With the cost of energy generated from wind and solar now less than coal, the share of Australia’s electricity coming from renewables has reached 23%. The federal government projects the share will reach 50% by 2030.
It is at this point that integrating renewables into the energy system becomes more costly.
We can add wind and solar farms at little extra cost when their share is low and other sources – such as coal and gas generators now – can compensate for their variability. At a certain point, however, there comes a need to invest in supporting infrastructure to ensure supply from mostly renewable generation can meet demand.
But by 2030, even with these extra costs, adding new variable renewable generation (solar and wind) to as high as a 90% share of the grid will still be cheaper than non-renewable options, according to new estimates from the CSIRO and Australian Energy Market Operator.
International research, including from the International Renewable Energy Agency, suggests solar and wind power are now the cheapest new sources of electricity in most parts of the world.
Our estimates, made for the third annual “GenCost” report (short for generation cost), confirm this is also now the case in Australia.
We compare the cost of new-build coal, gas, solar photovoltaics (both small and large scale), solar-thermal, wind and a number of speculative options (such as nuclear).
What we’ve been able to more accurately estimate in the new report is the cost of integrating more and more renewable energy into the energy system, as coal and gas generators are retired.
The two key extra integration costs are energy storage and more transmission lines.
For any system dominated by renewables, storing energy is essential.
Storage means renewable energy can be saved when it is overproducing relative to demand – for example, in the middle of the day for solar, or during extended windy conditions. Stored energy can then be used when renewables cannot meet demand – such as overcast days or at night for solar.
Among options being considered for large-scale investment in Australia are batteries and pumped hydro energy storage (using excess renewable power to pump water back up to dams to again drive hydroelectric turbines).
Pumped hydro sites can provide storage for hours or days. There are three schemes in Australia: Talbingo and Shoalhaven in New South Wales, and Wivenhoe near Brisbane.
Battery costs have been falling steadily and tend to be most competitive for storage electricity for less than eight hours. South Australia’s big battery (officially known as the Hornsdale Power Reserve) is the most obvious example.
The other key cost to integrate more renewable energy generation into the electricity grid is building more transmission lines. Right now those lines mostly run from coal and gas power stations near coal mines.
But this not where new large-scale renewable generation will be. Solar farms are best placed inland, where there is less cloud cover, and in the mid to northern regions of Australia. Wind farms are generally better located in elevated areas and in the southern regions. We’ll need to build new transmission links to these “renewable energy zones”.
Transmission links between the states in the National Electricity Market (Queensland, New South Wales, Australian Capital Territory, Victoria, Tasmania and South Australia) will need to be improved so they can better support each other if one or more are experiencing low renewable energy output.
So how much extra will it cost for Australia to have a higher share (up to 90%) of electricity from wind and solar (variable renewable energy)? The following graph summarises our findings based on 2030 cost projections.
The cost of generating energy from wind and solar (shown in light blue) is about A$40 per megawatt-hour (MWh). This is is slightly below current average market prices.
A higher share of renewable energy adds storage costs (in black) and transmission costs (grey and dark blue). These integration costs increase from A$4/MWh to A$20/MWh as the variable renewable energy share increases from 50% to 90%.
At 90% renewable energy, the total cost is A$63/MWh. But that’s still cheaper than the cost of new coal and gas-fired electricity generation, which is in the range of A$70 to A$90/MWh (under ideal assumptions of low fuel pricing and no climate policy risk).
The 2020-21 GenCost report is now in the formal consultation period with stakeholders including industry, government, regulators and academia. The final report is due to be published in March 2021.
Like so much of what I have done as Australia’s Chief Scientist, the electricity market review of 2017 was unexpected.
I was driving home after delivering a speech late one night in October 2016 when then federal energy minister Josh Frydenberg called and asked if I would chair a review of the National Electricity Market.
The urgent need had arisen as a consequence of the South Australian power blackout and ongoing concerns about the evolution of the electricity market. The call was brief; the task was huge.
This was new territory for me. While I have a PhD in electrical engineering, I had no specific interest in power systems. I had previously taken a business interest in green technologies. I had started a green lifestyle magazine, I had invested early in green technology stocks (and lost a small fortune), been involved in an electric car charging company, and I drove an electric car. I was an engineer but my work was in micro-electronics, at the scale of brain synapses. Large-scale power engineering had been my least favourite subject.
Now, it is close to my favourite. Work on low-emissions technologies has occupied a significant portion of my five-year term as Chief Scientist, which finishes at the end of this month.
Energy is a complex, vitally important topic, on which everyone has an opinion. The physics of human-induced global warming is irrefutable and a fast reduction in greenhouse gas emissions is urgent. Last summer’s bushfires were a grim reminder.
The Finkel Review at a glance
People often ask me whether climate policy is destined to destroy political leaders in Australia. Call me an optimist, but what I have seen is progress. When my proposed Clean Energy Target met its maker in October 2017, I was disappointed, but I was honestly excited the Australian, state and territory governments agreed to 49 out of 50 recommendations of our review.
