The end of baseload? It may come sooner than you think

One of the principal architects of Germany’s push into renewable energy technologies, Hans-Josef Fell, believes that the country could achieve 100 per cent renewables in its electricity sector by 2030 – and may do it quicker. The rest of the world could follow soon after.

Fell, a Greens politican and architect of the the feed-in-tariffs that have helped the country already produce 20 per cent of its energy from wind, solar, biomass and geothermal sources, and pushed it to the forefront of clean energy technologies, says the growth of renewables will continue at an exponential rate. This is partly because of the growing cost of conventional fossil fuels, and partly because of their inability (apart from gas) to balance the intermittent nature of renewable energy generation.

In an interview with RenewEconomy, Fell says a 100 per cent renewables electricity grid in Germany may be 40-50 per cent wind, 30-40 per cent solar, with the rest coming from other sources. Balancing this generation, however, would be the key challenge.

“This  is not possible with baseload, because you cannot switch them on and off very fast,” he said. “It was possible with gas-fired power stations, but peaking gas stations  were also emissions-intensive, and European countries such as Germany had to depend on gas imports from Russia.” He said new smart grid technologies and storage, where costs would also rapidly decline, would provide the answer.

Fell is effectively echoing the scenarios painted by Australian researchers David Mills, and from Mark Diesendorf and Ben Elliston at UNSW, along with preliminary work by the IEA, which suggests the concept of baseload and peaking power – the current model for electricity grids worldwide – will be replaced by a system of flexible and inflexible energy sources.

The ability to provide dispatchable, cost competitive energy, will largely decide the fate of the 100 per cent renewable goal, and of gas. Fell says there is clearly resistance from the conventional electricity energy, which sees its business model at risk, and which he says is fighting with “lies and misinformation.”

The cost appears horrendous. Fell puts it at $US100 trillion over 20 years, if the world was to transform to an entirely 100 per cent grid by 2030. It’s an academic number – based around work done by Stanford and Davis Universities in the US, but  he says the world would be paying double that  if it continued with conventional fuel sources. And he says while feed in tariffs might cause higher energy costs initially, these are quickly absorbed by the “merit order effect”, and will deliver further benefit as the cost curves of falling renewable energy sources and rising conventional sources intersect, as they have already done with onshore wind and coal and gas in Europe.

Here are some edited highlights of the interview with Fell.

Q: How has the renewable energy debate evolved in Germany?

A: In Germany it began at local level, and after successful introductions in villages and towns it came to the national level with the introduction of the Renewable Energy Act into parliament in 2000. I wrote the draft for that act, which was introduced by the Social Democrats and the Greens.  We set a target for renewable to double shares from 6% to 12% by 2010. We were told this target was unrealistic and unachievable. But in 2011, we have already 20 per cent.  The feed-in-tariff has driven high investment and so much innovation – in wind power and biogas and solar PV, that costs have dropped down very fast and solar PV is now as cheap as grid electricity.

Q: But there has been a lot of criticism about the FiT and its costs.

A: This comes from the conventional energy producers because they fear for their business models, and they make a lot of mis-information. In reality, in Germany the wholesale price of electricity is going down. When we have a lot of wind and sun, we can close down the most expensive electricity generation, and we get a price which is cheaper than without renewables. Now, new investment in wind power is cheaper than new coal fired power station, and it will continue to fall. With oil and gas and coal and uranium, the prices will rise and rise and rise.

Q: So you say that the business model of the conventional producer is under threat?

A: There is a fight in Germany between the old economy with nuclear and coal fired power stations, because they fear for their business, so they fight very hard. We  had the discussion in Germany that when you phase out nuclear, then our need for cheap energy means we will have to buy cheap nuclear power from France and the Czech Republic. The reality is otherwise. We have had a big cold winter, and France did not have enough from nuclear, so they bought electricity from Germany. We have so much that we can export it to Grance and help them in a cold winter so they don’t get a blackout.

And we are not at the end of the innovation process. Look at the semiconductor and information technology industries, where prices have been dropping down very very fast in the last 20 years, like laptops, mobile phones etc. PV is like semiconductors, the PV price will go down very fast in coming years. Solar will become the cheapest energy that we can have in the world.

Q: So how quickly do you think we can we move to 100% renewables?

A:  In Germany, we could achieve 100% renewable by 2030 at existing rates. We have now 20% in 2010. In 2020 with increasing rates – and these are exponential, we could have 50%, and in 2030 we could have 100%. It is possible but it must be supported by a good political framework, with reduced FiT tariffs, privileged grid access, and other regulatory changes.

Q: What does a 100% grid look like?

A: We can organize it in different ways, but we need all sources. Perhaps it could be 30-40% solar, 40-50% from wind. Then comes the task to balance high fluctuations from wind and solar as the weather changes. This balancing is not possible with baseload, because you cannot switch them on and off very fast. Gas power stations can switch on and off very fast – but natural gas brings emissions in carbon, and we are dependent on Russian natural gas.  We have to learn how to do without it. We should switch to biogas and green gas – perhaps we can use wind power, when we have too much, to make hydrogen and use that to produce electricity.

