Australia’s $10 billion wind and solar boom: But then what? | RenewEconomy

Australia’s $10 billion wind and solar boom: But then what?

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A $10 billion clean energy investment boom in 2017 could quickly fade without longer term policies. Labor tries to wedge Turnbull on climate policy, just as it did in 2009, while the Greens also say they would look at a Clean Energy Target.

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Australia’s clean energy industry warns that Australia’s current $10 billion splurge on large and small-scale renewable energy will not last unless the policy chasm that looms in 2020 is bridged.

Kane Thornton, the head of the Clean Energy Council, says its data shows there are some $8 billion of large-scale renewables under construction or committed in 2017, and a further $2 billion will be invested in rooftop solar by homes and businesses this calendar year.


“We are truly in the midst of an energy revolution,” Thornton said, pointing to the halving of generation costs of wind and solar in recent years and the “digitisation” of the energy sector.

But he said 2020 – when the current renewable energy target that is driving this growth, at least in large-scale generation – “loomed large”. The industry fears falling off another investment cliff, just as it did in 2013, after the Abbott government looked to scarp the renewable energy target.

He said it was “time to be practical, not political.”

Labor is seizing on the federal Coalition’s resistance to the proposed clean energy target to once again “wedge” Malcolm Turnbull, just as it did in 2009 when the current prime minister was leader of the Opposition, but was ousted because of his support for the CPRS proposed by the then Rudd government.

Turnbull and energy minister Josh Frydenberg should be expected to embrace a CET, but can’t because of the strength of the conservatives within the party. The Institute of Public Affairs this week said a survey it had conducted suggested more than half of Coalition MPs were climate skeptics.

But it seems that even economics are unable to win them over, and Labor is striking hard, with Opposition leader Bill Shorten on Tuesday declaring that his party was willing to meet “Malcolm in the sensible middle” and embrace all 50 of Alan Finkel’s recommendations, including the CET.

He proposed Frydenberg should sit down and negotiate a CET with Labor’s Mark Butler – in the same way that Penny Wong and Ian Macfarlane did on the CPRS nearly a decade ago – and bring an end to the so-called “climate wars;” a reference to Butler’s new book documenting the last 10 years of climate politics,

“Let’s get to work on a price on pollution now,” Shorten said in a speech to the Clean Energy Summit. “Let’s get the legislation into the parliament and through the parliament this year, so it’s not buried or derailed by an election campaign.”

bill shorten tweet - media release.

Shorten pointed to Turnbull’s embrace of a carbon price and an emissions trading scheme exactly two years ago (see Tweet above).

“That will require us to rise above politics-as-usual, all of us … to stare down vested interests and the familiar voices of those who profit from the status quo,” Shorten said. “I’m up for that challenge – even if that means making life a bit easier for Mr Turnbull.”

Greens leader Richard di Natale said his party would prefer an expanded renewable energy target rather than a CET, but would also keep an open mind on a CET, depending on the details. The critical issue, he said, was the level of the emission targets.

Di Natale used the story of a Japanese soldier kept on fighting 29 years after the end of World War II. “He was completely ignorant that the world around him had changed. Does that sound familiar?

“We know there is no future in coal ….. the gas industry is destroying itself through greed,” he added. The Liberal Party had chained itself to CCS “fantasies” and ultra super critical coal plants.

“No financier anywhere in the world will invest in those projects. Only our state and federal governments will put money in these god-awful projects.”

Di Natale’s estimate that clean energy – wind and solar – was clearly the cheapest form of new generation was supported by Don Harwin, the energy minister in the NSW Coalition government.

“Clean energy is the least cost new technology in NSW,” Harwin said, underlining the split within the Coalition that was highlighted in a remarkable speech on renewables, last month, that underlined how the Far Right had hijacked Australia’s energy policy.

On Tuesday, he reiterated that the proposed Snowy Hydro 2.0 pumped hydro scheme showed that what is old could be new, but could be a game changer, able to support 5GW of new renewables.

“We need to end the culture war – we need to let economics and engineering guide policy,” he said. “We need credible policy, it doesn’t need to be perfect. We can’t let the perfect be the enemy of the good.”

Harwin also dismissed the push by conservatives in the Coalition for the government to build a new coal-fired generator. “

“We don’t support government getting back into generation,” Harwin said, adding that it had to be up to the private sector to invest and take the risk.

Victoria energy minister Lily d’Ambrosio said the state Labor government had “some issues” with the Finkel Review, but was keen to get on with a CET because it would take time to implement.

