Garbage in, garbage out: Why the CCA got it so wrong

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Australian climate policy is being framed on the basis that the country should proceed as slowly as it possibly can – a course that is being justified by technology cost estimates heavily tilted against solar. No wonder the CCA is so confused.

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If Australia continues to rely on a renewable energy target to help meet its share of the global goal of capping global warming by 2°C, it is likely to result in new coal plants being built in the 2040s.

Sound implausible? Does it sound completely crazy? Yes, but this is the advice that was given to the Climate Change Authority and presumably helped them form their controversial stance on climate policies that was delivered to the government last week.

The idea that Australia, in a world aiming at cutting missions, would be likely to open new coal plants at a time when it should be hitting a zero net carbon target seems extraordinary.

Yet that is what consultancy Jacobs is suggesting, even though its modelling shows that 90 per cent of Australia’s generation by 2040 would come from renewables under an extension of the RET.

generation change jacobs CCA

Here’s the graph above. Under Jacobs’ modelling – apart from the reference case where Australia ignores global warming – coal-fired power becomes extinct in all its policy scenarios in Australia by the mid 2030s.

Until suddenly, in the renewable energy target scenario, it makes a comeback in the late 2040s. (That’s the blue uptick on the bottom right).

“Fossil generation increases from 2040, largely driven by new CCGTs (combined cycle gas plants), although some supercritical black coal generators are also built,” it says. This is despite the share of renewable energy in generation being at 74 per cent in 2030, and peaking at 91 per cent in 2039.

Quite where baseload coal plants, or gas plants for that matter, fit into that high renewables scenario is not clear, given the need for flexible generation.

And just who would invest in a new coal plant two decades hence, with 90 per cent renewables, as the world nears the zero emissions target it has locked itself into through the Paris agreement, boggles the mind, but that is what we are told the modelling tells us.

This scenario is just one of a number of extraordinary assumptions made by Jacobs in its modelling, which in itself is just the latest in a series of modelling assumptions to afflict Australian policy making, and judgments about the impact of various policies, including the carbon price, the RET, and feed-in tariffs.

Perhaps the most egregious was the Tony Abbott government’s Energy White Paper, which assumed no action on climate change, but there have been plenty of examples.

Why is this important? Because modelling is crucial to assessing whether one policy approach is better than another. The key assumption is the cost of abatement and the impact on economy.

The problems arise when the modelling is based on false premises. One of the reasons that the world was able to forge an ambitious agreement in Paris was the realisation that the cost of wind and solar and other technologies had fallen significantly, and effecting an energy transition would be nowhere near as expensive as it was made out to be. In fact, it might just save money over the long term.

In Australia, however, policy is still being set and advised on the basis of wrong assumptions about the renewable energy competitors to our current suite of coal and gas-fired plants. The idea that anyone would build a new coal plant in a high renewable, 2°c scenario more than two decades from now is a hint that something is wrong.

This is not the first time that Jacobs has made some outlandish predictions. In a report released last month for the Energy Networks Association, the main networks lobby group, it predicted that no new large-scale solar would be built before 2030.

It picks up this theme in the report for the CCA, saying that in the carbon pricing scenario “large-scale solar technology does not materially emerge until after 2040”. It says this is because it is competing with small-scale rooftop solar (haven’t they heard of storage?).

It also predicts in some scenarios that geothermal energy will be built before large-scale solar – which will be news to the company that just closed the last of the geothermal pilot plants, and the several dozen about to build large scale solar facilities.

How does it get it so wrong? Because its modelling makes extraordinary assumptions about the cost of technologies. As this graph below shows, its estimates of renewable energy are even more conservative than the widely discredited AETA  report from 2012, and nearly twice as expensive as the more credible 2015 APGT version.

jacobs capital costs CCA copy

Its assumptions on the capital costs of large-scale solar PV for 2030 have already been beaten – in 2016 – judging by the results of the tender announced last week by the Australian Renewable Energy Agency. 

(In its report for the ENA, Jacobs predicted 768GWh of large-scale solar in Australian by 2030. The ARENA tender guarantees there will be at least 1,300GWh, and there is clearly plenty more to come.)

But while its assumptions for renewables are far more pessimistic, its assumptions for nuclear are nearly half the price of the APTA report of 2015 and the recent nuclear royal commission.

It is broadly in line with other forecasts for gas and black coal. This leads it to favour gas because the “contribution from CCGTs in the 2020s prevents locking in more expensive renewable plant, such as large-scale solar with storage.”

This matters because these cost assumptions are then used to argue in favour of one policy suite over another. The Jacobs report says a high renewables policy scenario is more costly to business and consumers, and for emissions abatement.

It is perhaps not surprising that the CCA – having had its board stacked by Greg Hunt with former Coalition politicians and the architects of Direct Action – should come out with a recommendation that supports the continuation of  … Direct Action.

But the growing reality is that Australian policy appears to be being framed on the basis that the country should proceed as slowly as it possibly can. Dud technology cost estimates and modelling are being used to justify that.

And that was probably the underlying point of the dissenting paper presented by CCA board members Clive Hamilton and David Karoly – that it is in Australia’s short-term, mid-term and long-term interests to be acting as fast as it can.

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12 Comments
  1. Nick Thiwerspoon 3 years ago

    The charts would have been better if they had had a key!