Many of these recommendations ensured the electricity system would retain its operating strength as ever more solar and wind generation was added, and others ensured better planning processes for long-distance interconnectors and renewable energy zones. The public narrative that climate progress is moribund overlooks this ongoing work.
In early 2018, as I began to better understand the full potential of hydrogen in a low-emission future, I informally briefed Frydenberg, who responded by asking me to prepare a formal briefing paper for him and his state and territory counterparts. With support from government, industry, research and public interest colleagues, it developed last year into the National Hydrogen Strategy, which explored fully the state of hydrogen technology internationally and its potential for Australia.
The next step came this year with the Low Emissions Technology Statement, which articulates a solid pathway to tackle some of the pressing and difficult challenges en route to a clean economy. This was developed by Frydenberg’s successor, Angus Taylor, supported by advice from a panel I chaired.
When I was appointed Australia’s Chief Scientist in 2015, my predecessor Ian Chubb took me for a drink at Canberra’s Monster Bar. He had a prepared brief for me and we flicked through it. But Ian didn’t offer prescriptive advice, given the reality that the specifics of the role are defined by each chief scientist in line with requests from the government of the day.
I came to the role with a plan no more detailed than to work hard, do things well, be opportunistic, and always say yes – despite the device that sits on my desk and barks “no” whenever you hit the red button, a gift from my staff keen to see a more measured response to the many calls on my time.
I am most proud of my initiatives in STEM (science, technology, engineering and maths) education. These include the Australian Informed Choices project that ensures school students are given wise advice about core subjects that will set them in good stead for their careers; the STARPortal one-stop shop for information on extracurricular science activities for children; a report to the national education ministers on how businesses and schools can work together to provide context to science education; and the Storytime Pledge that acknowledges the fundamental importance of literacy by asking scientists to take a pledge to read to children.
But many of the high-profile tasks have arrived unexpectedly – the energy and low-emissions technology work, helping CSIRO with its report on climate and disaster resilience, and my work this year to help secure ICU ventilators and most recently, to review testing, contact tracing and outbreak management in the coronavirus pandemic.
The incoming Chief Scientist, Cathy Foley, will no doubt find, as I did, the job brings big surprises and unexpected turns. I expect she will also find government more receptive than ever to taking advice from experts in health, the physical sciences and the social sciences.
That doesn’t mean gratuitous advice. The advice we offer as scientists must be relevant and considered. Much of my advice has been in the form of deep-dive reviews, such as the report on national research facilities that was funded in the 2018 budget. But this year, amid the pandemic, we began something quite different: the Rapid Research Information Forum, which gives fast, succinct advice to government on very specific questions. This has been a highly effective way to synthesise the most recent research results with a very quick turnaround.
Nor does advice mean criticism. The Chief Scientist’s job is not to be the chief scientific critic of government policy. It is to advise ministers with the best that science has to offer. In turn, their job is to weigh that advice alongside inputs from other sectors and interests.
For me, working with the government has delivered results. Ministers have been receptive, have never told me what to say, and have agreed to the vast majority of my work being made public. In the energy sphere, we’ve made incredible progress. I am delighted to be staying on in an advisory role on low-emissions technologies.
When Frydenberg called late that evening in 2016, I had no idea where to begin to assess the state of the electricity market. And I had no idea that three years later we would be taking the first steps towards a clean hydrogen economy.
Now I am confident we will achieve the dramatic reduction in emissions that is necessary. Because of the immensity of the energy, industrial, agricultural and building systems, it will be slow and enormously difficult in a technical sense, politics aside.
Anyone who believes otherwise has not looked in detail at the production process for steel and aluminium. Converting these industries to green production is a mammoth task. But the political will is there. Industry is on the job, as is the scientific community, and the work has started.
The beginning of my term coincided with one of the most momentous scientific breakthroughs in a century: the detection of gravitational waves, literally ripples in the fabric of spacetime. This confirmed a prediction made by Einstein 100 years ago and was the final piece in the puzzle of his Theory of General Relativity.
As I finish my term, the contribution of Australian scientists to that discovery has just been recognised in the Prime Minister’s Prizes for Science. As chair of the Prizes selection committee, this was a nice bookend for me. More importantly, it’s a reminder we are playing the long game.
Several Australian states are going it alone on the the energy transition. The policies adopted by New South Wales, Victoria, Queensland and others represent major departures from the existing national approach, and run counter to the neoliberal principles underpinning the current system.
Most notably, the NSW Coalition government announced its electricity infrastructure roadmap. The government says by 2030, the policy will enable A$32 billion in private sector investment, and bring 12 gigawatts of new renewable energy capacity online. This is roughly equivalent to the amount of large-scale wind and solar installed in the National Electricity Market to date.
The states were forced to act on renewables after the federal government effectively vacated the policy space. The NSW law has been widely hailed as a victory for the clean energy transition, but also represents a return to the centrally planned system of decades past. In fact, it may well signal the breakup of the National Electricity Market as we know it today.