Q: So you are saying that the current model of baseload and peaking power will be replaced by flexible and inflexible energy sources.

A: Yes, and we can also call it a smart grid system. Balance with other energy sources and a lot of storage in hydro pumps, and  batteries and other energy. It is beginning now, we are learning with the grid operation, we need to do it in such a way that it can be done in time and in a way that frequency and volatage is stable.  That very important, but new technology, such as inverters for PV, can bring this about. Balancing is critical, otherwise won’t see enough investment.

Q: How quickly can world follow?

A: The world can follow in same period, if they want to. At Stanford University, they pointed out that information technology – via mobile phones and laptops – did not take 100 years or 50 years. Professor Mark Jacobsen (the Stanford engineer) said the world can achieve 100% renewable by 2030. It is possible on technology, and it is also cheaper to go to 100% renewables than to go on with conventional. He estimated it would cost $100 trillion over 20 years. That seems a lot, but it is only half of the estimated conventional fuel bill over the same time, which on 2008 prices is $200 trillion.

Q: Does this message get through to politicians?

A: There is a lot of criticism from old companies, nuclear, natural gas, coal and uranium. They fear of their business, and this fear is right. With 100% renewables, there is no baseload energy business. And they fight very strongly with misinformation and lies, and a lot of the media brings this argument. But on the other side, people in Germany see the reality – they  see the benefits in new jobs, which in Germany has gone from  30,000 in 1998 to 370,000 today – and they see they can reduce their own energy bill with solar energy at home and biofuels in the car. In Germany, 80% of people support the switch to renewables, even in the short term it means a higher price.

Q: Will it be only in the short term?

A: Yes, in the short term it is little bit higher – but we have already achieved reduced prices on the electricity market. Last year, the cost of the Renewable Electricity Act was €12 billion. At the same time, we avoided €11 billion by not buying oil, gas, coal and uranium. And savings from other costs, such as waste management, took the total savings to €17 billion

Q: What is your assessment of policies in Australia?

A: You have wonderful research for renewables in Australia, at ANU, Sydney University and elsewhere. Research is very important but without market introduction it is not so useful, and you do not have enough deployment. You need a good feed-in-tariff. But you do have a carbon price, which balances a bit the high external cost of fossil fuel production, so it balances a little the uncompetitiveness of renewables.

The main thing is that Australia is the biggest exporter of uranium and coal – most investors believe that when uranium and coal prices rise, it is good for their business, because they have a bigger income. But I believe that this is not stable in future. It happens already in Germany, the higher the coal price is rising, the more coal fired power stations they close, because they are uncompetitive with renewables. The higher they go, the less coal other countries will buy from Australia. I see most new investment  in coal is a stranded investment.

Q: That message is not getting across.

A:  That’s because they believe it will go on., but it will not go on. The oil price will be the leading price for all energies. Peak oil is already here, the IEA says it is. In coming years we must fear declining oil production. This will lift price very high, and that will increase pressure on people, banks and nations. The only chance to come out of this economic crash is to go renewables.

Q: Some would say those are the words of an ideologue.

A: I often here this argument, you are Green politician, you have no sense of the economy, you are unrealistic, a dreamer, and so on. I hear this all my life.  I see now all my forecasts have become reality, and for renewables they will go much faster because the price will drop down very fast.

Q: You said that 100% renewables in Germany is possible by 2030. How quickly will it occur in reality?

A: I personally believe it will come sooner, because of the problems of the conventional energy sector. We will see in the middle of this decade, oil price is about $200 a barrel. This will lead to much more investment in renewables.

Q: What about CCS?

A: CCS? No chance on an economic level. You must understand that new investment in coal power production without CCS is already not competitive with wind power in Europe. To have CCS you need one third more coal. How should it be competitive with renewables? There is no chance. We see it in Europe at the moment, all projects are cancelled.

Q: You are forecasting then a massive amount of stranded assets. That will be difficult to manage, politically and economically.

A: It is difficult to manage because most politicians and managers are going with  with the old thinking of conventional energies. This will lead to stranded investment and possibly economic crisis, and not only in energy system. The IEA highlighted in its report that subsidies for renewables were $52 billion and fossil fuels more than $400 billion, and this is growing because of rising oil prices.

Governments want to give energy consumers a stable, low but this costs them more as fossil fuel prices rise, and .ruins their budgets. We have seen what happens in Greence, and now Italy. Energy costs play a bigger role that is often assumed. Rising oil prices are also  leading to rising food prices, and to the transport sector.

Q: Are you optimistic about how all this pans out.

A: Yes, I am optimistic about the increasing rate of renewables and decreasing fossil fuels. I’m pessimistic if this comes fast for problems of climate change. It can happen quick enough when we can organize the political framework, when new actors can promote this. I think these new actors will come from the finance industry. I see hopeful movement there. A lot of them see now that investment in renewables is most secure investment – they want high profit and secure investments. When they want to organize a strategy to have private money go to  climate protection rather than climate polluting, then we have a chance in the world. The finance industry will go to the politicians and demand a feed-in-tariff, and it will come.