CSIRO sees $100bn savings in zero carbon grid by 2050

A major new study by the CSIRO and the main networks lobby says a decarbonised energy grid by 2050, with half of generation produced and stored locally, will save billions in upfront capital costs and consumer bills, and deliver a secure electricity system.

(See also out story CSIRO, networks put lie to conservative campaign against wind and solar).

In a direct rebuff to the renewable energy scare campaign and myth-making being played out in the political arena, the premier scientific body and Energy Networks Australia say that wind and solar will provide nearly all our electricity needs by 2050, and the system will be cheaper for all customers.

The Electricity Network Transformation Roadmap released on Tuesday builds on the Future Grid scenarios put together by CSIRO and the ENA and others in the past two years, which mostly highlighted the massive change in our electricity system, driven by the falling costs of renewable energy and storage and a major shift to distributed generation.

This latest study, however, looks at the possible strategies that could meet those scenarios, working on the assumption that business as usual is untenable and unsustainable, and would be economically destructive, both in terms of electricity costs and other impacts.

Its outcomes that might seem extraordinary to those wedded to the idea of centralised, fossil fuel-based systems, and who argue that only coal and gas can provide cheap, reliable power. The network owners and scientists say the best way to reliable and affordable energy is through renewables and local generation –  it suggests that nearly half of all generation will be local, on site in homes, business and communities.

Wind and solar will provide nearly all generation by 2050, with a significant amount – between one-third and one-half – coming from the nation’s rooftops. Battery storage in homes and business, and located on the grid, or at renewable energy installations, will balance the output and provide most network stability services.

On top of this, this scenario will save $100 billion in upfront capital costs over business as usual, and also deliver significant bill savings – of $400 or more a year for “active homes”, those with solar and storage and smart controls, and more than $600 for “passive homes”, those with no interest or no possibility to pursue such technologies.

The idea that a grid could be powered more than 90 per cent renewables, and nearly all of that by wind and solar, took even the study’s authors by surprise.

CSIRO Energy’s chief economist Paul Graham said that the team decided to look at the zero carbon by 2050 scenario suggested by the Climate Change Authority as necessary for Australia – and other countries – to meet the Paris climate goals.

“We started to look around and see how that viable would be,” Graham told RenewEconomy in an interview. “Frankly, it took a while to convince ourselves. But when we started looking at the falling cost of batteries, and the profiles of variable renewable sources, we could see that it could be done.”

Here are some of the headline numbers discussed in the report. By 2050, more than 10 million customers will own distributed resources like solar, storage, home energy management systems and electric vehicles, which they can use to sell grid support services worth $2.5 billion per year.

Rooftop solar PV will grow six-fold within a decade, and 16-fold by 2050, which is the equivalent of 80GW. Up to half of all electricity generation will be sourced “locally”, mostly on rooftops. Battery storage uptake will be significant, accounting for nearly 100GWh at the local level alone.

This will be critical in the shaping of the new grid. This battery storage will play an important role in balancing the grid and providing the network services needed, along with centralised storage, which could be from batteries, pumped hydro, solar thermal, or other.

“We think that battery storage is going to be built anyway, by the customer end,” Graham says. And that means that the grid will have to become very interactive, and smart, and need to manage this extraordinary transition.

Hence the need for urgency. It is critical for the networks. It seems that the networks can live with the idea of load defection (where consumers provide much of their own electricity needs), but the threat of grid defection is still very much alive, and a major concern.

The CSIRO and the ENA want policy makers to act in great haste before it is too late. One of the essentials is to get bipartisan support on climate policies, such as carbon pricing (good luck with that), and the other is to get cost reflective tariffs in place as soon as possible.

By these, the ENA is suggesting demand tariffs, which forces people to think carefully and consider other options at times of peak demand. It also wants a proper roll-out of smart meters, and not the ad hoc distribution that is taking place now.

ENA’s John Bradley hopes to lure those tempted by grid defection with special “stand alone power system tariffs”, that would offer a discount on grid charges, the opportunity to earn money for grid and peak demand services, and an agreement to “stand alone” at times of peak demand.

We’ve mentioned this before. One gets the feeling that there is an element of “fingers crossed” about this plan. But apart from taking a massive hit on the value of their networks, which they are clearly not prepared to do, they have no other choice.

But they warn that the impact of uncontrolled installations, and unfocused and constantly changing climate and clean energy policies will be disastrous and costly. The threat is very much alive that 10 per cent or more of consumers could leave the grid – hence the need to act soon, to offer incentives to stay.

Graham underlines the urgency. “There is a question about whether the roadmap is fast enough. On pricing reform, we were probably half way though modelling when we realised that battery prices were moving so quickly that we need to bring those reforms about five  years earlier.”

Bradley speaks of $2.5 billion of payments going to consumers a year in response to “network services” – helping meet critical peak demand, responding to average peaks through demand response and demand management programs, providing security of supply with services such as frequency control.

The ENA is also taking a close look at the New York Reform the Energy Vision program, which is now emerging as a blueprint on how grids can redefine themselves, encourage consumers to take part by generating and storing their electricity, create microgrids, improve reliability, slash emissions and lower costs. What’s not to like?

To do this, the ENA wants to see more trials of the type that SAPN are doing in South Australian on using customer-based storage as an offset against grid upgrades, and of the virtual power plants and peer-to-peer trading being trialled in South Australia, Western Australia and elsewhere.

“We should allow a few of those different frameworks to emerge,” Bradley says. But there is bound to be tension between the networks and the retailers, who want to keep them out of the household market and also protect their ageing centralised generation assets.

Bradley says that if the grid retention strategy works, and rapid policy changes allows networks to evolve, then the savings are tremendous – in what the country can achieve in emissions reductions (zero in the grid by 2050), in terms of renewable penetration (more than 90 per cent by 2050, mostly wind and solar), in reliability, and in cost savings.

He sees $100 billion in overall network expenditure savings by 2050, $16 billion of avoided network infrastructure through household solar and batteries alone, and network costs falling by one-third.

This should, and must, given the technology alternatives and the social benefits of a properly priced and structured grid, translate into energy savings for consumers.

An active family with solar and storage will make $414 in annual savings in average household electricity bills (compared with the roadmap’s counterfactual, business as usual, pathway), while a medium family who cannot take up distributed energy resources is over $600 p.a. better off through removal of cross subsidies.

This is how they see it playing out for consumers on business as usual (counterfactual), and the Roadmap.