This presents risks and challenges which, if not managed carefully, may result in white elephants and higher electricity bills for consumers.
Before the 1990s, electricity supply was fundamentally understood as a state responsibility. State-owned companies were tasked with generating, distributing and supplying electricity.
But in the 1990s, things changed, for several reasons. First, the cost of electricity supply was rising at a concerning rate. Second, neoliberalism began to dominate economic reform in Australia and internationally. Governments saw their jobs less as providing services (such as electricity), and more as promoting markets and competition to make systems, such as electricity supply, more efficient.
Also in the 1990s, two key inquiries – the Productivity Commission’s report into energy generation and distribution, and the Hilmer inquiry into national competition policy – identified issues in the electricity industry. These included wasteful overinvestment, largely driven by the political imperatives of keeping the lights on at all costs, and creating jobs in specific locations and electorates.
A new, reformed system, the National Electricity Market, began operating in 1998. It included all states and territories except Western Australia and the Northern Territory. In this new system, market logic – rather than central planners and bureaucrats – would decide the the location, timing and type of new energy generation investment. Private firms would supply electricity to consumers using price signals and contract markets to guide decisions.
Key to this new system was a set of highly prescriptive rules, and a process to develop them. This culminated in the Australian Energy Market Agreement and the establishment of three national energy market institutions we have today:
This market structure, and strict separation of powers and functions, was partly to isolate policy and investments from the political whims of the day.
The NSW government legislation is the latest, and perhaps most significant, in a string of policies to reject the old national market approach. Grattan Institute energy director Tony Wood described it as “the most extreme intervention we have seen to date, and moves even more closely to a centrally planned energy system and away from a market approach, than anything else I have seen to date”.
NSW is not alone here. In Victoria, the Andrews government is building the Southern Hemisphere’s biggest battery at Geelong, under a new law that sits outside the national framework. And government this month also announced a A$550 million budget plan to create six renewable energy hubs, and also bring another 600 megawatts of renewable energy generation online.
Such interventions are not limited to the states. The federal government is building the Snowy 2.0 pumped hydro scheme. It has threatened to build a 1,000MW gas generator, and has established a scheme to underwrite energy investments. And the Energy Security Board has the power to make rules outside the regular process, which it used most recently to tighten the standards around energy reliability.
The breakdown can largely be sheeted home to one factor: a lack of climate policy at a national level. This has left the states with little option than to manage the energy transition, and climate action, on their own.
The NSW policy will undoubtedly affect projects already in the pipeline. Following the announcement, both AGL and Energy Australia put the brakes on battery and gas projects in the state.
And the Australian Energy Council, which represents major electricity retailers, expressed “concern about its impact on the functioning of an increasingly interconnected National Electricity Market and the complexity it will certainly add to investment decisions”.
It’s hard to argue against a democratically elected state government pursuing what is within its constitutional remit – particularly given the federal failure on climate policy. But existing institutions and frameworks are not equipped to govern that kind of system.
So if the states do continue to go it alone, we need a new national accord which clarifies the roles and responsibilities of each government. That would ensure we don’t repeat mistakes of the past, and in particular excessive over investment for which consumers foot the bill.
Biomethane technology is no longer on the backburner in Australia after an announcement this week that gas from Sydney’s Malabar wastewater plant will be used to power up to 24,000 homes.
Biomethane, also known as renewable natural gas, is produced when bacteria break down organic material such as human waste.
The demonstration project is the first of its kind in Australia. But many may soon follow: New South Wales’ gas pipelines are reportedly close to more than 30,000 terajoules (TJs) of potential biogas, enough to supply 1.4 million homes.
Critics say the project will do little to dent Australia’s greenhouse emissions. But if deployed at scale, gas captured from wastewater can help decarbonise our gas grid and bolster energy supplies. The trial represents the chance to demonstrate an internationally proven technology on Australian soil.
Biomethane is a clean form of biogas. Biogas is about 60% methane and 40% carbon dioxide (CO₂) and other contaminants. Turning biogas into biomethane requires technology that scrubs out the contaminants – a process called upgrading.
The resulting biomethane is 98% methane. While methane produces CO₂ when burned at the point of use, biomethane is considered “zero emissions” – it does not add to greenhouse gas emissions. This is because:
it captures methane produced from anaerobic digestion, in which microorganisms break down organic material. This methane would otherwise have been released to the atmosphere
it is used in place of fossil fuels, displacing those CO₂ emissions.
Biomethane can also produce negative emissions if the CO₂ produced from upgrading it is used in other processes, such as industry and manufacturing.
Biomethane is indistinguishable from natural gas, so can be used in existing gas infrastructure.
The Malabar project, in southeast Sydney, is a joint venture between gas infrastructure giant Jemena and utility company Sydney Water. The A$13.8 million trial is partly funded by the federal government’s Australian Renewable Energy Agency (ARENA).
