Climate explained: is natural gas really cheaper than renewable electricity?

Shutterstock/AVN Photo Lab

Ralph Sims, Massey University


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The government wants us to phase out fossil fuels. Yet natural gas is much cheaper for households to buy per kWh than electricity. Why?

Natural gas is often touted as a transition fuel to use while we move away from coal and oil and as renewable energies continue to mature technologically and economically.

But the key point to note is that we simply cannot continue to produce greenhouse gases and the demand for natural gas, as for coal and oil, will soon have to decline rapidly.

In its draft package of recommendations to the government, New Zealand’s Climate Change Commission has called for a stop to new connections to the natural gas grid for commercial and residential buildings after 2025.

In that context, comparing the retail price of gas with electricity is not useful unless all other costs and likely future trends are considered.

Read more:
‘Renewable’ natural gas may sound green, but it’s not an antidote for climate change

The natural gas grid

Natural gas is extracted from gas fields and processed to “scrub” out other gases and condensates. The resulting gas, mainly methane, is then distributed through pipelines.

In New Zealand, natural gas is reticulated around much of the North Island, but it is not available in the South Island, where bottled liquid petroleum gas (LPG) is the alternative.

LPG is pressurised butane and propane that come from the scrubbed natural gas condensates as well as from oil refineries. A few cars such as taxis still use LPG, as do gas barbecues.

Natural gas is also combusted in gas-fired power stations to generate electricity. In New Zealand, this accounts for around 15% of total generation. Large volumes of gas are purchased relatively cheaply by power-generating companies and the electricity is then distributed through the grid to homes and businesses.

Cost comparison

The retail cost of electricity varies but is typically around 25 cents per kWh (also known as “c/unit”) for domestic users. Some retailers offer cheaper rates during “off-peak” times (to heat water for example).

The retail price for natural gas also varies and can be around 8c/kWh in Auckland or 5c/kWh in Wellington. If used for cooking, it can be cheaper than electricity. But to heat a building, an electric heat pump can be a cheaper option than a gas heater.

A heat pump concentrates the heat taken from the outside air and “pumps” it into the house very efficiently. One kWh of electricity consumed to run a heat pump can produce 3-4kWh of heat energy inside the house. It can also run the process in reverse and cool the air inside during hot summer days.

When comparing the cost of gas with electricity, two other cost factors must be considered. Under New Zealand’s Emissions Trading Scheme, there is a cost on the carbon dioxide produced when the gas is combusted because, like LPG, it is a fossil fuel and produces greenhouse gases.

Read more:
Reducing methane is crucial for protecting climate and health, and it can pay for itself – so why aren’t more companies doing it?

The current cost per tonne of carbon dioxide emitted is around NZ$35 (or around 1c per kWh of gas), but it is likely to increase significantly over the next few years. This will be added to domestic gas bills. Electricity bills are less affected by carbon price rises because (more than 80% of electricity) in New Zealand is generated from low-carbon renewable resources.

The other cost to consider is the fixed connection charge for having a gas pipeline coming into the house. This cost also varies, but in Auckland some customers pay $1.15 per day. In Wellington, some pay $1.60 per day.

A house running fully on electricity will avoid this fixed cost. There will be a fixed daily supply charge for the electricity connection but most homes have to pay this anyway in order to have lighting and electrical appliances.

Additional risks

When gas is combusted inside a building to provide heat, the process consumes oxygen and produces water vapour. If ventilation is poor, oxygen levels drop and carbon monoxide is also produced, which can lead to poisonous air.

The water vapour results in condensation, obvious on windows at certain times of the day. That, too, can lead to unhealthy mould in poorly ventilated homes.

And there are further risks with gas. As exemplified by an explosion last year in a Christchurch home, natural gas (methane) is volatile as well as toxic.
Of course there are also risks with using electricity, though fairly rare, such as getting an electric shock or vermin eating through plastic cable coverings and shorting the wires, which can start fires.

While gas may appear cheaper, this applies only to certain energy uses (such as cooking). Overall, the cost of gas is likely to rise significantly in the near future.

