Queensland’s 50% renewable energy plan: More work required

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Queensland’s 50% renewable target is a great idea and achievable, but its current plans will need radical change.

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Working through the implications of 50% renewables

We regard Queensland’s 50% renewable target by 2030 as potentially by far the largest driver of new renewable energy supply in Australia over the next 20 years. Queensland is the only State where electricity demand is presently growing, it is Australia’s second largest source of electricity demand the current renewable supply is tiny relative to the target. Only NSW has the potential to match Queensland and for now the NSW Govt is more preoccupied with public transport.

For these reasons we think that a large part of the utility industry’s cognitive surplus should be devoted to this topic.

What follows is ITK’s first take on the Queensland Renewable Energy Expert Panel Draft Report [Muggelstone Report].

Our conclusion is that as proposed the system won’t work. It will result in far too much PV in the middle of the day and require the remaining thermal generation to ramp up and down continuously in a way it was never designed for.

Proposed PPAs are too short, and the recommendation to have all the new generation sourced from Qld is too parochial and will increase costs to consumers in several ways. The report is successful politically in that the key conclusions are that prices won’t increase, no thermal generation has to close and system reliability isn’t compromised. These are the key objectives to move forward. But they are less than the full story.

Today’s note shows why the plan probably won’t work as currently outlined. The second part of this note will show, based on work being done in the USA, how it can be made to work very successfully, but it will require far more underlying change to the rules and regulations than is contemplated so far.

30 TWh by 2030 means 22 new TWh over next 13 years

The most important number is 22 TWh. That’s roughly the amount of new renewable energy that will need to be produced in Queensland over the next 14 years to get to a 50% target of 30 TWh by 2030. If we take the numbers in the Mugglestone report, based on Jacobs modelling, and use our estimate of capacity factors we get to:

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Figure 1 Renewable demand and supply in Qld. Source, Mugglestone report, ITKe

The composition of supply is that assumed by the Mugglestone report. It certainly doesn’t have to be that way. In our view the most questionable assumption is in fact that there will be another 3400 MW of rooftop PV.  Even with just 1600 MW of existing PV, QLD already has 30% of houses with solar on the roof (see APVI map). To get another 3400 MW in just 17 years seems a stretch even assuming a lot comes from the commercial sector.  If it does work out that way, its going to have a lot of implications for networks, which we can’t get into here.

This duck has big teeth

The shape of  thermal electricity demand during the day when there is significant PV penetration is referred to in the industry as a “duck curve”.  I’m no artist but its fairly conceptual. Never mind here’s the past 12 months in Qld. The duck is only starting to emerge.

Figure 2 Qld thermal demand past 12 months by time of day. Source: NEM Review
Figure 2 Qld thermal demand past 12 months by time of day. Source: NEM Review

We don’t have data on Qld wind generation, but we can model the PV impact

In mid May 2016 the AEMO started providing an  estimate of rooftop PV supply. The following chart shows the estimate by time of day for QLD. The shape of the chart is entirely as expected but its interesting to note that the maximum ouput as estimated by the AEMO never exceeds 800 MW that is just about 50% of capacity and less than modelled by the AEMO.  As we get Summer data these numbers may increase a bit.

Figure 3 QLD Rooftop PV average last 6 months. Source: NEM Review
Figure 3 QLD Rooftop PV average last 6 months. Source: NEM Review

Projecting the duck curve forward

In terms of energy, most of the new supply in Qld is projected by the Mugglestone Report, based on Jacobs Modelling to come from Utility scale PV. We assume that this will mostly be single axis tracking. Single axis tracking PV has a much higher capacity factor, on an AC basis, than rooftop PV. We have used the Moree PV farm for the single axis capacity use data and based it on the 56 MW AC capacity rather than the 70 MW PV DC..

Figure 4 Rooftop and single axis utility PV compared. Source: Nem Review
Figure 4 Rooftop and single axis utility PV compared. Source: Nem Review

The daily thermal ramp up and down is the problem

Figure 5 below is the most important figure in this note. It has been derived as follows.

  • We calculated 2016 average daily half hourly demand and then increased it by 10% to allow for demand growth to 2030.
  • We forecast the PV output using the same production curve for QLD rooftop PV as already supplied by the AEMO but using the Mugglestone report estimate of rooftop PV capacity installed by 2030
  • We used the Moree single axis solar plant as the daily production profile for the single axis utility solar expected to be built by 2030 in the Mugglestone report
  • We subtracted the total PV output from the daily demand and what is left is the average daily energy that has to be supplied by thermal (gas and coal) and wind.
  • Note that this is a daily average. The variation around this will be enormous, both from hot or cold weather increasing or reducing demand but also from storms or whatever impacting PV output.
Figure 5 PV and other generation estimated daily profile 2030. Source: ITKe
Figure 5 PV and other generation estimated daily profile 2030. Source: ITKe

In our view its (extremely) unlikely that coal plant will be able to ramp up from 1 GW to 7 GW and down again every single day without suffering absolutely significant economic and physical impacts. The plant wasn’t designed that way. Even  gas generators don’t like being cycled too often.