Sydney Water, which runs the Malabar wastewater plant, will install gas-purifying equipment at the site. Biogas produced from sewage sludge will be cleaned and upgraded – removing contaminants such as CO₂ – then injected into Jemena’s gas pipelines.
Sydney Water will initially supply 95TJ of biomethane a year from early 2022, equivalent to the gas demand of about 13,300 homes. Production is expected to scale up to 200TJ a year.
A report by the International Energy Agency earlier this year said biogas and biomethane could cover 20% of global natural gas demand while reducing greenhouse emissions.
As well as creating zero-emissions energy from wastewater, biomethane can be produced from waste created by agriculture and food production, and from methane released at landfill sites.
The industry is a potential economic opportunity for regional areas, and would generate skilled jobs in planning, engineering, operating and maintenance of biogas and biomethane plants.
Methane emitted from organic waste at facilities such as Malabar is 28 times more potent than CO₂. So using it to replace fossil-fuel natural gas is a win for the environment.
It’s also a win for Jemena, and all energy users. Many of Jemena’s gas customers, such as the City of Sydney, want to decarbonise their existing energy supplies. Some say they will stop using gas if renewable alternatives are not found. Jemena calculates losing these customers would lose it A$2.1 million each year by 2050, and ultimately, lead to higher costs for remaining customers.
The challenge for Australia will be the large scale roll out of biomethane. Historically, this phase has been a costly exercise for renewable technologies entering the market.
Worldwide, the top biomethane-producers include Germany, the United Kingdom, Sweden, France and the United States.
The international market for biomethane is growing. Global clean energy policies, such as the European Green Deal, will help create extra demand for biomethane. The largest opportunities lie in the Asia-Pacific region, where natural gas consumption and imports have grown rapidly in recent years.
Australia is lagging behind the rest of the world on biomethane use. But more broadly, it does have a biogas sector, comprising than 240 plants associated with landfill gas power units and wastewater treatment.
In Australia, biogas is already used to produce electricity and heat. The step to grid injection is sensible, given the logistics of injecting biomethane into existing gas infrastructure works well overseas. But the industry needs government support.
Last year, a landmark report into biogas opportunities for Australia put potential production at 103 terawatt hours. This is equivalent to almost 9% of Australia’s total energy consumption, and comparable to current biogas production in Germany.
While the scale of the Malabar project will only reduce emissions in a small way initially, the trial will bring renewable gas into the Australia’s renewable energy family. Industry group Bioenergy Australia is now working to ensure gas standards and specifications are understood, to safeguard its smooth and safe introduction into the energy mix.
The Morrison government has been spruiking a gas-led recovery from the COVID-19 recession, which it says would make energy more affordable for families and businesses and support jobs. Using greenhouse gases produced by wastewater in Australia’s biggest city is an important – and green – first step.
Last week San Francisco became the latest city to ban natural gas in new buildings. The legislation will see all new construction, other than restaurants, use electric power only from June 2021, to cut greenhouse gas emissions.
San Francisco has now joined other US cities in banning natural gas in new homes. The move is in stark contrast to the direction of energy policy in Australia, where the Morrison government seems stuck in reverse: spruiking a gas-led economic recovery from the COVID-19 pandemic.
Natural gas provides about 26% of energy consumed in Australia — but it’s clearly on the way out. It’s time for a serious rethink on the way many of us cook and heat our homes.
San Francisco is rapidly increasing renewable-powered electricity to meet its target of 100% clean energy by 2030. Currently, renewables power 70% of the city’s electricity.
The ban on gas came shortly after San Francisco’s mayor London Breed announced all commercial buildings over 50,000 square feet must run on 100% renewable electricity by 2022.
Buildings are particularly in focus because 44% of San Franciscos’ citywide emissions come from the building sector alone.
Following this, the San Francisco Board of Supervisors unanimously passed the ban on gas in buildings. They cited the potency of methane as a greenhouse gas, and recognised that natural gas is a major source of indoor air pollution, leading to improved public health outcomes.
From January 1, 2021, no new building permits will be issued unless constructing an “All-Electric Building”. This means installation of natural gas piping systems, fixtures and/or infrastructure will be banned, unless it is a commercial food service establishment.
In the shift to zero-emissions economies, transitioning our power grids to renewable energy has been the subject of much focus. But buildings produce 25% of Australia’s emissions, and the sector must also do some heavy lifting.
A report by the Grattan Institute this week recommended a moratorium on new household gas connections, similar to what’s been imposed in San Francisco.
The report said natural gas will inevitably decline as an energy source for industry and homes in Australia. This is partly due to economics — as most low-cost gas on Australia’s east coast has been burnt.
There’s also an environmental imperative, because Australia must slash its fossil fuel emissions to address climate change.
While acknowledging natural gas is widely used in Australian homes, the report said “this must change in coming years”. It went on:
This will be confronting for many people, because changing the cooktops on which many of us make dinner is more personal than switching from fossil fuel to renewable electricity.