The Climate Change Commission’s final advice to government is due at the end of May and will provide a time frame for the end of new gas connections — but there is no intention to disconnect existing gas supplies to buildings at this stage.The Conversation

Ralph Sims, Professor, School of Engineering and Advanced Technology, Massey University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Batteries made with sulfur could be cheaper, greener and hold more energy

Mahdokht Shaibani, Monash University

Lithium-ion batteries have changed the world. Without the ability to store meaningful amounts of energy in a rechargeable, portable format we would have no smartphones or other personal electronic devices. The pioneers of the technology were awarded the 2019 Nobel Prize for chemistry.

But as society moves away from fossil fuels, we will need more radical new technologies for storing energy to support renewable electricity generation, electric vehicles and other needs.

Read more:
Charged up: the history and development of batteries

One such technology could be lithium-sulfur batteries: they store considerably more energy than their lithium-ion cousins – in theory as much as six times the energy for a given weight. What’s more, they can be made from cheap materials that are readily available around the world.

Until now, lithium-sulfur batteries have been impractical. Their chemistry allows them to store so much energy that the battery physically breaks apart under the stress.

However, my colleagues and I have engineered a new design for these batteries which allows them to be charged and discharged hundreds of times without breaking down. We hope to have a commercial product ready in the next 2–4 years.

What’s so good about sulfur?

Lithium-ion batteries require minerals such as rare earths, nickel and cobalt to produce their positive electrodes. Supply of these metals is limited, prices are rising, and their mining often has great social and environmental costs.

Industry insiders have even predicted serious shortages of these key materials in the near future, possibly as early as 2022.

In contrast, sulfur is relatively common and cheap. Sulfur is the 16th most abundant element on Earth, and miners produce around 70 million tonnes of it each year. This makes it an ideal ingredient for batteries if we want them to be widely used.

What’s more, lithium-sulfur batteries rely on a different kind of chemical reaction which means their ability to store energy (known as “specific capacity”) is much greater than that of lithium-ion batteries.

The prototype lithium-sulfur battery shows the technology works, but a commercial product is still years away.
Mahdokht Shaibani, Author provided

Great capacity brings great stress

A person faced with a demanding job may feel stress if the demands exceed their ability to cope, resulting in a drop in productivity or performance. In much the same way, a battery electrode asked to store a lot of energy may be subjected to increased stress.

In a lithium-sulfur battery, energy is stored when positively charged lithium ions are absorbed by an electrode made of sulfur particles in a carbon matrix held together with a polymer binder. The high storage capacity means that the electrode swells up to almost double its size when fully charged.

The cycle of swelling and shrinking as the battery charges and discharges leads to a progressive loss of cohesion of particles and permanent distortion of the carbon matrix and the polymer binder.

The carbon matrix is a vital component of the battery that delivers electrons to the insulating sulfur, and the polymer glues the sulfur and carbon together. When they are distorted, the paths for electrons to move across the electrode (effectively the electrical wiring) are destroyed and the battery’s performance decays very quickly.

Giving particles some space to breathe

A CT scan of one of the sulfur electrodes shows the open structure that allows particles to expand as they charge.
Mahdokht Shaibani, Author provided

The conventional way of producing batteries creates a continuous dense network of binder across the bulk of the electrode, which doesn’t leave much free space for movement.

The conventional method works for lithium-ion batteries, but for sulfur we have had to develop a new technique.

To make sure our batteries would be easy and cheap to manufacture, we used the same material as a binder but processed it a little differently. The result is a web-like network of binder that holds particles together but also leaves plenty of space for material to expand.

These expansion-tolerant electrodes can efficiently accommodate cycling stresses, allowing the sulfur particles to live up to their full energy storage capacity.

Read more:
A guide to deconstructing the battery hype cycle

When will we see working sulfur batteries?

My colleagues Mainak Majumder and Matthew Hill have long histories of translating lab-scale discoveries to practical industry applications, and our multidisciplinary team contains expertise from materials synthesis and functionalization, to design and prototyping, to device implementation in power grids and electric vehicles.

The other key ingredient in these batteries is of course lithium. Given that Australia is a leading global producer, we think it is a natural fit to make the batteries herea.