At an absolute minimum the average efficiency of the plant will be way worse. Coal and gas plants are designed to run at one temperature. Almost certainly there will be a substantial increase in the forced outage rate, which in turn will impact daily prices. The figure below shows how little variation there is in average coal and gas generation in Qld over the past 12 months.

Figure 6 Coal and gas generation QLD, average daily output. Source NEM Review
Figure 6 Coal and gas generation QLD, average daily output. Source: NEM Review

To be clear, ITK fully supports 50% and even 100% renewable energy but we just don’t think the Mugglestone Report has had a deep enough think about it.

A report such as this is largely a political document. The real work is done once the policy is adopted. What we are signaling is that much more radical change is required. This is not a bad thing, it should and will be fully embraced. The technical answers are clear, they are just not being spelled out. We will get to them.

Next consider the implications for price.

We already see with only modest PV penetration, relative to what’s coming much higher prices in the early evening compared to midday.

Figure 7 Average half hourly pool price last 12 months. Source: NEM Review
Figure 7 Average half hourly pool price last 12 months. Source: NEM Review

Other issues even ignoring daily profiles

In ITK’s view some of the recommendations in the Queensland Renewable Energy Expert Panel Draft Report [Muggelstone Report] might be debated in the interests  of lowering the price of renewable electricity to both Queenslanders and Australians. Two areas that immediately spring to mind are:

  1. The report suggests the tenor [length] of PPA’s to be 7-15 years. However its likely that longer PPAs would produce even lower unit prices as the longer the PPA the lower the residual risk to the supplier. The Govt is the party best placed to carry risk because its cost of capital is the lowest. In our view the QLD Govt should be considering a PPA life of 15-25 years and focusing on a 20 year PPA.
  2. The report suggests that all the renewable electricity be supplied from QLD. In ITK’s view this will artificially reduce potential supply and likely increase costs.

Why should all Queensland’s renewable demand and supply be in Queensland?

One of the draft recommendations in the Mugglestone report is that all of Queensland’s new renewable energy to meet the 50% by 2030 target be located in Queensland.

Its easy to understand the appeal of this to Queenslanders, who along with West Australians always seem to feel “State first, Australia second”  but is it good policy?

A feature of the ACT’s small but effective 100% renewable scheme was that the generation could be located anywhere. For sure this creates the lowest price for consumers by encouraging the lowest cost supply.

Additionally  it likely leads to a more balanced and less distorted NEM.

About electricity generation in Queensland

The distinguishing feature of Qld generation is that very little electricity gets into Qld that wasn’t produced there.

The figure below shows most (95%) of Qld electricity generation sorted by total output over the past 12 months. Qld is a net exporter of electricity, all of it to NSW, but those exports have declined in the past 12 months making an important contribution to the significant increase in NSW futures prices.

Figure 8 Qld Generators by output. Source NEM Review
Figure 8 Qld Generators by output. Source: NEM Review

The chart shows that the gas generators, Darling Downs, Braemar, Braemar 2 and Yarwun are already reducing output due to rising gas prices, and in some cases because the available gas has physically been sold to an LNG plant. Our data runs just to the end of September so this reduction in gas may have further to run. That’s the case even though the pool price data shows prices over $100 MWh available in the late afternoon in Qld.

Over the past couple of years units at Stanwell Power Station and Tarong were shut in as Qld demand reduced and gas generation and PV increased. However except for PV those dynamics have reversed and the units are all running. If all the major generation units in Qld ran at 90% capacity utilization output could be as much as 16 TWh higher. One mothballed State Govt. owned gas generator, Swanbank is still listed by the AEMO as restarting in 2017.

rsz_screen_shot_2016-10-20_at_31054_pm

However in ITK’s opinion Gladstone’s ability to significantly lift ouput over an extended period is limited and we see the main prospects for supply increase from Stanwell, Tarong and Kogan Creek.  These stations collectively may well be able to produce about 6 TWh a year more than in the past 12 months and this would be enough, from NSW’s perspective to offset the closure of Hazelwood. Don’t forget if “The Age” speculation is to be believed the Board decision on Hazelwood is this month.

Transmission is the issue

Over the past seven years, with rare exceptions, far more electricity has flowed out of Qld to NSW than in the other direction. The chart below shows the total and other work we have done makes it clear that for the most part it doesn’t matter how much higher the pool price in Qld is relative to NSW its still difficult for NSW generators to access the Qld market. We think there are three reasons for this.

  1. Some of the Qld generators are located close to the NSW border. Whenever pool prices rise in Qld those generators, specifically Kogan Creek tend to “hog” the transmission up to the South East of Qld.
  2. There are physical constraints on the NSW transmission line around the New England region that make it harder for power to flow North
  3. The main interconnector has been designed to allow for higher capacity from Qld than to Qld.
Figure 9 Transmission to and from Qld, Source: NEM Review
Figure 9 Transmission to and from Qld, Source: NEM Review

The combined Qld to NSW capacity is presently about 1.3 GW. If this was to run at 100% capacity all year round, then Qld could export 11 TWh to NSW or about 8 TWh more than at present. So again in theory this could partly compensate for Hazelwood closure.