The report said space heating is by far the largest use of gas by Australian households, at about 60%. In the cold climates of Victoria and the ACT, many homes have central gas heaters. Homes in these jurisdictions use much more gas than other states.
By contrast, all-electric homes with efficient appliances produce fewer emissions than homes with gas, the report said.
Australia’s states and territories have much work to do if they hope to decarbonise our building sector, including reducing the use of gas in homes.
In 2019, Australia’s federal and state energy ministers committed to a national plan towards zero-carbon buildings for Australia. The measures included “energy smart” buildings with on-site renewable energy generation and storage and, eventually, green hydrogen to replace gas.
The plan also involved better disclosure of a building’s energy performance. To date, Australia’s states and territories have largely focused on voluntary green energy rating tools, such as the National Australian Built Environment Rating System. This measures factors such as energy efficiency, water usage and waste management in existing buildings.
The National Construction Code requires mandatory compliance with energy efficiency standards for new buildings. However, the code takes a technology neutral approach and does not require buildings to install zero-carbon energy “in the absence of an explicit energy policy commitment by governments regarding the future use of gas”.
An estimated 200,000 new homes are built in Australia each year. This represents an opportunity for states and territories to create mandatory clean energy requirements while reaching their respective net-zero emissions climate targets.
Under a gas ban, the use of zero-carbon energy sources in buildings would increase, similar to San Francisco. This has been recognised by Environment Victoria, which notes
A simple first step […] to start reducing Victoria’s dependence on gas is banning gas connections for new homes.
Creating incentives for alternatives to gas may be another approach, such as offering rebates for homes that switch to electrical appliances. The ACT is actively encouraging consumers to transition from gas.
Banning gas in buildings could be an economically sensible move. As the Grattan Report found, “households that move into a new all-electric house with efficient appliances will save money compared to an equivalent dual-fuel house”.
Meanwhile, ARENA confirmed electricity from solar and wind provide the lowest levelised cost of electricity, due to the increasing cost of east coast gas in Australia.
Future-proofing new buildings will require extensive work, let alone replacing exiting gas inputs and fixtures in existing buildings. Yet efficient electric appliances can save the average NSW homeowner around A$400 a year.
Learning to live sustainability, and becoming resilient in the face of climate change, is well worth the cost and effort.
Recently, a suite of our major gas importers — China, South Korea and Japan — all pledged to reach net-zero emissions by either 2050 or 2060. This will leave our export-focused gas industry possibly turning to the domestic market for new gas hookups.
The window to address dangerous climate change is fast closing. We must urgently seek alternatives to burning fossil fuels, and there’s no better place to start that change than in our own homes.
It’s now beyond dispute that — for new electricity generation — solar, wind and other forms of renewable energy are cheaper than anything else: cheaper than new coal fired power stations, cheaper than new gas-fired stations and cheaper than new nuclear power plants.
The International Energy Association says so. Its latest World Energy Outlook describes solar as the cheapest electricity in history.
Solar costs 20% to 50% less than it thought it would two years ago.
Attention has turned instead to the ways to best meet demand when renewable resources are not available.
The government is a big supporter of gas, and as importantly, pumped hydro.
Pumped hydro is an old technology, as old as the electricity industry itself.
It became fashionable from the 1960s to 1980s as a complement to inflexible coal and nuclear generators.
When their output wasn’t needed (mainly at night) it was used to pump water to higher ground so that it could be released and used to run hydro generators when demand was high.
Australia’s three pumped hydro plants are old, built at least 40 years ago, and they operate infrequently, and sometimes not at all for years.
Gas fired electricity generation, whether by turbines (essentially a bigger version of those found on aeroplanes) or by conventional reciprocating engines, has several advantages over pumped hydro including much smaller local environmental impacts and in many cases smaller greenhouse gas impacts.
They can be built quickly and, most importantly, if there is a gas supply they can be built close to electrical loads. There are 17 gas-fired peaking generators in the National Electricity Market, but none have been built over the past decade.
Batteries have advantages over both.
In 2017, Australia built the world’s biggest battery, but it since been overtaken by a Californian battery more than twice its size and may soon be overtaken by one 150 times the size as part of the Sun Cable project in the Northern Territory which will send solar and stored electricity to Singapore.
In a study commissioned by the Bob Brown Foundation, we have compared the pumped hydro “battery of the nation” project to actual batteries and to gas turbines.
The battery of the nation (BoTN) is a proposal instigated by the Australian and Tasmanian governments to add more pumped hydro to Tasmania’s hydro power system and used enhanced interconnectors to provide electricity on demand to Victoria.
We sought to determine what could most cost-effectively provide Victoria with 1,500 megawatts — the BoTN, gas turbines or batteries.
Partly this depends on how long peak demand for dispatchable power last. BoTN would be able to provide sustained power for 12 hours, but we found that in practice, even when our system becomes much more reliant on renewables, it would be unusual for anything longer than four hours to be needed.