We hope to have a commercial product ready in the next 2–4 years. We are working with industry partners to scale up the breakthrough, and looking toward developing a manufacturing line for commercial-level production.The Conversation

Mahdokht Shaibani, Research Fellow, Mechanical & Aerospace Engineering, Monash University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Renewables will be cheaper than coal in the future. Here are the numbers

Ken Baldwin, Australian National University

In a recent Conversation FactCheck I examined the question: “Is coal still cheaper than renewables as an energy source?” In that article, we assessed how things stand today. Now let’s look to the future.

In Australia, 87% of our electricity generation comes from fossil fuels. That’s one of the highest levels of fossil fuel generation in the world.

So we have important decisions to make about how we’ll generate energy as Australia’s fleet of coal-fired power stations reach the end of their operating lives, and as we move to decarbonise the economy to meet our climate goals following the Paris agreement.

What will the cost of coal-fired and renewable energy be in the coming decades? Let’s look at the numbers.

Improvements in technology will make renewables cheaper

As technology and economies of scale improve over time, the initial capital cost of building an energy generator decreases. This is known as the “learning rate”. Improvements in technology are expected to reduce the price of renewables more so than coal in coming years.

The chart below, produced by consulting firm Jacobs Group and published in the recent Finkel review of the National Electricity Market, shows the projected levelised cost of electricity (LCOE) for a range of technologies in 2020, 2030 and 2050.

The chart shows a significant reduction in the cost of solar and wind, and a relatively static cost for mature technologies such as coal and gas. It also shows that large-scale solar photovoltaic (PV) generation, with a faster learning rate, is projected to be cheaper than wind generation from around 2020.

Notes: Numbers in Figure A.1 refer to the average.
For each generation technology shown in the chart, the range shows the lowest cost to the highest cost project available in Jacobs’ model, based on the input assumptions in the relevant year. The average is the average cost across the range of projects; it may not be the midpoint between the highest and lowest cost project.
Large-scale Solar Photovoltaic includes fixed plate, single and double axis tracking.
Large-scale Solar Photovoltaic with storage includes 3 hours storage at 100 per cent capacity.
Solar Thermal with storage includes 12 hours storage at 100 per cent capacity.
Cost of capital assumptions are consistent with those used in policy cases, that is, without the risk premium applied.
The assumptions for the electricity modelling were finalised in February 2017 and do not take into account recent reductions in technology costs (e.g. recent wind farm announcements).

Independent Review into the Future Security of the National Electricity Market

Wind prices are already falling rapidly. For example: the graph above shows the 2020 price for wind at A$92 per megawatt-hour (MWh). But when the assumptions for the electricity modelling were finalised in February 2017, that price was already out of date.

In its 2016 Next Generation Renewables Auction, the Australian Capital Territory government secured a fixed price for wind of A$73 per MWh over 20 years (or A$56 per MWh in constant dollars at 3% inflation).

In May 2017, the Victorian renewable energy auction set a record low fixed price for wind of A$50-60 per MWh over 12 years (or A$43-51 per MWh in constant dollars at 3% inflation). This is below the AGL price for electricity from the Silverton wind farm of $65 per MWh fixed over five years.

These long-term renewable contracts are similar to a LCOE, because they extend over a large fraction of the lifetime of the wind farm.

The tables and graph below show a selection of renewable energy long-term contract prices across Australia in recent years, and illustrate a gradual decline in wind energy auction results (in constant 2016 dollars), consistent with improvements in technology and economies of scale.

But this analysis is still based on LCOE comparisons – or what it would cost to use these technologies for a simple “plug and play” replacement of an old generator.

Now let’s price in the cost of changes needed to the entire electricity network to support the use of renewables, and to price in other factors, such as climate change.

Carbon pricing will increase the cost of coal-fired power

The economic, environmental and social costs of greenhouse gas emissions are not included in simple electricity cost calculations, such as the LCOE analysis above. Neither are the costs of other factors, such as the health effects of air particle pollution, or deaths arising from coal mining.

The risk of the possible introduction of carbon emissions mitigation policies can be indirectly factored into the LCOE of coal-fired power through higher rates for the weighted average cost of capital (in other words, higher interest rates for loans).