There are proposals around to lift transmission from QLD not just to NSW but all the way to South Australia (1600 km). This could be done by a DC link where costs are falling rapidly but would likely cost about $1.3 bn according to “Trans-Australian HVDC Interconnection Investigation” by Prof Simon Bartlett of the University of Queensland. DC links would seem to be way cheaper looking forward considering that the PV and wind is DC by nature.

By contrast the proposed NSW SA interconnect is expected to be half that cost, but  a standard AC line. It allows more renewable development along its corridor but almost by definition wind built in that corridor will be more correlated with wind in South Australia, than wind built further North.

David Leitch is principal of ITK. He was  formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.  

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7 Comments
  1. Adam Smith 3 years ago

    Well thanks Giles, someone that actually understands some of the impacts of Labors 50% renewable’s plan making sensible comments. The truth is that, if the plan went ahead, Stanwell and the other thermal generators would not ramp up and down each day to accommodate, they would either just have to idle for part of the day or they would close and mothball plants, in order to reduce the oversupply. This would then without question reduce security and ability to manage frequency and inertia in the network. The coming solution to all this though is battery storage, both residential and grid scale that can be controlled by the market operator. HVDC would be a huge waste of money and in fact a lot of large scale renewable generators could possibly become white elephants in the medium term when storage is sorted. The trick is that popular politics has gotten ahead of the technical solutions.

  2. Analitik 3 years ago

    Nice summary of the inherent issues with the Queensland proposal – it really does not deserved to be called a plan, given the issues you have recognised (I notice the submissions to the panel included one which also highlighted the daily ramping issue with PV).

    The idea of increasing transmission capacity needs to be costed out plus analysis needs to be performed to verify that demand and likely generation patterns in other parts of Australia will conform with Queensland’s requirements else whoever pays for the upgrades may find the sums spent don’t actually solve the intermittency issue.

    Storage would be nice but the scale is the issue – the amount required would be hideously expensive even if the cheapest option, pumped hydro, was geographically possible. And spare us the toy projections made by the “Melbourne Energy Institute” on this subject – they have no engineering expertise to begin to appreciate the difficulties and limitations of their modelling.

  3. David Osmond 3 years ago

    Always enjoy reading your analysis David.

    I agree that they seem to be modelling a lot of new solar. As you say, this will result in a very strong duck curve. This would dramatically reduce the spot electricity price at noon, and make the economics of new utility PV very difficult. I expect that if QLD go to 50% renewable, it will have a more more equal weighting of wind and solar than they’re modelling.

    But taking their model at face value, along with 3400 MW of new rooftop PV, I suspect many of these buyers will also get battery storage. It wouldn’t surprise me if that 3,400 MW of PV was accompanied by ~5 GWh of new battery storage (say 1.5 kWh of battery for every kW of PV). 5 GWh of battery storage, would greatly reduce the duck curve. Instead of the fossil generators ramping from 1.5 GW to 7 GW throughout the afternoon, 5 GWh of batteries could probably reduce it to a ramp from 3 GW to 6 GW. Still extremely challenging, but far less outrageous. Then change some of the PV to wind, and it becomes more manageable again.

  4. John Saint-Smith 3 years ago

    Has any consideration been given to the construction of more pumped hydro systems like Splityard Creek above Wivenhoe Dam? It delivers up to 500 MW for 5 hrs which assists the existing network to cope with morning and evening peaks.

    Several more of these hydro ‘batteries’ could store more of the daytime excess of PV electricity, while still being re-charged at night from the thermal power, levelling out the peaks and troughs, and providing much more voltage and frequency ‘inertia’ to stabilize the grid during emergencies like the recent South Australian storms which are likely to be a significant factor in electricity continuity in Queensland in a climate challenged future.

  5. nakedChimp 3 years ago

    Ok, why in this whole article is there not even one sentence about the composition of the load on the grid?
    It’s all about sources of energy without any thought about WHAT and WHO is using that energy.
    Did I really miss it?

    I ask, because if you are able MOVE consumption (pool pumps, water heaters, etc..) of energy into parts of the day where there is ABUNDANT generation you won’t have to deal with a duck with big teeth to begin with.

    So again, please some graphs of energy consumption by sinks please and some information about the flexibility of those sinks to move into time-spans when there is regenerative energy being harvested vs. as it’s now the case where such energy sinks are placed into the middle of the night when every chimp on this island is asleep and the non-regenerative generators would spin without loads.

  6. alexander austin 3 years ago

    David. Great article – I had been worried about the time of day issues of the focus on solar – and it is great to see someone put some numbers on what it means. One aspect of your article I would disagree with is the comments re a Queensland focus on incremental generation to meet the 50% target. I think one of the things the RET misses – and the ACT scheme repeats this – is that we need to be focused on generating additional renewable energy, at the times and places that users want it, at the lowest cost. No just producing the lowest cost incremental generation (even if it is not really needed). In particular, the outworkings of the subsidisation of SA wind by ACT households feels like a less balanced rather than a more balanced NEM to me.

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