Thinking big with small-scale renewables

Clean energy that comes in small-scale units, like wind turbines, solar PV and energy-efficient appliances, offers significant fundamental advantages over large-scale alternatives in terms of speed to install, lower commercial risk, and potential for faster learning and improvement.

Last week Climate Spectator highlighted that over the past decade, and in the decade to come, smaller-sized clean energy technologies such as solar PV, energy efficient appliances, and wind power were winning the clean energy race over large unit-sized power generation such as coal with carbon capture and storage. 

This cannot be explained as just a function of greater government support.

According to the Carbon Capture and Storage Institute, governments around the world have allocated US$23.5 billion of funding to support carbon capture and storage. Yet we still haven’t got ourselves a single commercial-scale coal fired power station that captures and ultimately stores its greenhouse gas emissions.

Nuclear power has been offered soft loans, production tax credits, and a range of other subtle leg-ups not to mention 40 years as the primary beneficiary of government energy R&D budgets. But in terms of the new and improved generation III design, we’ve seen debacles in Finland (Olkiluoto) and France (Flamanville), and the number of plants proceeding to genuine construction across the globe can be counted on two hands. This has led the Economist magazine, a champion of nuclear in the past, to recently declare nuclear power as the “dream that failed”.

In the end there are some fundamental advantages from smaller, modular abatement technological options.

Smaller typically means faster and less risky for end buyer to construct/install

From the perspective of the end purchaser, a rooftop solar system can be up and generating electricity within eight hours. A 100 MW wind farm can be fully commissioned in less than 12 months of ground being prepared, and even start feeding part of its generating capacity into the grid within six months. An energy efficient television, refrigerator or light bulb can make a difference within an hour of purchase.

On the other hand, a run of the mill coal fired power station takes four years to construct, let alone tack-on carbon capture and storage. A nuclear power plant at best involves four years, but recent experience has been closer to seven years. With Australian geothermal projects we’re still yet to see any convert into power (except a very small plant in Birdsville, Queensland) but construction times in the realm of two years have occurred for New Zealand projects. Solar thermal is probably the best of the large-scale technologies with a construction time in the realm of one and half to two years.

This of course neglects the time involved in setting-up a manufacturing plant for solar PV or a refrigerator, but for end customers, smaller is most definitely faster than big. Also such products involve less risk of construction time and budget blow-outs because of their standardised nature and simple installation.

When you’re dealing with capital intensive, long-lived equipment – quick and easy to install/build matters a lot because it means less risk, and therefore cheaper financing.

Smaller typically means faster learning and improvement

Learning and improving is to a large extent a function of repetition, an ability to isolate cause and effect, and then being able to rapidly apply whatever is learned before it is forgotten.

The factory-based, mass production involved in small, standardised equipment does this better than infrequent, field-based construction of large power plants. A factory involves more readily controlled conditions than a large civil project whose conditions and suppliers can change from location to location and are subject to vagaries of the weather. The personnel at the factory get repeated experience churning out hundreds of units per day where learning can be rapidly applied in the next production run. Whereas personnel involved a civil construction project might only get to work on a plant once a year, with possibly long lags from project-to-project.

On top of this, mass production provides greater rewards on investments in research and development that improve a product unit’s performance or production cost. R&D is an upfront cost to develop knowledge that is costless to replicate. With small mass-produced equipment these upfront costs can be offset over tens of thousands or even millions of units per annum. On the other hand you’d be lucky to sell a handful of nuclear plants per year and maybe a hundred coal plants.

The Economist magazine, in seeking to explain the failure of nuclear power, came up with an incredibly apt analogy for this phenomenon described above – whales evolve slower than fruit flies. 

Smaller units mean less market risk for end buyers

You are much less likely to tip an electricity market into oversupply and depress electricity prices if you add a hundred megawatts in one go rather than a thousand megawatts. Consequently buyers see less market risk in purchasing small power generation units than big ones.

This is one of the prime reasons proposals to construct new 1000MW nuclear power plants tend to be confined to electricity systems where prices are set by regulators rather than liberalised electricity markets, where prices are determined by supply and demand.

Implications

Clean energy technologies that come in small, unit sizes have some important advantages over large scale technologies, but one should avoid being too dogmatic. Each technology tends to have a range of pros and cons that mean it would be foolish to rule one in or out based purely on unit size. Rather the lesson from this is that we should avoid silly policies like Solar Flagships, which are deliberately biased in favour of large-scale projects.