The Jacobs report to the Finkel Review estimates that the weighted average cost of capital for coal will be 15%, compared with 7% for renewables.

The cost of greenhouse gas emissions can be incorporated more directly into energy prices by putting a price on carbon. Many economists maintain that carbon pricing is the most cost-effective way to reduce global carbon emissions.

One megawatt-hour of coal-fired electricity creates approximately one tonne of carbon dioxide. So even a conservative carbon price of around A$20 per tonne would increase the levelised cost of coal generation by around A$20 per MWh, putting it at almost A$100 per MWh in 2020.

According to the Jacobs analysis, this would make both wind and large-scale photovoltaics – at A$92 and A$91 per MWh, respectively – cheaper than any fossil fuel source from the year 2020.

It’s worth noting here the ultimate inevitability of a price signal on carbon, even if Australia continues to resist the idea of implementing a simple carbon price. Other policies currently under consideration, including some form of a clean energy target, would put similar upward price pressure on coal relative to renewables, while the global move towards carbon pricing will eventually see Australia follow suit or risk imposts on its carbon-exposed exports.

Australia’s grid needs an upgrade

Renewable energy (excluding hydro power) accounted for around 6% of Australia’s energy supply in the 2015-16 financial year. Once renewable energy exceeds say, 50%, of Australia’s total energy supply, the LCOE for renewables should be used with caution.

This is because most renewable energy – like that generated by wind and solar – is intermittent, and needs to be “balanced” (or backed up) in order to be reliable. This requires investment in energy storage. We also need more transmission lines within the electricity grid to ensure ready access to renewable energy and storage in different regions, which increases transmission costs.

And, there are additional engineering requirements, like building “inertia” into the electricity system to maintain voltage and frequency stability. Each additional requirement increases the cost of electricity beyond the levelised cost. But by how much?

Australian National University researchers calculated that the addition of pumped-hydro storage and extra network construction would add a levelised cost of balancing of A$25-30 per MWh to the levelised cost of renewable electricity.

The researchers predicted that eventually a future 100% renewable energy system would have a levelised cost of generation in current dollars of around A$50 per MWh, to which adding the levelised cost of balancing would yield a network-adjusted LCOE of around A$75-80 per MWh.

The Australian National University result is similar to the Jacobs 2050 LCOE prediction for large-scale solar photovoltaic plus pumped hydro of around A$69 per MWh, which doesn’t include extra network costs.

The AEMO 100% Renewables Study indicated that this would add another A$6-10 per MWh, yielding a comparable total in the range A$75-79 per MWh.

This would make a 100% renewables system competitive with new-build supercritical (ultrasupercritical) coal, which, according to the Jacobs calculations in the chart above, would come in at around A$75(80) per MWh between 2020 and 2050.

This projection for supercritical coal is consistent with other studies by the CO2CRC in 2015 (A$80 per MWh) and used by CSIRO in 2017 (A$65-80 per MWh).

So, what’s the bottom line?

The ConversationBy the time renewables dominate electricity supply in Australia, it’s highly likely that a price on carbon will have been introduced. A conservative carbon price of at least A$20 per tonne would put coal in the A$100-plus bracket for a megawatt-hour of electricity. A completely renewable electricity system, at A$75-80 per MWh, would then be more affordable than coal economically, and more desirable environmentally.

Ken Baldwin, Director, Energy Change Institute, Australian National University

This article was originally published on The Conversation. Read the original article.

Australia can’t lose in the global race for cheaper, cleaner energy

Paul Graham, CSIRO

Despite our sometimes heated national debate about our energy future, Australia is well positioned to benefit from innovative low emission technologies. No matter which avenue we take to cleaner energy, our energy-rich resources means there are opportunities for Australian businesses – and cheaper energy for Australian consumers.

That’s the conclusion reached by CSIRO in our Low Emissions Technology Roadmap, which outlines potential pathways for the energy sector to contribute to Australia’s emissions reduction target.

