Australian industry finally sees potential in wind and solar | RenewEconomy

Australian industry finally sees potential in wind and solar

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Australia’s debate about energy costs has been framed around reports that are either ignorant or deliberately pessimistic about the cost of renewable energy alternatives. But a whole series of events is now causing industry to think differently.

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It has taken years of fierce resistance and catastrophising about the supposed cost and economic impacts from the shift from fossil fuels, but it seems that Australian industry is finally waking up to the possibilities of wind and solar.

Australia’s debate about energy costs has constantly been framed in the light of reports that are either ignorant or deliberately pessimistic about the cost of renewable energy alternatives such as wind and solar.

Industrial solar installation. Image source: Todae Solar

But a whole series of events is now causing industry to think differently. One of these was the blackout in South Australia, widely blamed – for ideological and political purposes – on wind energy, but in fact a perfect illustration of how inefficient and unwieldy the grid and the old model of centralised generation had become.

Then there is the entering into force of the Paris climate agreement last Friday, some three or four years before expectations and at a fraction of the speed of the much narrower Kyoto Protocol that preceded it.

New research, highlighting the precarious state of both the Arctic and Antarctic ice caps, the continuing records in monthly temperatures, and the rapidly closing window for action are putting on the pressure for quick action, something that will be reinforced in the international climate talks that begin this week in Marrakesh.

Industry recognises what’s at stake. As this slide from Innes Willox, the head of the Australian Industry Group shows, the Paris climate agreement means business and will require Australia reaching zero net emission before 2050.

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If you remember, Australia’s bipartisan target once was for an 80 per cent reduction in emissions by 2050, but the Abbott government dumped that when it sacked the carbon price.

The Turnbull government hasn’t even thought yet how it can get to its modest interim target of a 26 per cent cut by 2030, let alone the reality of zero net emissions barely a decade later. Industry is not impressed.

Then there is the growing reality that Australia’s coal fleet is starting to close down and will need replacing. One major factor driving this is that Australia’s fossil fuel plants can no longer continue at current prices. Some in industry and the conservative commentariat have blamed the closure of the Northern brown coal power station on government policies, but Alinta spent a lot of effort trying to get industry to sign contracts to take its output at a cost of $50-$60/MWh. No one took up the offer, so it closed.

In Victoria last week, the most powerful symbol of Australia’s high polluting coal generation sector, the Hazelwood brown coal power station in Victoria, was slated for closure because it is too old and is no longer economic to run at current power prices.

Now it is dawning on industry that there is no way they can avoid the closure of the remaining fleet of coal-fired power plants. Much of it has to be retired within a decade or two, so best that they investigate the alternatives.

And that leads us to the last and the most important factor – that the Australian debate about energy costs has mostly been framed in the light of reports that are either ignorant or deliberately pessimistic about the cost of renewable energy alternatives such as wind and solar.

The presentation by Willox provides perhaps the clearest sign yet that Australian industry has been either blind to, ignorant, or duped about the price of renewables, solar and wind in particular.

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First is his admission that recent price spikes have been driven by costly gas. Second is the admissions that, as this graph above shows, most of the information relied on by industry and government have put all alternatives, such as wind and solar, at two to three times the cost of current power.

“If this slide represents the future, why would they ever reinvest in Australia?” Willox said.

One reason they might is that everybody is in the same boat. Here’s Willox: “If this is what it costs to produce low- or zero-carbon energy, and the world is moving in that direction, then the high cost of new energy in Australia might not mean a competitive disadvantage – assuming the countries that matter are moving at roughly the same time.”

Bravo, he is is finally learning from the likes of Ross Garnaut who have spoken at length of the magnificent energy and economic opportunity Australia has in renewables.

“A second answer is that the projections may be wrong,” Willox says. “We could be pleasantly surprised by technological and commercial innovations that means new energy turns out to be cheaper than we thought.”

Yes, we could. As this next graph shows, those forecasts (now in green and gold stripes) have been beaten in Australia’s own top-start large scale renewable energy sector, and absolutely thrashed by experience elsewhere.

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The Australian projections are some of the same ones we just looked at, now in green and gold stripes. The Australian actuals are in solid green, and represent the outcomes of the ACT wind auction and the ARENA large scale solar round.