“We can’t wait another six months, or another a year, or until next election,” she said. “We all know our energy system is being transformed. It is responsibility of governments to show leadership … but it will happen with or without national leadership.”

AGL CEO Andy Vesey agreed: “It takes time to deliver solutions. It doesn’t happen tomorrow. We don’t have a lot of time.”

And Vesey warned that Australia could miss out without policy certainty. “Capital is very nervous. It wants certainty or it will go somewhere else. You have to give capital security and you do that by giving it certainty.”

He also said that any CET needed to take climate targets seriously, otherwise the mechanism would be ineffective.

His comments were echoed by the head of GE Renewable Energy Jerome Pecresse, who said capital will flee to jurisdictions with clear policy.

But Pecresse also cited the US, where policy had changed but renewable investment continued because renewables were cost competitive, and state governments had their own targets.

Origin Energy CEO Frank Calabria said he had “not lost hope” on a CET being agreed, but noted that policy uncertainty had been missing for years. “Even without that policy, technology costs will continue to come down” but the transition would be more volatile if without clear policy.

Victoria, Queensland, South Australia and the ACT have vowed to “go it alone” on a CET – even the ACT which is the last place to need one (having committed to reach 100 per cent renewables by 2020) – and have asked the AEMC to work on how a state-based CET might work.

The federal Coalition has tried to fight this wedge with another wedge, seeking to embarrass the Queensland Labor government by asking the Australian Energy Regulator to investigate market gaming by the two big state-owned generators.

But Queensland is not alone on this charge. In fact, as networks, retailers and politicians have observed, the gaming is rampant right across the country, but Queensland has its pulled its pants down around its ankles because it instructed its generators to stop, and since then the state’s prices have fallen like a stone.

Frydenberg’s intervention has one advantage. It does highlight that the bulk of the price increases are the results market manipulation, and dealing with market rules, and giving the regulators more power, are essential to reducing prices.

The AER will undoubtedly say of the Queensland generators that it looks bad, smells bed and feels bad, but it is within the market rules. As South Australia’s government has been saying for a while, it’s proof that the market is broken.

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  1. john 3 years ago

    Giles lots of typos in article.
    Obvious as sin the gaming of the market rules in place has no method of fixing other than going to a 5 minute rule.
    To venture into using a capacity payment is perhaps not the way to go.
    Sustained base price will not allow coal generators to survive they need those high spike prices to carry on.
    Once enough distributed Renewable Generators are in place the outcome should be a stabilized cost of power supply.
    This is going to take a lot more than is in the system atm.
    Providing backup be it fresh or salt water pumped hydro storage or for short term battery to allow start up of gas to bridge a gap is an imperative.
    It would be good to see concentrated solar and storage built and as far west of the east coast as possible.
    On that note connecting Western Australia to the eastern grid would allow the evening peak to be mitigated with cheap solar.
    Perhaps the East could help the West in the morning however the cost of build may curtail this venture in the short term.
    I have noticed mention of nuclear as the best price solution.
    Not today not on today’s costs nuclear will not ever be competitive, however expect it to be tossed into the basket.
    Build as much RE in as many distributed places as possible, provide backup storage, curtail the gaming of the price of power by incumbent generators.

    • Mark Roest 3 years ago

      Re “Providing backup be it fresh or salt water pumped hydro storage or for
      short term battery to allow start up of gas to bridge a gap is an
      No, we DON’T use short term battery to allow start up of gas! We use enough solar and wind to be able to fill a large-enough battery buffer, sufficiently to meet the longer-term shortfall that is likely to be brought on by major wildfires or long storms. And we keep increasing the total size of that system as we rapidly replace internal combustion engines with full battery electric, or battery-electric-with-range-extender.
      That is the way to, after the systems have paid for themselves with savings in about 2 to 5 years (assumes batteries at $100/kWh, by 2021), have the cost of energy fall to nearly zero, adding ten percent of gross domestic product in spending power for the nation (that’s how much is now spent globally on energy).
      That also gives resiliency — when there is such a fire or storm, lots of vehicles can be left at home to supply Vehicle2Grid, and people can ride together both to allow for such V2G support, and for safety in numbers.
      And it works the same way for the rest of the world. That’s the whole systems way of thinking.

      • Ian 3 years ago

        Hear, hear. Most likely, in the next 5 to 10 years, personal transportation will be electric – battery vehicles. The majority of suburban homes and businesses will have solar and battery storage. The grid will become supernumerary to these people. That is how energy is trending right now.

        How will the grid have any relevance in that situation? Will anyone care in 10 years if the grid is supplied with electricity generated by fossil fuels or large scale renewables, or even if large scale storage will be utilised any more than the Wivenhoe pumped storage scheme is used now?

