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Bigger networks, bigger Snowy: Silver bullets or white elephants?

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This summer has exposed yet another aspect of the fragility of our traditional electricity grid, with several failures in local distribution networks—the so-called ‘poles and wires’.

As former ATA staffer Craig Memery has reminded us in a recent article, the vast majority of power failures—97.2% on Craig’s figures—happen within local networks, with just 0.24% from insufficient generation.

Once again we face a choice between propping up traditional over-built electricity supply infrastructure or driving transformation.

The first involves inefficient capital investment in power lines and equipment capacity used for just a few hours a year; the second involves innovation with confusing options and other risks.

Energy efficiency, demand management, distributed storage, local renewables and new business models all have roles to play (as described in my earlier columns and my article in The Conversation).

The risks seem very different depending on whether you look at the supply or the consumer side of the meter.

The supply side includes generation, wholesale markets, high-voltage long- distance transmission and local networks of poles and wires. The wholesale electricity market is fundamentally about supply and demand. When supply exceeds demand, prices fall and the consumer is king.

When supply is tight, suppliers exploit the situation to maximise profit. Policymakers are frantically trying to develop better mechanisms to reward actions that ‘keep the lights on’, but this is a politically difficult area.

Networks are regulated regional monopolies, but regulation has failed to limit price increases, while network operators have failed to maintain reliable supply in extreme weather.

On the supply side of the meter, the situation is increasingly risky.

Building a large power generator, transmission line or energy storage facility takes time and locks up a lot of capital for years: will there be a long-term revenue stream to repay the cost and provide profit? Will consumers continue to tolerate paying for poor decisions?

On the consumer side, if they were available, innovations such as better-insulated fridges that could keep food cold during a 10- or 20- hour power failure and use smart sensors and controls to maximise use of on-site rooftop solar generation—and in the process use $100 less electricity each year—could be attractive.

An informed, rational business should be keen to buy behind-the-meter technology such as on-site renewable energy, energy storage and efficient, flexible equipment that could keep production going and income flowing for up to an hour during a power failure—and make money at other times by managing demand.

These products are emerging, allowing more businesses and households to invest ‘behind the meter’ to take control of reliability and cost, and as a form of insurance.

Local action looks increasingly attractive when you consider the avoided cost of disruption to business, lifestyle or health, combined with increasingly attractive financial returns, lower climate impacts and the opportunity to ‘send a message’ to the energy industry and governments.

A rapidly growing industry is happy to provide the technologies and services, although consumer protection issues need a lot more attention.

Snowy 2.0: Silver bullet or white elephant?

The proposed Snowy 2.0 pumped hydro storage system provides an interesting example of the dilemmas facing energy investors.

Pumped hydro uses cheap, excess electricity to pump water uphill, then produces electricity at other times as the water runs back downhill through a generator. The environmental credentials of pumped hydro depend on the source of its electricity input, design and environmental impacts on habitats.

To profit, it will rely on the gap between buying at cheap wholesale electricity prices and selling at high prices, after allowing for its large ‘round trip’ energy losses of over 30%, as water flows through a 27 kilometre tunnel between the upper and lower reservoirs.

But the size and frequency of profitable price gaps depend on many factors. If too many energy storage facilities are built before it starts operating or demand response trims peak demand (when prices usually peak), the price gap will close.

If improving energy efficiency drives demand down, it undermines the economics of all supply options by shifting the balance between supply and demand.

Snowy 2.0 won’t be operating until well after the Liddell coal power station closes in 2022, so a lot of new storage and supply capacity and demand-side measures will need to be introduced before then.

That will undermine the viability of Snowy 2.0. Given the rapid growth and declining prices of alternatives, Snowy 2.0 may require big subsidies.

When price peaks are smaller, all generators operating at the time make less money because the most expensive generator running sets the price for all other generators.

So investors on the supply side of the meter face potentially significant and unpredictable financial risks. Projects that can negotiate long- term contracts and be built quickly have the best prospects.

But investing in demand-side modular projects, especially at fringe-of-grid, and packaging high-value services with energy for consumers both look much less risky.

Alan Pears is Senior Industry Fellow at the School of Global Studies, Urban and Social Studies (GUSS) at RMIT University. This article was originally published on Renew MagazineReproduced with permission.

  

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  • Chris Fraser

    If most commercial and home consumers get driven by adverse political policy into increasing their energy independence, will Snowy 2.0 be a good investment ? The question may be one of whether all that large scale and rooftop solar output can be mopped up by Snowy 2.0 for use in the evening peak.

    • Peter F

      By my calculations Snowy II is a dud now small on grid projects like Cullerton are a much better investment

    • PacoBella

      Given the ANU study that showed there are over 20,000 potential pumped hydro sites around Australia, the chances that Turnbull magically picked the best one (which costs somewhere between $2 billion and $10 billion) without doing due diligence on the other 19,999 potential sites seems pretty remote. What are the odds of it turning into another NBN triumph?

