Will the National Energy Guarantee hit pause on renewables?


Frank Jotzo, Australian National University and Salim Mazouz, Australian National University

The federal government’s new National Energy Guarantee (NEG) proposal looks likely to put the brakes on renewable energy investment in Australia. And based on the sparse detail so far available, there are serious questions about whether the plan really can deliver on its aims of reliability, emissions reductions and lower prices.

The broad mechanism design could be made to work, but to be effective in driving the transition of the energy sector it would need adequate ambition on carbon emissions and very careful thought about the reliability requirements of the future electricity grid.


Read more: Infographic: the National Energy Guarantee at a glance


The policy may well be used to force investment into the fossil fuel power fleet through regulatory intervention, and perhaps for the power sector to buy emissions offsets. This would risk locking in a carbon-intensive power system.

The NEG: top or flop?

Having rejected several options – including an emissions intensity scheme, the Clean Energy Target put forward by the Finkel Review, and any continuation of the Renewable Energy Target – the government has finally managed to get a policy proposal through the party room, formulated in advice by its newly established Energy Security Board.

Analysts’ initial reactions have ranged from unbridled enthusiasm to derisive rejection. It depends on political judgments, expectations about how the scheme might operate in practice, and how high one’s expectations are for efficiency and environmental effectiveness.

The politics of this are complicated, but there are hopes that the Labor opposition will agree to the scheme in principle. But the decision is ultimately with the Australian states, which would need to pass legislation to implement it.

Reliability guarantee: supporting fossil fuels?

The first element of the NEG is the “reliability guarantee”. This would require electricity retailers to buy some share of their electricity from “dispatchable” sources that can be readily switched on. The NEG list includes coal and gas, as well as hydro and energy storage – essentially, anything except wind and solar.

The NEG proposal might be informed by a political imperative to support coal. As John Quiggin has pointed out, defining coal-fired plants as dispatchable is questionable at best: they have long ramp-up times and are sometimes unavailable.

The Australian Energy Market Operator (AEMO) would prescribe the share of the “dispatchable” power sources and perhaps also the mix of technologies in retailers’ portfolios, separately in each state. This would be a remarkably interventionist approach.

Demand from retailers for the power sources they are told to use could trigger investment in new gas generators, refurbishment of existing coal plants, and some investment in energy storage. It is difficult to see how it would force the building of new coal plants, given their very large upfront cost and long-term emissions liabilities.

Would electricity prices be lower, as the Energy Security Board’s advice claims? Investment in new power generation will tend to reduce prices, cutting into profit margins. But the resulting investments will come at higher economic cost than market solutions, because they are determined by regulators’ orders made with a view to the short-term energy mix, not long-term cost-effectiveness. And there would be risk premiums on project finance, reflecting uncertainty about future policy settings.

Emissions guarantee: flexible but weak?

The NEG’s second pillar is the “emissions guarantee”. This would require retailers to keep their portfolio below some level of emissions intensity (carbon dioxide per unit of electricity).

This increases the demand for electricity from lower-emissions technologies, allowing them to command higher market prices and therefore encouraging investment in them. This price signal would benefit renewables and also favour gas over coal, as well as discriminating against the most polluting coal plants.

The Energy Security Board’s advice suggests that retailers would have flexibility in complying with that obligation, by buying and selling emissions components of their contracts, and potentially also using emissions offsets from outside the scheme to make up for any exceeding of emissions limits.

The reliability and emissions elements of the NEG interact with each other, and the net effect depends on the detailed implementation as well as the relative importance of the two components.

Given the politics within government, the weight could be on support for coal and gas generation. The reliability guarantee could therefore end up putting a tight lid on the amount of new wind and solar that can enter the system.

Renewables, gas or credits?

The Energy Security Board makes explicit reference to Australia’s Paris target of a 26-28% reduction in emissions, relative to 2005 levels, by 2030. Prime Minister Malcolm Turnbull has said the NEG will be expected to cut electricity emissions by a similar percentage, as a “pro rata” contribution to this goal.

But to meet the economy-wide target, the electricity sector would need to make deeper cuts, because emissions reductions are cheaper and easier here than elsewhere.