Our target under the Paris climate agreement calls for a 26-28% reduction of emissions by 2030 from 2005 levels. Our analysis also considers how the energy sector could meet the more ambitious aspiration of avoiding 1.5-2℃ global warming.

Looking past the political wrangling

Perhaps one of the reasons the energy debate in Australia is so vehement is that, with the exception of oil, we are rich in energy resources. While we cannot wait indefinitely, the lack of resource constraints means we can monitor and test what options emerge as the most cost effective. Technology neutrality is often called upon as a key policy design principle.

Another reason for caution is that technological change is inherently unpredictable. For example, at the start of this century, few would have expected solar photovoltaics to be one of the lowest cost sources of electricity. Current expectations of sourcing cost-effective bulk electricity storage would have seemed even less likely at the time.

However, there are two key choices that will determine how we reduce greenhouse gases, and the shape of our energy future.

First, we must decide how much weight we give to improving energy productivity, versus decarbonising our energy supply. This is essentially a policy decision: should we use our existing energy more intelligently and efficiently in our buildings, industries and transport, or aggressively pursue new technology?

Whatever strategy we pick, we also need to choose what technology we emphasise: dispatchable power, from flexible and responsive energy generation, or variable renewable energy (from sources like solar, wind and wave), supported with storage.

From these choices four pathways are derived: Energy productivity plus, Variable renewable energy, Dispatchable power and Unconstrained.

There are four broad pathways to cheaper, cleaner energy. (Click to view larger image.)

Our electricity market modelling found the different pathways lead to comparable household electricity bills. High energy productivity scenarios tend to delay generation investment and reduce energy use, leading to slightly lower bills in 2030 (including the cost of high efficiency equipment).

Weighing risk

The main attribute that separates the pathways is the mix of risks they face. We’ve grouped risks into three categories: technology, commercial and market risk, social licence risk and stakeholder coordination risk.

Risks identified with each pathway to cheaper renewable energy. (Click to view larger image.)

Energy productivity plus combines mature existing low emissions technology with gas, so there’s no significant market risk. However there is a social license risk, as many will protest a stronger reliance on expanding gas supplies.

Gas-fired generation is high in this scenario. If improved energy productivity reduces emissions elsewhere, the electricity sector will have less pressure to phase out highly polluting generators.

This scenario would also require a high degree of cooperation between government, companies and customers. We would need to coordinate, to make sure incentives and programs work together to bring down household and business energy use.

Variable renewable energy invites more technical and commercial risk, as our electricity grid will need to be transformed to accept a high level of energy from fluctuating sources like wind. There’s also considerable community concern around the reliability of variable renewables.

While the evolution towards a secure system with very high variable renewable generation has been modelled in detail for the Roadmap, its final costs will remain uncertain until demonstrated at scale. Whether stakeholders will have the appetite to demonstrate such a system (with some risk to supply security and electricity prices) represents a coordination risk for this pathway.

Dispatchable power is perhaps the most risky option. Solar thermal, geothermal, carbon capture and storage and nuclear power are all relatively new to Australia (although other countries have explored them further). Developing them here will mean taking some technological and commercial gambles.

Carbon capture and storage and nuclear power are also deeply unpopular, and there’s a risk of dividing community consensus even further.

While solar thermal – and potentially nuclear power – could be deployed as small modules, in general the technologies in this category require high up-front capital investment. These projects may need strong government guarantees to achieve financing.

Unconstrained would mean both improving energy productivity and investing in a wide range of generation options: solar, efficient fossil fuels and carbon capture and storage.

Unfortunately there is no objective way of weighing the risks of one pathway against another. However, we can narrow risks over time through research, development and demonstration.

Between now and 2030 we are likely to rely on a narrow set of mature technologies to reduce greenhouse gases: solar photovoltaics, wind, natural gas and storage.

The ConversationAs the world, and Australia’s, greenhouse gas reduction targets ramp up after 2030, we’ll be well positioned to adapt, with the capacity to incorporate a broader range of options.

Paul Graham, Chief economist, CSIRO energy, CSIRO

This article was originally published on The Conversation. Read the original article.

Australia: Green Energy Cheaper

The link below is to an interesting article that reports on the cost of electricity generation in Australia.

For more visit: