A peak at Australia's energy potential

A recent contribution to the debate over electricity futures for Australia comes from the Grattan Institute report ‘No quick fix for Australia's future energy challenge'. Some of the points it makes are important. For instance, Grattan shows that we cannot rely solely on fuel switching to gas-fired electricity to achieve all our emissions reductions. I would restate this as saying that, although there may be a temporary role of gas for fuelling some peak-load power stations during the transition to an ecologically sustainable energy future based on the efficient use of renewable energy, it would be a mistake to convert base-load coal to base-load gas.

Grattan gives a useful table summarising its assessment of the various technology options, although it is hard to know what to make of the entry ‘projected costs [of carbon capture and storage (CCS)] competitive'. Projected by whom and competitive with what? And under what level of carbon price?

More serious concerns are triggered by Grattan's assertion, in relation to commercially available low-carbon energy technologies, that ‘none currently represents more than 2 per cent of Australia's electricity supply and their future technical and economic potential is shrouded in uncertainty'. While the charge of uncertainty can be readily applied to CCS, nuclear and possibly hot-rock geothermal, it's hard to justify for wind, solar PV, some forms of bioenergy and concentrated solar thermal power (CST) with thermal storage.

The 2 per cent level has little significance in light of the high levels of installed wind power and very high growth rates being achieved by both wind and PV in several countries. With appropriate policies, Australia could have substantial contributions from both wind and PV, and even a few gigawatts of CST, by 2020, while it's unlikely that it could have any contributions from CCS or nuclear by then.

There is sufficient experience with wind, PV, biofuelled gas turbines and CST to make reasonable projections of their future costs under very large-scale mass production. For example, the report by the California Energy Commission on ‘Comparative Costs of California Central Station Electricity Generation' projects that nuclear power commissioned in 2018 could be as expensive as large-scale PV. Contrary to Grattan, all low-carbon alternatives are not equal in uncertainties about future technical and economic potential.

Grattan makes a case for government intervention in the market, beyond a carbon price, to assist the development, demonstration and early deployment of low emissions technologies. While its case is valid, it could be strengthened by recognising that the transformation of the energy system in the face of climate change means giving temporary support to the roll-out of safe and effective renewable energy technologies that are not necessarily the cheapest at the margin. We should be planning for the whole period 2020-2050, not just 2013.

Grattan is hobbled by its notion that, “it is possible that none of the technologies can produce power at a scale and at costs similar to today's electricity.” So what? Grattan overlooks the research showing that current prices of fossil fuels are too low because they don't take into account the environmental, health and economic damage produced. Surely the principal justification of a carbon price is to reform the market to internalise the costs of these adverse impacts?

With this perspective, current market prices of energy technologies are less important than future projections, taking into account externalities and relative risks. What would be the costs of insuring a nuclear power station properly against a rare but catastrophic accident such as experienced at Chernobyl or Fukushima? The Japan Center for Economic Research estimates the partial costs of the Fukushima disaster at $US71-250 billion, yet TEPCO was insured for only $US1.5 billion.

It's surprising that, in considering the scale-up of new technologies, Grattan omits to cite, let alone discuss, the two studies that suggest that 100 per cent renewable electricity may be technologically feasible for Australia.

In 2010 the ‘Zero Carbon Australia Stationary Energy Plan' found that 100 per cent renewable energy is technically possible for Australia. The core of this study is a single hour-by-hour computer simulation of Australian electricity demand in 2008 and 2009. The principal renewable energy sources chosen were CST with thermal storage and wind power. While I take issue with ZCA's claim that the transition could be made in a decade and several other assumptions, this ground-breaking work deserves to be acknowledged.

In early December 2011, UNSW researchers Ben Elliston, Iain MacGill and I published the first of a series of peer-reviewed papers on our independent simulations, which remove most of the assumptions constraining the ZCA study, making it unnecessarily expensive. However, we still have some assumptions of our own that will be progressively removed before we perform an economic analysis.

We ran a series of hour-by-hour computer simulations of 2010 electricity demand in the five Australian states and the one territory (ACT) covered by the National Electricity Market. To meet demand we chose a broad renewable energy mix: CST with thermal storage, wind, solar PV, biofuelled gas turbines and existing hydro. All are commercially available technologies.

Gas turbines are highly flexible generating plant ideally suited to supporting fluctuating wind and PV renewable generation. Some are already deployed in Australia as peaking plant fuelled on natural gas. However, they can also burn liquid and gaseous biofuels produced sustainably from the residues of existing crops. Jet aircraft on some overseas commercial flights are already flying with one or more of their engines burning biofuels.

Based on scores of simulations and extensive sensitivity analysis, our research finds that it would have been technically feasible to supply 2010 electricity demand by 100 per cent renewable energy with the same reliability as the existing fossil fuelled system. The key challenge is meeting demand on winter evenings. A large part of this demand is of course residential space heating. At sunset on overcast days, the thermal energy storages are not full and sometimes wind speeds are low as well. Initially we used biofuelled gas turbines to fill the gap. This is likely to be lower cost than ZCA's solution of choosing a vast excess of CST power stations, many of which would not be operated in summer.

Our second peer-reviewed paper (Elliston, Diesendorf & MacGill, Energy Policy, in press) explores an even cheaper solution than lots of gas turbines or excess CST: namely a revitalised residential energy efficiency and smart grid program to reduce peak electricity demand on winter evenings.

Both the ZCA and UNSW simulations refute the notion that renewable energy cannot replace base-load coal-fired power. ZCA interprets its results by saying that CST with thermal storage is base-load. We interpret the simulation results differently, concluding that although CST can perform in a similar manner to base-load in summer, it cannot in winter. That doesn't matter however. In a predominantly renewable energy supply mix, we find that the concept of ‘base-load power station' is redundant. The important result is that renewable energy mixes can give the same reliability of the whole generating system in meeting demand as the existing polluting fossil-fuelled system. Similar results for the US were presented at the Solar 2011 conference by David Mills and Weili Cheng.

Mark Diesendorf is Associate Professor and Deputy Director of the Institute of Environmental Studies at UNSW. His latest book is ‘Climate Action'.