The Energy Security Board says it expects renewables to reach 28-36% by 2030. This is rather low, considering that the Finkel Review projected 42% under its proposed clean energy target, and 35% under business as usual. Other analyses have shown that much higher levels of renewables are achievable.

So if the NEG is not geared to support renewables, how could significant emissions reductions be achieved?

One way would be to replace coal with gas-fired power, and brown coal with black coal. But the government has flagged that it is opposed to closing old coal plants. And a large-scale shift to gas would raise electricity prices further, unless gas prices were to tumble.


Read more: The government’s energy policy hinges on some tricky wordplay about coal’s role


That leaves another option, mentioned in the Energy Security Board’s report: power retailers could buy emissions offset credits from elsewhere to make up for not meeting the emissions standard, specifically from projects under the government’s Emissions Reduction Fund (ERF).

This might be attractive for the government, as electricity retailers would then pay for ERF credits, rather than government as has been the case until now. It may also be attractive to the power industry, as it would reduce the cost of complying with the new obligations. Retailers would pass on the costs to their customers, so electricity consumers would end up paying for ERF projects.

Even assuming that all of the ERF’s emissions reductions are real (and some of them may not be), all this does is shift the adjustment burden from electricity to other sectors such as agriculture.

The ConversationThe NEG has the potential to reduce emissions effectively if the parameters are adjusted accordingly. But what seems more likely is that it will put the brakes on investment in renewables, solidify the status quo and delay the energy transition.

Frank Jotzo, Director, Centre for Climate Economics and Policy, Australian National University and Salim Mazouz, Research Associate, Centre for Climate Economics and Policy, Australian National University

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

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After the storm: how political attacks on renewables elevates attention paid to climate change



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AAP/David Mariuz

David Holmes, Monash University

This time last year, Australia was getting over a media storm about renewables, energy policy and climate change. The media storm was caused by a physical storm: a mid-latitude cyclone that hit South Australia on September 29 and set in train a series of events that is still playing itself out.

The events include:

In one sense, the Finkel Review was a response to the government’s concerns about “energy security”. But it also managed to successfully respond to the way energy policy had become a political plaything, as exemplified by the attacks on South Australia.

New research on the media coverage that framed the energy debate that has ensued over the past year reveals some interesting turning points in how Australia’s media report on climate change.

While extreme weather events are the best time to communicate climate change – the additional energy humans are adding to the climate is on full display – the South Australian event was used to attack renewables rather than the carbonisation of the atmosphere. Federal MPs hijacked people’s need to understand the reason for the blackout “by simply swapping climate change with renewables”.

However, the research shows that, ironically, MPs who invited us to “look over here” at the recalcitrant renewables – and not at climate-change-fuelled super-storms – managed to make climate change reappear.

The study searched for all Australian newspaper articles that mentioned either a storm or a cyclone in relation to South Australia that had been published in the ten days either side of the event. This returned 591 articles. Most of the relevant articles were published after the storm, with warnings of the cyclone beforehand.

Some of the standout findings include:

  • 51% of articles were about the power outage and 38% were about renewables, but 12% of all articles connected these two.

  • 20% of articles focused on the event being politicised by politicians.

  • 9% of articles raised climate change as a force in the event and the blackouts.

  • 10% of articles blamed the blackouts on renewables.

  • Of all of the articles linking power outages to renewables 46% were published in News Corp and 14% were published in Fairfax.

  • Narratives that typically substituted any possibility of a link to climate change, included the “unstoppable power of nature” (18%), failure of planning (5.25%), and triumph of humanity (5.6%).

Only 9% of articles discussed climate change. Of these, 73% presented climate change positively, 21% were neutral, and 6% negative. But, for the most part, climate change was linked to the conversation around renewables: there was a 74% overlap. 36% of articles discussing climate change linked it to the intensification of extreme weather events.

There was also a strong correlation between the positive and negative discussion of climate change and the ownership of newspapers.

The starkest contrast was between the two largest Australian newspaper groups. Of all the sampled articles that mentioned climate change, News Corp was the only group to has a negative stance on climate change (at 50% of articles), but still with 38% positive. Fairfax was 90% positive and 10% neutral about climate change.

