says that this hydrogen export market is at least a decade away, and it is still not clear whether it will emerge as compressed hydrogen, ammonia exports, or hydrogen exported as “green steel” i.e. used to make low carbon steel and other metal products.
“We are focusing on the domestic opportunity in the first instance. Unless we get to work, we won’t get experience and the cost reductions in electrolysers that we need to seize the opportunities.”.
Hence ARENA’s focus on injecting hydrogen into gas networks, even if it is not a long term solution, and in transport and in the production of ammonia.
“We should aim for that export opportunity- and if all we get is a dometic opportunity than that could be good too,” Miller says.
There are already at least two such projects in early development. In the Pilbara, the Asian Renewable Energy Hub consortium, including CWP Renewables, Macquarie Group and Vestas, is looking at a 15GW wind and solar project. On Tuesday, a new 5GW wind and solar facility was announced by a consortium involving Siemens.
Miller says ARENA is also seeing a lot of interest in hydrogen for remote power, where it can already beat the current incumbent, diesel, that costs up to $400/MWh. “We just neeed someone to take the risk with new technology and use hydrogen as a balancing fuel rather than diesel and gas.”
In the interview Miller, a former head of retailer Mojo Power, covered a range of subjects, including the scale of disruption from new technologies and business models, the need to change the rules of the market, and some of the future developments.
“We are in an incredible transition from an old centralised model using fossil fuels to new renewable energy future, which will be largely distributed, democratised and consumer-focused,” Miller said.
“It’s vitally important for the renewable transition not to be slowed down, we need to co-ordinate the distributed technology installed by consumers – we think it is important that consumers participate as equal players in the market.”
He said the pace of disruption meant it was extremely busy inside the industry, although sometimes it felt that for every two steps forward, there was one step back as the industry dealt with integration issues such as grid constraints and system security issues.
ARENA has only around $280 million of funding yet to be committed, and that will likely be committed by the end of next year, meaning that ARENA – on current plans – will be left largely managing those projects and involved in knowledge sharing.
Miller said the future of ARENA beyond that was being discussed. “The.government is considering whether there is a role going forward … Minister Taylor is positive about the role we can play …. but it hasn’t been decided yet.”
Miller predicted that the choice of a pumped hydro project – under the scheme with the South Australian government will be chosen by year end. This will provide $40 million to the best-place project.
“We are not sure that market can bear more than one (pumped hydro project) at a time . each one will eat the next one’s lunch” in terms of arbitrage. “So we’d like the best project to come forward.”
Miller also flagged some imminent announcements in solar thermal, saying that despite the failure of the Aurora solar tower and molten salt storage project near Port Augusta to land financing, the technology held promise, and could be developed at a more modular scale.
It was also import to change and adapt the rules of the market, to unlock the technology, economic and regulatory potential of large scale batteries, for instance, which Miller said could perform many of the functions currently performed by thermal generation.
“Batteries ought to be able to number of things they not being paid to do right now,” he said, adding that these included acting as “virtual synchronous condensers, and providing system strength.
“We hope that syncons will only be an interim solution,” he said of the technology that is being imposed on many new wind and solar farms, in a way that has been criticised as random and wasteful by network providers such as Transgrid.
“The rules and frameworks we have were designed for old ways of doing things. There were market signals to allow the occasional gas peaker to come into market (but) the world is changing rapidly. I don’t know that rules and frameworks we have can support the transition that we are having.
You can listen to the interview in the Energy Insiders podcast here.