Why small is beating big to clean up our energy supply

The mantra that 'bigger is better' could get us in trouble when it comes to clean energy policy, with the impact of quick-to-build small-scale renewables clearly usurping that of large-scale abatement technology in recent years.

Two days ago I wrote about the possibility that the small-scale renewable energy target (SRET) was under threat. One of the issues underlying this was Climate Change Minister Greg Combet’s response to a question about the future of the SRET by the AFR:,

“What is important in the transformation of the energy sector is large-scale renewable energy,” Mr Combet said.

After we published the article on Tuesday we received the following response from Combet’s office:

"The Government expects the RET review to focus on making the scheme more cost effective. It is not intended to be a mechanism to remove all support for household solar."

The review of the Renewable Energy Target is dictated by the legislation and is really a matter for the Climate Change Authority, but ultimate decisions rest with government ministers.

So what is of greater interest is the views of ministers and the public servants that advise them about whether they think rooftop PV can make a large, cost-effective contribution to our future energy supplies. On this point I suspect there is still a pervading belief in Canberra that unless something is big, it’s not the real deal.

Back in the early- to mid-2000s those with their hands on the levers of Australian energy and climate change policy, and the energy modellers that advised them, scoffed at the idea of small things like wind turbines, solar panels, and more efficient light bulbs and refrigerators making any real dent in Australia’s, or any other nations, greenhouse gas emissions. These were just small play things.

To make a big difference you needed big stuff – like coal with carbon capture and storage, nuclear power and, to a lesser extent, geothermal. This dominant way of thinking was evidenced in the result of the economic models which tended to predict niche roles for wind and solar; and relatively minor contribution from energy efficiency.

This was also reflected in the government establishing the Low Emission Technology Demonstration Fund in 2004. This program was all about supporting the demonstration of large-scale abatement technology, particularly carbon capture and storage.

Yet in the eight years that have transpired, big has most definitely been usurped by small, modular generating units in the clean energy stakes. The quick to build, standardised, and modular solar PV panels and wind turbines have been the success story of the past five years – and also likely to be the success story for the next ten. Whereas power plants have tended to struggle that involve a great deal of on-site construction, customised design, and have large minimum economic scale generating units, such as solar thermal, nuclear, CCS, geothermal, and biomass steam turbines.

As an example, if we look at nuclear, it has been completely put in the shade by solar and wind over the last few years.

Source: Worldwatch Institute (2011)

In Europe, wind and solar PV are even starting to outpace gas installations and have completely taken out coal, nuclear and any other source of power other than gas.

European Union annual installations of power generation capacity (megawatts)

Source: Bloomberg New Energy Finance (2012)

In the United States you have a similar story. Wind and solar PV sit only behind gas in terms of new capacity added to the grid. The chart below from the US Energy Information Administration illustrates that they expect renewables capacity to slightly outpace gas over 2011 to 2015. The vast majority of this renewable capacity will be wind power and solar PV.

EIA projection of power generation capacity installed over 2011-2015

Source: US Energy Information Administration – 2012 Annual Energy Outlook

These statistics are not intended to rubbish the other alternatives for cleaning up our energy supply and suggest they should be ignored. In fact they are likely to be vital to get us from say 40-50 per cent zero-carbon electricity to something closer to 80 per cent or more. 

However, the mentality that ‘bigger is better’ and ‘big equals serious’ is a flawed mindset that can lead to poor policy that forces the market to go big when it might be smarter to build small. 

Some put the success of solar PV and wind down solely to government generosity with the cheque book. This has an element of truth, particularly for solar PV, but the story is far more complicated than that. In the end there are some fundamental advantages from smaller, modular power generation technologies. In fact it’s one of the reasons conventional gas turbines have come to dominate new power generation installations in developed economies since the 1980s.

Next week I’ll describe some of the fundamental advantages of smaller, modular clean energy technologies over big power generation that are part of the reason for their relative success.

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