        To reverse the death spiral trend in the electricity grid, power prices need to drop to about 15c/KWH on average. People will then not bother installing batteries and will think twice about excessive rooftop solar. They will rather spend their money on EV and will not care where they recharge their vehicles.

        Once EV get going and become cost effective a new type of death spiral will occur. That will be liquid fuel importation and distribution. At some time the number of ICE vehicles may have dwindled to the point that fuel pump stations may start closing down making liquid fuels rare and expensive.

  2. Brunel 3 years ago

    Given that electricity is more expensive in SA compared to a Vic, I think there is a lack of transmission capacity.

    A bit silly for SA to build gas power stations. An UHVDC transmission line is needed.

    • Peter F 3 years ago

      UHVDC still needs a power station at the other end.If SA duplicated the proposed AGL station with reciprocating plants that is the lowest overall cost long term backup power for the proverbial 3 days without wind and sun, It can be scaled and it can be distributed to places like the Eyre peninsula and Mt.Gambier and its standby operating costs are much lower than gas turbines and it doesn’t have a single point of failure.

      SA overall is better to increase wind and solar PV backed up with solar thermal pumped hydro, power to heat and batteries.

      Any investment is a balance between operating costs capital costs and reliability. More renewables, storage and limited use high capacity gas is probably a far more reliable low cost investment than more interconnectors

      • Brunel 3 years ago

        When it gets too windy, the wind turbines shut down – ironically.

        And if wind is the cheapest source of electricity, the UHVDC transmission line can transmit the electrons to another state.

        • solarguy 3 years ago

          Perhaps you have a point with UHVDC, it does make some sense, but what of the cost? BTW wind turbines can slow down in very high winds, 1. By furling the blades 2. By using electro magnetic brakes. Tornado’s all bets are off.

          • Brunel 3 years ago

            I can not remember now but I know that India has several of them.

            If 3rd world India can afford it…

            And each UHVDC transmission line will probably last 50 years. Certainly longer than the 12 submarines – which will last only 35 years each.

          • solarguy 3 years ago

            But tells me nothing about the cost per 20km.

          • Brunel 3 years ago

            Dude the AFR article says U$1 billion for a 1100 km long HVDC or UHVDC line currently under construction in USA.

            “The Plains and Eastern Line, as it is to be known, will carry 4,000MW.”

            “the deciding factor in AC’s favour in the 19th century was the transformer. This allows AC voltages to be increased after generation, for more efficient transmission over longish distances, and then decreased again at the other end of the line, to supply customers’ homes and businesses. At the time, direct current had had no such breakthrough.

            When one eventually came, in the 1920s, in the form of the mercury arc valve, AC was entrenched.”

          • Peter F 3 years ago

            Latest estimates I found for the line is $US2.5b (A$3.3b). we do not want a single 4GW line. Two 1.3GW lines would make much more sense one to Melbourne region and one at least as far as Canberra. Overall cost probably about $A3.5b. At WACC of 7.5%. capital charges are $285m per year. Maintenance and operation around $100m i.e. total cost around $350-400m per year

            Assume it moves 20% of SA annual demand to SA and half that amount the other way. i.e. total energy transfer 3.5-4TWhr. That means we are adding $100-120/MWhr to the cost of power delivered.

            If you build 1 GW / 8 GWhr of pumped hydro ($1,200-1,800m) keep 1GW of gas and 1 GW / 5 GWhr of power to heat ($200m) and 0.5 GW / 3 GWhr ($800m) of batteries, the cost is about $1b less and you don’t have a risk of common mode failure. You can build it incrementally and get some results within a year and you have the opportunity to change the system design to suit technology and market changes

            By definition the total amount of generation capacity is the same because someone has to generate the power to move/store

          • Brunel 3 years ago

            What maintenance?

            The population is increasing and we will have electric trucks and ships, so the electricity demand will surely go up.

            Do you know that there is already a transmission line from QLD to NSW to Vic to SA?

            But it is an AC line. If it was replaced by an UHVDC line, it would have less transmission losses.

      • Mark Roest 3 years ago

        What are the numbers? Perhaps carried out to levelized cost for comparison purposes. Measure the cost of everything used for backup or resilience in the fossil fuel paradigm. Then compare that to sufficient battery storage and additional renewable energy, at prices 2 to 4 years from now when they will be much lower, because it takes that long to permit and build a fossil fuel system, while major solar can be up in 9 months.
        I think battery storage and renewable energy will blow the doors off fossil fuels and attendant infrastructure, especially when a lot of it is rooftop solar.