  2. Tim Forcey 3 years ago

    2013 Australian Energy Market Operator 100% Renewable Electricity study info here, as a reminder of what was seen as possible 3 to 4 years ago. https://www.environment.gov.au/climate-change/publications/aemo-modelling-outcomes

  3. howardpatr 3 years ago

    Some might find it worthwhile reading the following link just because it discusses how a very substantial technological breakthrough could come with batteries:-

    http://seekingalpha.com/article/3976731-teslas-huge-mistake-thin-film-lithium-ion-batteries-power-ev-revolution

    Despite Turnbull’s rhetoric about innovation it seems he is well and truly caught by Abbott type mentality that results in “his” government wanting to abolish ARENA and constrain renewable energy technologies as much as they can.

    • onesecond 3 years ago

      Your link is a Tesla shorter and from what I’ve read I think he does not understand the battery industry. He is fooled by all of the “miracle batteries” that are announced on a daily basis, but there are a lot of parameters that need to be improved together to actually make a working real world battery better and up until now, it is always only one parameter that someone improved, often to the detriment of the other parameters. This does not deliver a better battery in the real world. Musk and Straubel (and a lot of other people) know a great deal more about the battery industry than this article guy short seller.

      • howardpatr 3 years ago

        Your point re shorting is acknowledged by the author.

        I think the author was expressing concern about putting so many eggs in one basket when there is so much happening in the battery space. Pellion is having magnesium batteries made based on its R & D. The following link indicates the nature of other research that may result in quantum advances:-http://www.jcesr.org/research/multivalent-intercalation/

        On the other hand Tesla might, with its GF, be well placed to commercialize breakthrough developments. Yes, I am sure Musk and his team have been thinking about all of this.

        Imagine the huge shift in the electricity and EV markets if batteries can be bought for $200 Kwh?

        • onesecond 3 years ago

          Tesla stated their battery price as 190 $/kWh a couple of months ago, so before the GF was even in production. They need a lot of cash for all their investments, but on a single car sale they already make around 25% profit. The huge shift is already underway with 400000+ reservations for the Model 3. The German carmakers are in the process of upping their lousy EV game because of that.

  4. Kenshō 3 years ago

    It’s a tension of old money against new money. Centralised interests versus the rest of humanity.

  5. Peter F 3 years ago

    The comforting thing about all this is that the people will leave these dinosaurs behind yet again. If it is true that Enphase has 70,000 orders and there are at least 10 other suppliers in the market it is likely that by the end of next year there will be 200,000 behind the meter battery systems in Australia, by the end of the decade possibly 700,000+. At a weighted average power output of 3kW that is 2.1GW, about 10% of winter peak demand assuming there are no more aluminium smelter closures. That is roughly the contribution to peak supply from OC gas at the moment

    If SA offered a subsidy to customers for a battery pack they could rapidly reduce peak demand to the point where gas companies do not have the pricing power they have now.

    If the subsidy started at 35% this year declining by 5% per year it would result in at least 900 MW of batteries within 6 years. Adding distribution batteries and half a dozen Lyon type plants would mean that about 1.2GW would be available from storage. Combined with 840 MW interconnect capacity and Pelican Point and Osborne running at 90% capacity, winter evening peak demand of 2100 MW, could be completely covered even if there was no wind without running any OC plants

    The cost of the subsidy could be capped at $25m/yr or total installed capacity 1.1GW/3GW.hrs whichever comes first. Total cost to government would be $175m far less than the cost of a new interconnector.

    If this policy was supported by 7 star energy building regulations and power to heat storage for both space heating and hot water as well as continued implementation of LED lighting, high efficiency commercial HVAC systems etc. it would be possible to reduce peak electricity demand by 2-3% per annum.

    In sum a combination of demand smoothing, efficiency and storage will facilitate continued installation of solar and wind. This will result in fewer price spikes and in fact lower average costs. OC gas costs a minimum of $85/MW.hr and at up to $350 at the range of gas prices in the last 3 months. Solar and wind can be contracted for around $80/MW.hr fixed for 20 years. This is lower than future prices for power in SA and far less than the price anyone needs for building a new thermal power station of any sort

    • Cooma Doug 3 years ago

      You must consider also the ability of behind the meter technology, given the milli second response and smart switching, to respond at much higher mw values than the kwh rating of the battery. You can double the figure at least and for short time ancillary service it is much more effective then anything on the grid.
      If the market is redesigned to enable appropriate techologies and creates appropriate price signals that utilise technology and cafbon free options, there will be no value at all in gas as a generation source.

    • nakedChimp 3 years ago

      sounds about right – if we’re really lucky we get not the complete opposite of it.
      😉

  6. Kenshō 3 years ago

    On the other side of Peter’s comment regards community based initiatives, I think it’s important as a community that we accept that many fossil fuel generators will be reluctant to accept their supportive transitional role, and may fight to game the system until the day an outraged and aware community finally lobbies to have them turned off. The problem is many funding these interests will have a sense of entitlement, by birth or family, and will feel society need return generous profits on their investment, ad infinitum. It’s a habit as much as alcohol or illegal drugs.

  7. solarguy 3 years ago

    New coal plant is not cost competitive with RE now, “so no one “will invest in coal then!

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