We could easily dismiss gas turbines — the Australian Energy Market Operator’s costings have batteries much cheaper than gas turbines to build and operate now and cheaper still by the time the Battery of the Nation would be built.
And batteries are able to respond to instructions in fractions of a second, making them useful in ways gas and pumped hydro aren’t.
They are also able to be placed where they are needed, rather than where there’s a gas connection or an abandoned mine, cliff or hill big enough to be used for pumped hydro.
We found batteries could supply 1,500 megawatts of instantly-available power for less than half of the cost of the enhanced Tasmania to Victoria cable alone, meaning that even if the rest of the BoTN cost little, batteries would still be cheaper.
Origin Energy recently gave up on expanding the Shoalhaven pumped hydro scheme in NSW after finding it would cost more than twice as much to build as first thought.
Similarly, investor-owned Genex has repeatedly deferred its final investment decision on one of the cheapest pumped hydro options in Australia — using depleted gold mine pits in Queensland — despite being offered concessional loans from the Australian Government to cover the entire build cost.
The final barrier seems to be obtaining subsidies from the Queensland Government to fund the necessary transmission lines.
Snowy 2.0 seems to be proceeding after the Australian Government pumped in $1.4 billion to get it going, and paid a king’s ransom to New South Wales and Victoria for their shares in Snowy Hydro.
Yet even before the main works are to start, credit rating agency S&P has down-graded Snowy Hydro’s stand-alone debt to “junk” and suggested the government will need to pump more money into Snowy Hydro to protect its debt.
Prime Minister Morrison has said recently that batteries can’t compete with gas generators , yet a couple of days later, his government announced support for a 100 megawatt battery in Western Australia, where gas is less than half the price it is on the east coast.
Our analysis suggests neither gas nor pumped hydro can compete with batteries, and if the prime minister wants more of either, he will have to dip his hands deeply into tax payer’s pockets to get it.
The proposed Asian Renewable Energy Hub (AREH) will be a huge step forward. It would eventually comprise 26,000 megawatts (MW) of wind and solar energy, generated in Western Australia’s Pilbara region. Once complete, it would be Australia’s biggest renewable energy development, and potentially the largest of its type in the world.
Late last week, the federal government granted AREH “major project” status, meaning it will be fast-tracked through the approvals process. And in another significant step, the WA government this month gave environmental approval for the project’s first stage.
The mega-venture still faces sizeable challenges. But it promises to be a game-changer for Australia’s lucrative energy export business and will reshape the local renewables sector.
Australia’s coal and gas exports have been growing for decades, and in 2019-20 reached almost A$110 billion. Much of this energy has fuelled Asia’s rapid growth. However, in recent weeks, two of Australia’s largest Asian energy markets announced big moves away from fossil fuels.
China adopted a target of net-zero greenhouse emissions by 2060. Japan will retire its fleet of old coal-fired generation by 2030, and will introduce legally binding targets to reach net-zero emissions by 2050.
The Asian Renewable Energy Hub (AREH) would be built across 6,500 square kilometres in the East Pilbara. The first stage involves a 10,000MW wind farm plus 5,000MW of solar generation – which the federal government says would make it the world’s largest wind and solar electricity plant.
The first stage would be capable of generating 100 terawatt-hours of renewable electricity each year. That equates to about 40% of Australia’s total electricity generation in 2019. AREH recently expanded its longer term plans to 26,000MW.
The project is backed by a consortium of global renewables developers. Most energy from AREH will be used to produce green hydrogen and ammonia to be used both domestically, and for shipping to export markets. Some energy from AREH will also be exported as electricity, carried by an undersea electrical cable.
Another Australian project is also seeking to export renewable power to Asia. The 10-gigawatt Sun Cable project, backed by tech entrepreneur Mike Cannon-Brookes, involves a solar farm across 15,000 hectares near Tennant Creek, in the Northern Territory. Power generated will supply Darwin and be exported to Singapore via a 3,800km electrical cable along the sea floor.
The export markets for both AREH and Sun Cable are there. For example, both South Korea and Japan have indicated strong interest in Australia’s green hydrogen to decarbonise their economies and secure energy supplies.
But we should not underestimate the obstacles standing in the way of the projects. Both will require massive investment. Sun Cable, for example, will cost an estimated A$20 billion to build. The Asian Renewable Energy Hub will reportedly require as much as A$50 billion.
The projects are also at the cutting edge of technology, in terms of the assembly of the solar array, the wind turbines and batteries. Transport of hydrogen by ship is still at the pilot stage, and commercially unproven. And the projects must navigate complex approvals and regulatory processes, in both Australia and Asia.
But the projects have good strategic leadership, and a clear mission to put Australian green energy exports on the map.
Together, the AREH and Sun Cable projects do not yet make a trend. But they clearly indicate a shift in mindset on the part of investors.