    • David Mitchell 3 years ago

      UHVDC certainly has it’s place. But, like all large projects, it is potentially a single point of failure. So it would need to be backed up in any event.

      • Brunel 3 years ago

        What kind of backup? Batteries?

        • David Mitchell 3 years ago

          Thought experiment. Postulate a UHVDC transmission line between Ceduna and Sydney supplying 4GW for the evening peak from an 12GW solar PV complex at Ceduna. The UHVDC termination point in Sydney is adjacent to the Transgrid’s Sydney West 330kV substation at Eastern Creek which is a good distribution point into the Sydney metropolitan transmission ring.

          It’s 5.10 pm in Sydney, 19 July, the sun set 3 minutes ago and there is zero solar production on the east coast. Ceduna is still producing 4GW (sun sets at 6.21 pm AEST in Ceduna today). There is an incident at the UHVDC transmission station in Eastern Creek which trips the transmission line. Instant loss of 4GW of supply. This must be backed up from somewhere. Batteries, sure, but only for minutes, then gas, hydro etc. The larger the transmission capacity, the larger the backup problem.

          UHVDC is the equivalent of a large single point generator, with the same risk profile. Not saying it can’t be done, but it’s not a magic wand.

  3. Peter F 3 years ago

    If we renewables supporters really believe what we are saying by 2020, new renewable capacity will be much cheaper than new coal or gas. In India the latest contracts are already cheaper than existing coal. Therefore as coal plants retire they will be replaced by renewables. More and more coal plants will rotate individual generators out of service seasonally and the coal share will continue to fall.

    By 2020 $10b of grid scale renewables and 2.5-3GW of new solar will be on the grid. That will generate 20-23TWhr, more than half Victoria’s demand or 1/3rd of NSW or two to three large coal plants worth. Either all coal plants are going to become uneconomic or one or two more are going to retire, again prices go up attracting new generation which will be even cheaper wind and solar so the merry-go-round will continue.

    The eventual replacement of the five minute rule and the other 49 Finkel recommendations will just hasten the process. Some coal plants will hang around longer than we would like just like DAESH in Mosul but they will be there for emergencies and might be fired up for 6 -8 weeks in summer and again in winter

    The final nail in the coffin will be a requirement to meet new international standards for SOx, NOx and particulate emissions. None of our coal plants meet current standards and only two or three would be economical to retrofit

    • solarguy 3 years ago

      Sounds a reasonable assumption to me, however coal plants need to retire when the when the RE generation is all but built. In other words their given the nod when to cease.

    • Mark Diesendorf 3 years ago

      Peter F: “If we renewables supporters really believe what we are saying by 2020, new renewable capacity will be much cheaper than new coal or gas.”
      Although wind and solar PV may be cheaper than new coal and new combined cycle gas, the variable renewables will have to be balanced by batteries, contracted demand management and dispatchable renewables (e.g. pumped hydro; concentrated solar thermal with thermal storage; gas turbines burning gas initially and then renewable fuels). All the variable renewables are more expensive than wind and PV..

      • Peter F 3 years ago

        It is true that intermittent renewables need backup but so does new thermal plant. In Texas studies have shown that the combined capital and running costs of “spinning reserve” for coal backup and fast demand swings is actually greater than the capital cost and much smaller operating cost of spinning reserves for wind.

        There are four or five relatively low cost alternatives to grid batteries or at least grid batteries designed for bulk renewable storage.
        1. Power to heat or ice for heating/cooling particularly if driving heat pumps. Making ice at night rather than aircon at 40C uses 1/3rd less power and stores it at about 1/10th the price of batteries. Reverse for hot water
        2. Biomass peakers either anaerobic digestors for wet waste or furnaces for dry waste.
        3. Upgrading existing hydro with additional turbines, variable speed turbines and mini hydro on existing low head outfalls that are not currently utilised. In the US they estimate increasing peak output by around 20% and annual output by 10% with no new dams
        4. Customer/distributor owned behind or near meter batteries which reduce transformer and feeder sizes, capture excess local solar with minimal losses and even in adverse solar conditions can be recharged from the grid off peak, lowering, peak demand, losses and costs. These will be installed regardless of generation technology
        5. It appears that 2-3GW of demand response can be mobilised in 2-3 years

        Adding storage to the grid will allow existing CC gas and even coal plants to run much more efficiently because they can start before the peak to charge and run after the peak to recharge. During minor peaks the storage can eliminate the start up and shutdown costs for marginal generators.

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