      • solarguy

        I reckon the odds are pretty bloody high!

  • David leitch

    This is a great article that deserves a follow up. What are the highest return investments for energy efficiency behind the meter? Many of us have already looked at this but could look again.

    In my case, and I’m an energy bandit by nature in an old house with lots of gadgets, we cut down on the number of fridges, put in LED lighting and a variable pool pump. There is insulation in the roof and in the walls of the newer parts of the house. Some glass is energy efficient. All these things have helped but gross electricity consumption still remains well above the State per household average.

    Recent enquiries suggest that in the recent building boom in NSW only about 10% of new houses/apartments had double glazing installed, but due to better environmental standards in Victoria and South Australia maybe as many as 50% of new house there do.

    • Alan Pears responds (he not on Disqus).

      David the highest returns occur when appliances and equipment are replaced at or near end of life with a much more efficient one. Fridges stand out, as a lot of old fridges were a lot less efficient when new, and may use even more due to loss of refrigerant or deterioration of insulation and door seals.
      Up to 80% savings can be captured. Similarly old air conditioners. LED lighting is a no-brainer.

      You have also picked up on the big savings (and DR potential) of pool pumps. Old plasma and LCD TVs can be big consumers as can be games computers…. Shading (even using cheap shadecloth) can be big for cooling savings.

      Those who have smart meters in Vic can access half-hourly historical data and match it against their activities to identify what they were doing when usage was high. I am hopeful that emerging data analytics will help to identify causes of high usage so we can act on better advice.

      My EPA Vic Greenhouse calculator can help to explore a range of equipment and behavioural drivers of higher consumption – but it only reports carbon emissions so you have to convert to energy or costs. Your baseline given a pool pump, multiple fridges etc may well have been a lot higher than your present consumption – it’s relative.

      And of course most people look at the $ not the usage when looking before and after, so rapid increases in prices can mask energy savings. And if you have made changes over time you may need to go a few years back to really see your baseline usage. How many people keep their bills that long?

      • solarguy

        I keep my bills for longer!

    • Ian

      Multiple fridges . That’s bonkers. You need to have a garage sale or visit the tip!

    • Rod

      Knowledge is power.
      I’ve not seen the Wattwatchers offerings but my Wattson whole house energy meter was a revelation. Sadly no longer available.
      It is a continuous improvement challenge for some of us extremists. I’m down to 4kWh/day in the shoulder seasons. Hopefully my new inverter type fridge will get that down.

      • solarguy

        Rod, that 4kwh/day is what you import from the grid after solar offset, isn’t it?

        • Rod

          No, calculated from import/export and inverter reading. I’m not sure if the inverter figure includes inverter losses so the actual house usage may even be lower.
          Currently importing about 1.5kWh/day or a bit more if I charge my e-bike. Boosting my solar HWS in Winter will ruin those figures though.
          This is the average nett credit result for the past 56 days according to AGL from my 2.5kW split array. 1kW being 18 years old.

          Daily Average
          $-4.64
          -8.61kWh

          3 adults, all electric other than bottled gas cook top. Did I mention I’m an energy extremist?

    • Tim Forcey

      People interested in improving the performance of their homes and operating them without burning stuff can join the discussion at My Efficient Electric Home, now with > 3,000 members. Hundreds and hundreds of case studies of people moving their homes off gas. New Members welcome! https://www.facebook.com/groups/996387660405677/

  • Peter Todd

    As with most Asset Investments cost effectiveness comes from looking at all alternatives plus doing high quality demand projections to ensure project completion aligns with the most likely actual demand.

  • Tim Forcey

    SNOWY 2.0 GOING AHEAD. I attended a Snowy Hydro public presentation the other night in Jindabyne. Final Investment Decision this year. I don’t know what will prevent Snowy 2.0 from going ahead.

    More here for Facebookers: https://www.facebook.com/groups/NEMWatch/permalink/574118379653477/

  • Warwick Sands

    I don’t think that I have ever seen a 5 star refrigerator

  • Ray Miller

    Great article Alan. In sunny Queensland with many very remote towns our electricity price is under a community service obligation where everyone pays the same (or close). The annual cost is substantial and due to a number of factors, one being transmission loss.
    It would seem to me if all these remote towns had their own tracking solar farm (and even some battery storage) to cover some significant part of the daily load would not only reduce the losses and cost but also reduce our emissions as a byproduct. Of course other efficiency measures should be invested in at the same time. One benefit is likely to to be a significant improvement in availability, what not to like? Everyone gets lower costs and more reliability.
    Economics and service issues are likely to be the drivers in the renewable energy transformation.
    I agree Snowy Hydro II is best compared to the NBN, much money spent and low value delivered.