The international actuals are in solid blue, and represent contract prices for the winning bidders in a wide range of auctions and procurement processes. For good measure, recent Australian wholesale prices and price futures are depicted at the far left.

In wind and solar, Willox notes, there is a yawning gap. Competitive wind projects in the United States, Mexico and Chile are being built for 4-6c/kWh – 4-5c/kWh cents less than the Australian projection. And they are dropping fast – solar by 50 per cent in a year, wind by 25 per cent.

“Solar is becoming genuinely cheap,” he says. The contracted prices in Abu Dhabi, Chile and Dubai for $A0.03-$A0.04 per kilowatt hour is below Australia’s own historical benchmark for cheap power.

“Even keeping the on-costs of networks and reliability in mind, these prices are extraordinary – and they keep happening, with new record lows reached every few months in 2016,“ he further noted.

And he might have added battery storage as well – although he did mention it as part of the reforms that are so desperately needed in Australia, along with demand response, so that Australia can develop a smart electricity system, rather than the dumb one it has relied along for so long.

Australia could reduce its costs dramatically – probably not as much as the Middle East, but certainly a lot lower than most forecasts. But, as Willox notes, it needs policy certainty – that will reduce the cost of finance which can influence one-third of the cost.

But as Tesla has demonstrated, the costs of battery storage can and will fall quickly. Their household offering has nearly halved in price per kilowatt hour in less than a year, and that is before the much anticipated gigafactory opens.

Willox was speaking about industry, which he notes has enjoyed prices of 4c/kWh. Consumers – households and most business – have had no such luxury and are paying nearly 10 times that much after the cost of the grid, retail margins and other add-ons are included.

Now, as Bruce Mountain has pointed out, those grid costs are already being challenged by solar and storage – with obvious ramifications for the future of the grid and centralised generation.

Battery storage at grid level is also shown to be much cheaper than grid upgrades and new wires, and for micro-grids it’s role as a cheaper alternative to diesel and gas plants, and with added security, is now being widely considered.

Indeed, if the various value proposals for battery storage are considered – time-shifting renewables, smoothing out renewable output, responding to peak demand, providing frequency and other ancillary services, and as a replacement for poles and wires – then the technology is probably well and truly in the market.

What needs to happen is for the rules to be changed. This is a reasonably complex issue as it is, made more challenging by the resistance and scare mongering by those technologies who will lose their market dominance – gas peaking plants, coal fired generators, retailers and network operators stuck in old business models.

But Willox is recognising some unavoidable truths. The need to de-carbonise is pressing. Australia’s electricity fleet needs to be renewed. Nuclear – as illustrated by the citizen jury response to the idea of nuclear waste storage – is not going to happen, new coal plants won’t be built, gas is a marginal option due to its own emissions and volatile fuel costs, and the best way to bring the costs of solar and wind down to the levels of coal is to accelerate their deployment, and the regulatory and policy changes that need to go with it, not hold it back.

That is a major step forward.

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  1. David Pethick 4 years ago

    Thanks for a strong, factual piece @GilesParkinson.

    I’ve been working my way through this problem over the last six months, and I can’t see any viable alternative to significant investment in transmission, distributed generation (including storage) and utility-scale renewable generation.

    NEM consumption seems to have stopped falling, but gas prices are almost certain to continue rising whilst ORG and others are still short. There will obviously be some increased investment in maintenance of the existing coal fleet, but even TSB isn’t contrarian enough to build a new coal fired power station. A group of 350 South Australians just put nuclear back in the box it came in and purchased a new padlock.

    That leaves hydro, wind and solar. It’s going to be interesting…

    Dave P.

    • Kenshō 4 years ago

      How would promoting “significant investment in transmission” sidestep giving networks the opportunity for further gold-plating of their assets?

      • David Pethick 4 years ago

        It’s not my area of expertise, but perhaps we could open up transmission services to greater competition. Murraylink and Directlink were relatively efficient investments, built to arbitrage power flows between neighboring states. From memory, they were not built by the existing transmission operators.

        Greater transmission capacity (intra- and inter-state) is necessary for geographically diverse portfolios of renewable energy generation. Without geographic diversity, we end up with lower system security.