The projects promise enormous clean development opportunities for Australia’s north, and will create thousands of jobs in Australia – especially in high-tech manufacturing. As we look to rebuild the economy after the COVID-19 pandemic, such stimulus will be key. All up, AREH is expected to support more than 20,000 jobs during a decade of construction, and 3,000 jobs when fully operating.
To make smart policies and investments, the federal government must have a clear view of the future global economy. Patterns of energy consumption in Asia are shifting away from fossil fuels, and Australia’s exports must move with them.
John Mathews, Professor Emeritus, Macquarie Business School, Macquarie University; Elizabeth Thurbon, Scientia Associate Professor in International Relations / International Political Economy, UNSW; Hao Tan, Associate professor, University of Newcastle, and Sung-Young Kim, Senior Lecturer in International Relations, Discipline of Politics & International Relations, Macquarie School of Social Sciences, Macquarie University
Shifting Australia to a low-emissions energy system is a big challenge. Much has been said of the need to change the electricity generation mix, from mostly fossil fuels to mostly renewables. Yet our electricity transmission network must also be overhauled.
The transmission network largely consists of high-voltage cables and towers to support them, as well as transformers. This infrastructure moves electricity from where it’s generated, such as a coal plant or wind farm, to an electrical substation. From there, the distribution network – essentially the “poles and wires” – takes the electricity to customers.
On Australia’s east coast, increased renewable energy generation is already stretching the capacity and reach of Australia’s ageing transmission network. New capacity is being built, but is struggling to keep up.
In his budget reply speech last week, Labor leader Anthony Albanese pledged to create a A$20 billion corporation to upgrade Australia’s energy transmission system. So let’s take a look at what work is needed, and what’s standing in the way.
The electricity grid covering Australia’s east is part of the National Electricity Market (NEM). It’s one of the largest interconnected electricity networks in the world, and covers every jurisdiction except Western Australia and the Northern Territory.
The NEM comprises:
electricity generators (which produce electricity)
five state-based transmission networks, linked by interconnectors that enable electricity to flow between states
the distribution network (poles and wires)
electricity retailers (which sell electricity to the market)
customers, such as homes and businesses
a financial market in which electricity is traded.
The NEM’s transmission grid currently has a long, thin structure, running from the north of Queensland to the south of Tasmania and the east of South Australia. This reflects the fact that electricity has traditionally been produced by a small number of large, centralised (mostly coal and gas) generators.
Australia’s electricity networks were originally built and owned by state governments, mostly during the latter half of the 20th century. Over several decades, interstate transmission interconnectors were built to share resources more efficiently across borders. The NEM was formally created in the late 1990s.
Between 2000 and 2015, several states either partly or fully privatised their transmission networks, leading to the mixed model of today. The transmission companies are monopoly providers, and the prices they charge are set by the Australian Energy Regulator (AER).
The Australian Energy Market Operator (AEMO) operates the national market and is responsible for transmission planning. In Victoria, AEMO also decides on transmission investments. In the other jurisdictions, that role rests with the transmission companies.
In the past, electricity companies made some infrastructure investments far beyond what was needed – mostly in distribution networks, but also in transmission. This so-called “gold plating” of networks led to inflated costs for consumers, who ultimately pay for the investments via their power bills.
Renewables have increased the total NEM generation capacity from 40 gigawatts to 60 gigawatts since 2007. More than 30 gigawatts of renewable generators and 12 gigawatts of energy storage are expected to come online by 2040.
In mid-2017, a panel led by Australia’s Chief Scientist Alan Finkel recommended a plan be drawn up to create “renewable energy zones”. These would coordinate the development of new renewable projects with new grid infrastructure.
The zones were contained in AEMO’s 2018 “Integrated System Plan (ISP). It identified transmission projects that should start immediately, and possible future projects.
Two initial projects involve expanding the system’s capacity between Queensland, New South Wales and Victoria. Possible future projects include a second interconnector between Victoria and Tasmania.
But upgrading the transmission grid is easier said than done. The large size and cost of new transmission lines means planning and approval is subject to lengthy, intensive economic assessments.
What’s more, renewable energy generators are often built in regional areas, where solar and wind energy are plentiful. In many cases the electricity grid in those areas, designed in a different era, doesn’t have the capacity to accommodate them.
In September, the Energy Security Board (ESB), created by COAG energy ministers, said the transmission grid must be reconfigured along the lines of the ISP to suit the emerging mix of renewable generation and storage. This means upgrading existing interconnectors, and building new interconnectors and intrastate transmission from regional areas to coastal centres.
Labor leader Anthony Albanese last week released a A$20 billion “Rewiring the Nation” policy to upgrade the grid. It would establish a government-owned body to partner with industry, providing low-cost government finance for the upgrades.
The Morrison government, for its part, is also working on transmission solutions. It’s supporting projects prioritised in the ISP, including up to A$250 million allocated in this month’s federal budget.
Some states have separately accelerated their own high-priority transmission projects. However, none of the above measures effectively solve two big impediments to modernising the transmission network.
