Renewables in Australia – a bright, sunny future?
Name the odd one out: America, China, the EU, Australia, Canada, or Japan.
That’s right, Australia is the only country without a commitment to carbon neutrality! And beneath the weeds of other pollution sources (cows), the elephant in the room is Australia’s electricity.
As of 2019, Australia generates ~21% of its power through renewable sources including solar, wind, hydro, and bioenergy. This is compared to a whopping 83% by New Zealand, or even 27% for China, and an EU27 average of 34%, according to research by BP.
But how does a country with the highest per capita installation of rooftop solar panels lag so far behind in the energy transition?
Why the lack of a renewable tailwind?
There are a few key issues that bodies like the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC) are working to resolve. From a geographical perspective, despite being a renewables rich nation, with average PV potential is one of the best in the world exceeding 4.5kwh/kwp1, the vast majority of resources are located in the middle of nowhere, with no existing transmission infrastructure to connect to cities. As a result, Australia can really only tap renewable resources near the coast and major urban centres.
Moreover, Australia’s current transmission infrastructure was not designed for asynchronous renewable energy. Asynchronous here refers to the type of energy (AC, rather than DC) that is created in the solar or wind turbine process, which causes rapid increases and decreases in electricity output down power lines. The lines heat and cool quickly from large, intermittent energy throughput, causing strain and depreciating the system faster than traditional, constant sources of energy such as coal.
The energy merry-go-round
However, perhaps most importantly is the reality of intermittent, variable renewable energy sources. Imagine a situation where Australia has fully switched to solar energy. Now imagine it’s night time, and no one has any power because the sun is not shining.
This is not good.
Even wind farms only spin around 30-35% of their max megawatt (MW) capacity, or have a capacity factor of 30-35% for those so inclined. Like solar, wind farms have peaks and troughs of generation through the day that don’t always align with electricity demand that ramps up in the evening.
Places like New Zealand have the geographic advantage of rich geothermal sites and rivers for hydro power, which alleviate this problem. Australia, on the other hand, continues to need both coal and gas fired peaking plants2 to ‘firm’ the grid, and cover the increasing electricity demand in the 6:00-9:00pm time of the market, where renewables are slowing down.
Furthermore, this problem, and damage to electricity transmission lines, are exacerbated by personal solar panels; over 2m, or 21% of Australians households with personal systems are putting increasing amounts of power onto the network during the daytime.
No capital for coal
Coal plants are very good at one thing: staying on. It’s a slow, ~8 hour process to stop coal turbines spinning and creating electricity, and a similar time to ramp up. This is not well suited to dealing with the variable nature of electricity demand.
Many plants were designed to be on constantly, and so are losing economic viability as prices in the day are pushed down, and being shut down earlier than expected. Refinancing coal plants is also next to impossible, with large ESG considerations skyrocketing the cost of capital. This is beginning to create more shortfall in the system that must be covered by other energy sources.
Some may be familiar with a “duck curve”, which I’ll include below because it’s cute, and demonstrates the above demand phenomenon. Electricity demand spikes just at the end of the day, so factoring in the decline of solar generation, there is a steep ramp up of non-renewable demand at the end of the day, which can be hard to manage. Prices also jump steeply at evening time, too.
Electricity: The soon, and hopefully soon(ish)
So, where do we go from here?
The coup de grâce would be a method to store renewable energy throughout the day, to then use it when it’s needed most in the evening.
Hydrogen is an increasingly interesting solution. Through a process of electrolysis, it’s possible to split up water into oxygen and hydrogen gas using spare renewable energy, and so the hydrogen gas can be used as a form of zero-emission electricity. It’s also possible to create ammonia, before a conversion back into energy. Sounds attractive!
What’s better is the interest from government and private firms – the government announcing a goal of ‘H2 under $2’ before 2050, a A$300m mandate for the CEFC, along with over $1bn and hundreds of MW projects in the pipeline from firms like Origin, Engie, and Fortescue.
However, current pricing is too high to be economically viable on a large scale, and before it hits $2 a tonne, hydrogen is unlikely to be a solution for the electricity market. Also, storage of hydrogen in gas form has its challenges, such as needing to be under negative 250 degrees Celsius. As if the negative 70 for COVID vaccines wasn’t hard enough.
Another technology right around the corner are batteries. SA has had success in utilising its 150MW Tesla batteries installed in 2017. The battery is able to ensure grid stability when many, many households in SA are putting solar back onto the system – preventing blackouts from an oversupplied grid.
The technology has further to go before large enough battery systems are economical enough to negate the need for energy sources other than renewables, but in the meanwhile, will likely play a crucial role for grid stability. Recently, the clean energy fund CEP announced a 1,200MW nameplate capacity battery in NSW – a step in the right direction.
New (energy) South Wales
Now, to where we live. What’s currently in the pipeline?
In November 2020, NSW Government unveiled an electricity infrastructure roadmap. This plan guides up to A$32bn investment in energy infrastructure, a focus on renewable energy zones, and a balance between new renewable investment – particularly hydro, and firming the grid with gas and batteries.
The renewable energy zones below are an interesting point, targeting areas in NSW with existing transmission infrastructure and good renewable resource potential, to help alleviate the problems we previously touched on. Ultimately, though, plans are plans, and we’ll have to bide time to see concrete investment and action.
Finally, a struggle with current policy is a mismatch between Federal and State energy plans within the National Electricity Market3 (NEM), with the NSW plans targeted more at renewables, throwing a monkey wrench at private investment. For example, in late 2020, uncertainty of the NSW roadmap caused AGL, a major NEM gentailer (generator and retailer; generates electricity and then sells it to consumers like us) to delay investment in a Newcastle gas plant and battery at its Liddell site.
We’re inching towards a fully renewable grid, but the highway there is stopped, for the time being, by lack of technology or economic viability. Hopefully we’ll get there by the time I’m 30 so my electricity bill is lower.
1: “PVOUT is defined as the amount of power generated per unit of installed PV capacity over the long term (the specific yield), measured in kilowatt hours per installed kilowatt peak (kWh/kWp)” – Global Photovoltaic Power Potential by Country, The World Bank, 2020
2: Gas fired peaking plants are plants that burn natural gas, with the ability to quickly fire up and down to match demand when the wholesale price of electricity reaches a certain level, most often during evenings.
3: The NEM doesn’t actually include WA or NT, which I’ve been neglecting for much of this time as they have a different system. Big country, scam name.
Note: Many subtler points, explanations, and examples were glossed over in the interest of not reading a 20 page report by some random guy. Feel free to reach out with any comments, questions, or (constructive or not) criticism!