        • Kenshō 4 years ago

          Australia has four fifths the land area of the USA and yet we have very different population density, with the USA having 35 people/km2 and Australia having 2.8 people/km2.
          There’s been articles where a minority of grid operators have begun discussing “thin links”.
          I’ve retrained although once I was an electronics technician. At the micro level if we look at a house and compare it’s renewable energy with a country these are my conclusions:
          a) for hybrid solar systems which maintain a grid connection, solar/storage only has small shortfalls of electricity occurring over a relatively long period of time e.g. cloud in winter. Supplying this shortfall only needs a relatively “thin link” to a grid,
          b) the article mentions “demand response”, a popular concept among smart grid advocates. A single property with solar/storage never needs demand response strategies, as the inverter ramps up and down at the speed electromagnetic fields ramp up and down, accurately matching supply with demand. It is only fossil fuel generators which are slow to ramp up and down, having difficulty matching supply with demand,
          In summary if we zoom out to a country and look towards future renewable energy grids, we see there really is only a need for thin links between various geographic areas, “as long as” renewable energy can be targeted reasonably accurately to population needs. I’ve heard this termed “energy harvest at point of use”. This is a radically de-centralized distributed grid, with a minimum of poles and wires.

          • nakedChimp 4 years ago

            Yep. you’re on the right track.. just no hybrid inverters that are are made for this available yet (single dwelling, 10kW continuous, single phase completely isolated from grid, grid connection just as 3kW source for bad days, always islanding, battery bank for 3-4 days ~30-50kWh)

          • Kenshō 4 years ago

            My hybrid inverter is 6kW peak/2.5kW continuous output power and my daily usage is almost invisible to the grid. That amount of output power is enough to run a fridge, computers, router, lights and one high power appliance at once (kettle, toaster, hotplate or microwave). It’s worked well for three extended grid outages. We don’t run the washing machine, air conditioner or solar hot water booster during grid outages. The inverter also has a grid transfer ability of 50A or over 10kW for when the grid is working. With the battery bank size, books I’ve read suggest oversizing solar to cope with winter, rather than increasing battery kWh size. As you know, batteries are expensive and their manufacture produces a significant amount of CO2. Local geographic areas and townships could also have their own solar/wind/storage, reducing poles and wires to thin links between regional areas.

  2. Andrew Thaler 4 years ago

    And despite the fact that I have been banging on about it for years, one of the first natural opportunities is to back-build our wind farms with Solar PV amongst the turbines, sharing the turbines electrical infrastructure still seems to be overlooked.
    Not even is it being considered as part of new wind farm builds… I wonder why?
    AND we still only talk about Renewable Energy as if all of our energy was electricity. The high levels of Renewable-Electricity are technically achievable with present-day tech… but thats only addressing around 15% of our energy demand.. we need to do so very much more to more to a true High-Level Renewable ENERGY future.

  3. Kenshō 4 years ago

    Finn Peacock: “LG Chem does appear able to produce their battery storage at a much lower cost per kilowatt-hour than they sell them for…”

    “Yes, that’s right! My plan is to go to the United States and buy a 2017 Chevy Bolt electric car when it comes out at the end of this year. This will score us LG Chem batteries at a price that’s around 8% cheaper per kilowatt-hour than buying a RESU10 and they come wrapped in a handy mobile package called an electric car for free.”

  4. Brad Sherman 4 years ago

    I am also encouraged by the recent bid for a 2GW CSP with storage proposal for California coming in at 10 cents/kWh. This should put an end to the ‘we need fossil fuels for reliability and baseload requirements’ argument. I would assume that such a plant if located in SA could black-start the grid since it’s basically large scale thermal generation. Would that be the case?

    • Chris Fraser 4 years ago

      I’m hoping someone can tell me why thermal generation is needed for grid black-start.Could it be because being thermal it therefore has similarities with coal thermal generation that conservative folk think we need ? … or could it be because CSP drives a spinning turbine and provides ‘inertia’ (& therefore sets AC frequency and phase angle that every subsequent generator has to match) ?