First, the processes to identify, analyse and build transmission projects is too slow. Second, a state’s transmission infrastructure is currently paid for by consumers in that state – a poor fit for the increasingly integrated, and therefore shared, national grid.
Much work must be done to address these issues. Perhaps a government-owned national company could be established. It would own the shared transmission system, while AEMO would drive what gets built. Operations could be outsourced to a private company to deliver efficiencies.
Separating planning from owning would minimise the perverse financial incentives that led to past “gold plating”.
To minimise the risk of white elephants being built, strong, up-to-date benefit-cost assessments would be required.
Such alternatives will come with their own challenges. But the transition towards low emissions is too important for radical solutions to be ignored.
In the town of Goulburn in southern New South Wales, an energy revolution is brewing. The community has come together to build its own 4,000-panel solar farm – everyday citizens are invited to buy shares in the venture and reap the rewards.
Goulburn is not alone: community-owned energy is an idea whose time has come. About 100 community energy groups operate across Australia – their projects at various levels of development – up from 25 groups in 2015.
The concept is gaining political attention, too. Independent MP for the federal Victorian seat of Indi, Helen Haines, in August moved a motion in parliament, calling on the Morrison government to support community energy, including establishing a new government agency. The bill is backed by fellow independent Zali Steggall.
At its core, community energy rests on the belief that everyday people should have power over how their energy is generated – including its environmental and social impacts. Big corporations should not control our energy systems, nor should they reap all the profits. So let’s take a look at how community energy works.
Australia’s first community-owned renewable energy project, Hepburn Wind, started generating power in June 2011. Since then, many more communities across Australia have banded together to manage their own solar, wind, micro-grid and efficiency projects.
The Goulburn project will be built in the Hume electorate of federal energy minister Angus Taylor, about 3km from the town centre. Earlier this year it received a A$2.1 million state grant, under the Regional Community Energy Fund.
Investors can reportedly buy A$400 shares, each covering the cost of a solar panel and the infrastructure needed for grid connection.
Community energy groups take various forms.
Hepburn Wind and the Goulburn Solar Farm, for example, involve a community investment model in which local groups develop a project, then seek investors from the community to fund it.
This might involve forming a cooperative, or selling shares in the venture. The community organisation may take responsibility for delivering the project – including design, installation, and management – or may outsource this to an external company.
A second model involves raising money through donations, either via crowd-sourcing platforms or traditional means. The money is usually spent on installing a sustainable energy system at a local premises. For example in north-east Victoria, a First Nations-owned renewable energy project will deliver solar power to the office of a state government agency.
The third type of project involves a group of households coming together to find a renewable energy solution, such as bulk-buying solar energy.
Community-owned renewable energy projects are a great way for everyday people to get involved in the transition to a low-carbon future. The benefits include:
local job creation and economic development
returns on investment for community shareholders
increased energy security, helping communities to avoid blackouts
more affordable energy
the creation of funds to reinvest in other community projects. For example in Scotland, dividends from renewables developments have been invested in electric public transport and local skills development
community building, in which towns develop a stronger identity, participate in communal activities and make collective decisions about their future.
The energy transformation is not just about moving from fossil fuels to renewables. It’s also about changing who is responsible for, and benefits from, our energy system.
We’ve seen this play out in Australia, which has triggered more than a decade of climate policy inaction. More recently, the Morrison government has pushed ahead with a plan for a “gas-fired” economic recovery, despite the harm this will cause to our emissions reduction efforts. These developments are clearly at odds with community support for action on climate change.
Traditionally, communities are often shut out of decision making on energy projects, including renewables. Communities often become dependent on both local political representation to voice their views, and the capacity of energy network operators to work with them.
Communities must be empowered to take part in planning, and have ownership of projects. Our research, soon to be published, shows such empowerment involves helping communities develop the capacity and power to meet their own energy goals. This means developing new skills, working together and becoming equal decision makers.
Governments are central to this by helping communities deliver projects. The Victorian government’s Community Power Hubs are a good example. At three “hubs” – in Ballarat, Bendigo and the Latrobe Valley – various types of energy projects were implemented. Each sought to build local knowledge of, and participation in, community energy, and ensured the benefits stayed in the region.
Australia’s growing community energy movement shows us what’s possible, but it needs more government support, especially at the federal level. Helen Haines’ proposal is a very good start.
The energy transformation will require massive investment, and most projects will be built in regional communities.
Empowering community energy is the ideal way to provide some of that investment, build stronger rural economies and ensure the benefits of the energy transformation are shared by all.
Dominique McCollum Coy, Doctoral Researcher, Behaviour Change Graduate Research Industry Partnership (GRIP), Monash Sustainable Development Institute, Monash University; Roger Dargaville, Senior lecturer & Deputy Director Monash Energy Institute, Monash University, and Shirin Malekpour, Senior Lecturer and Research Lead, Monash Sustainable Development Institute, Monash University