      • nakedChimp 4 years ago

        Grid black-start ability just depends on your generator/converter.
        If you can match the load with your supply and stay within the frequency/voltage bands all is fine.

        • Chris Fraser 4 years ago

          Excellent nC thanks. In the perfect world you’ve got a singular, impeccably reliable black-start generator, near the centre of your NEM, with good rev control, that can handle small loads to very large ones, while everyone else with a licensed generator is coming on line. There, that doesn’t need technical language.Now we can imagine another black-start scenario armed with a string of small powered inverter chargers on chemical batteries. It may be possible to do black-starts with them, but I suspect that control for all of them would be ceded to AEMO or something, at least for a time, to coordinate signals from groups of small powered devices and their loadings.I think there is something happening now on a smaller scale to supply FCAS. The black-start solution sounds like a new investment and a bigger project, but it would not be outside of all possibility.

      • Guest 4 years ago

        Inertia. Controllable rotating masses produce the perfect sinewave, so you have less to think about line frequency. Hydro can do the job, too.

      • Brad Sherman 4 years ago

        Doesn’t need to be thermal. Just needs to be big and steady. Hydro is a good example but thermal generation can be used anywhere (not any decent hydro opportunities in SA). For example, Fitzroy Falls power station can black-start the NSW grid or so I’ve been told.

        I’m not sure if this is the right way to think about it, but I think of black-starting a bit like having a conductor available to get all the members of the choir to sing in time and in tune. I can imagine multiple small AC generation sources cancelling each other out if they aren’t synchronised (180 degrees out of phase). I believe smaller generators somehow get pulled into phase when there is a a steady dominant generator already feeding into the grid.

        If Cooma Doug is reading this, I suspect you can provide an accurate description. I used to work for a large hydropower company > 30 years ago back in Northern California, but my memory of the details of power transmission, frequency services, etc, is no longer reliable.

        • nakedChimp 4 years ago

          This is all true for generator like gear that convert mechanical motion (rotation) into electricity.
          As soon as you have power electronics to convert DC into AC it’s a different ball game.

        • Chris Fraser 4 years ago

          Those are fine analogies ?. And please keep them coming for most of the readership here I think.

        • Kenshō 4 years ago

          “The black start myth”
          This is old paradigm premises projected onto future renewable energy grids, which would never need a “black start”. When a grid drops out, local RE/storage would island itself at every level – individual properties, townships, regions, states. If any part of the fabric went offline, everything else would keep standing. Any part that goes offline is responsible to get back on its own feet. It is only old big generators that have difficulty matching supply, demand, ramping frequency and take many hours to come online. Inverters are electrical not mechanical and ramp up their output to match the load at instantaneous speed. My inverter synchronises with the larger grid in milliseconds with no effect on the onsite AC loads. In fact it can do this often, only connecting to the grid for short periods of time, to back up its peak power output. Inverters are already disconnecting from the larger grid to supply local loads autonomously, then resynchronising and reconnecting in milliseconds to back up their peak power output. Conversely, if the larger grid goes down, inverters are already disconnecting and resynchronising automatically, with no effect on local loads.
          Worst case scenario is:
          1) a state grid goes down,
          2) regional grids island themselves,
          3) state grid comes back online easily with no loads connected,
          4) in milliseconds regional grids resynchronise with the state grid, with no disruption to loads being supplied within the previously islanded areas.

          • Brad Sherman 4 years ago

            I agree we should have started the move to smarter grid technology some time ago. But, I imagine we need to work with the grid we’ve got and I don’t know if what we’ve got is capable of compartmentalising itself in the way you describe.

            I was trying to make the point that the Solar Reserve CSP bid for 2GW at 10cents/kWh ticks all the boxes that I can think of as it can satisfy the huge industrial demands that comprise what I think of as baseload, can be used to black-start an Australian grid, and could be implemented in a few years with, I assume, no modification to existing grid technology.

            I fully take your point about the flexibility of electronic battery-based frequency services, but I suspect they are a few years further down the track before they become a cost-competitive replacement for the existing energy production practices in Australia – especially if one needs to provide power in the 100s of MW range.

            The recent Grattan Inst report highlighted the fact that the structure of the ‘privatised’ Australian market does not currently include a provision for providing a market for frequency services. This situation needs to be corrected as a matter of urgency.

            The Grattan report also pointed out (and it’s never picked up on in the media) that the abolition of the carbon tax while retaining the RET completely buggered up the electricity market by driving out some gas-fired plants that can’t compete on price with old coal-fired plants when pollution is assumed to be cost free nor with wind farms paying customers to take their energy so that they can collect the RET payment at times of low demand. The economists who designed the Australian energy market have a lot to answer for given the obvious deficiencies of their handiwork. There’s a lot to be said for vertical integration when it comes to water and power.

          • Kenshō 4 years ago

            I agree, CSP projects like Solar Reserve are proposing sound like a fantastic technology to base state grids upon. Perhaps projects like Lyon’s solar/storage could work well for more regional areas and so on down the scale from city councils to smaller microgrids and local agricultural, commercial and industrial premises. With critical systems like water pumping, I think every local area could use PV for daytime pumping and rely upon local hilltop reservoirs for storage overnight. This would disaster proof our water supply.

          • Kenshō 4 years ago

            The way the inverter/charger can island itself, is by using relays to disconnect the “external AC input” on the inverter from being transferred through to the load, while simultaneously acting as a UPS by sourcing DC from the batteries and ramping the inverter “AC output” to supply the local loads. So the inverter/charger stands midway between a local site and its larger context. To do this effectively inverter/chargers also can have features such as:
            a) an additional AC output for load shedding if the provision of the peak inverter power is modest,
            b) they can supply a load from a battery while a diesel generator or otherwise is being turned on and reaching frequency,
            c) they can manage multiple external AC inputs e.g. larger grid, wind farm, diesel with these being separately programmed and prioritised, to either top up the inverters own peak power from the batteries in periods of high demand, or charge the batteries in periods of low demand (like the equivalent of FCAS except instead of balancing the inverters frequency which is always stable, the purpose is maintaining the battery state of charge,
            d) inverter/chargers are scalable in terms of adding more in parallel to increase amps and configuring sets of three into three phase power applications,
            e) if a local regional area has a shortfall of power over a particular period, they can be programmed with a power control feature to take that shortfall from a larger grid in a specific value of amps, helping the larger grid by smoothing any imports.

  5. John Saint-Smith 4 years ago

    Ok, now we’ve got the last of the intelligent, forward thinking, and even cynically profit motivated business people on board, all that remains is to deal with the politically opaque intransigent leaders of the present Federal Government. We’d like them to stop their endless scare-mongering and join us on our quest to build an ecologically and ethically sustainable economy.

  6. Peter 4 years ago

    Does anybody know the average payback in years of current wholesale solar prices?
    I know with residential its roughly a 5-7 year payback. But no idea what the wholesale payback average is in years?
    If anybody can help it would be greatly appreciated.

    • Eb 4 years ago

      Of the recently funded large PV plants (, so far I’ve only found two vague ‘annual generation’ forecasts and it is unclear if they are year 1 or average, before or after parasitic loads and other losses. Dividing forecast ‘total project cost’ (assuming the figure published by ARENA is GST exclusive) by forecast ‘annual generation’ gives Parkes Solar Farm forecast to be CAPEX $782/(MWh pa) and the Kidston Solar Farm less than $901/(MWh pa). Ignoring construction time, interest on debt, return on equity, discount rates, tax, ARENA funding, PV degradation, network loss factors and assuming a lifetime average of $20/MWh OPEX gives a ‘simple payback’ of 7.8 to 9 years if you assume each MWh is sold for $120, (daytime pool price average + Large Generation Certificate price average, GST exclusive).
      What assumption did you use for % exported generation for a residential ‘simple payback’ of 5 to 7 years?

      • Peter 4 years ago

        Thanks for the reply. I am not sure exactly how they calculate it but i have been looking at quotes and all websites claim 5 – 7 years if you do not export and use all the electrcity the solar panels generate. Most sites have a calculator also here is a link to 1 of them
        It seems quite a few variables can come into play so it is hard to be exact.

        But i am curious about solar payback in years. So based on this calculator you are saying wholesale payback is 7.8 – 9 years in Australia now?
        Seems the case for solar is growing everyday and coal less and less.

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