Positive/negative stance of articles covering climate change by percentage.

Given that more than half of all articles discussed power outages, the cyclone in a sense competed with renewables as a news item. Both have a bearing on power supply and distribution. But, ironically, it was renewables that put climate change on the news agenda – not the cyclone.

Of the articles discussing renewables, 67% were positive about renewables with only 33% “negative” and blaming them for the power outages.

In this way, the negative frame that politicians put on renewable energy may have sparked debate that was used to highlight the positives of renewable energy and what’s driving it: reduced emissions.

But perhaps the most interesting finding is the backlash by news media against MPs’ attempts to politicise renewables.

19.63% of all articles in the sample had called out (mainly federal) MPs for politicising the issue and using South Australians’ misfortune as a political opportunity. This in turn was related to the fact that, of all the articles discussing renewables, 67% were positive about renewables with only 33% supporting MPs’ attempts to blame them for the power outages.

In this way, while many MPs had put renewables on the agenda by denigrating them, most journalists were eager to cover the positive side of renewables.

Nevertheless, the way MPs sought to dominate the news agenda over the storm did take away from discussion of climate science and the causes of the cyclone. Less than 4% of articles referred to extreme weather intensifying as a trend.

This is problematic. It means that, with a few exceptions, Australia’s climate scientists are not able to engage with the public in key periods after extreme weather events.

When MPs, with co-ordinated media campaigns, enjoy monopoly holdings in the attention economy of news cycles, science communication and the stories of climate that could be told are often relegated to other media.


The ConversationWith thanks to Tahnee Burgess for research assistance on this article.

David Holmes, Director, Climate Change Communication Research Hub, Monash University

This article was originally published on The Conversation. 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.

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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.

Can two clean energy targets break the deadlock of energy and climate policy?



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Climate policy has become bogged down in the debate over a clean energy target.
Shutterstock

Bruce Mountain, Victoria University

Malcolm Turnbull’s government has been wrestling with the prospect of a clean energy target ever since Chief Scientist Alan Finkel recommended it in his review of Australia’s energy system. But economist Ross Garnaut has proposed a path out of the political quagmire: two clean energy targets instead of one.

Garnaut’s proposal is essentially a flexible emissions target that can be adapted to conditions in the electricity market. If electricity prices fail to fall as expected, a more lenient emissions trajectory would likely be pursued.

This proposal is an exercise in political pragmatism. If it can reassure both those who fear that rapid decarbonisation will increase energy prices, and those who argue we must reduce emissions at all costs, it represents a substantial improvement over the current state of deadlock.


Ross Garnaut/Yann Robiou DuPont, Author provided

Will two targets increase investor certainty?

At a recent Melbourne Economic Forum, Finkel pointed out that investors do not require absolute certainty to invest. After all, it is for accepting risks that they earn returns. If there was no risk to accept there would be no legitimate right to a return.

But Finkel also pointed out that investors value policy certainty and predictability. Without it, they require more handsome returns to compensate for the higher policy risks they have to absorb.


Read more: Turnbull is pursuing ‘energy certainty’ but what does that actually mean?


At first sight, having two possible emissions targets introduces yet another uncertainty (the emissions trajectory). But is that really the case? The industry is keenly aware of the political pressures that affect emissions reduction policy. If heavy reductions cause prices to rise further, there will be pressure to soften the trajectory.

Garnaut’s suggested approach anticipates this political reality and codifies it in a mechanism to determine how emissions trajectories will adjust to future prices. Contrary to first impressions, it increases policy certainty by providing clarity on how emissions policy should respond to conditions in the electricity market. This will promote the sort of policy certainty that the Finkel Review has sought to engender.

Could policymakers accept it?

Speaking of political realities, could this double target possibly accrue bipartisan support in a hopelessly divided parliament? Given Tony Abbott’s recent threat to cross the floor to vote against a clean energy target (bringing an unknown number of friends with him), the Coalition government has a strong incentive to find a compromise that both major parties can live with.


Read more: Abbott’s disruption is raising the question: where will it end?


Turnbull and his energy minister, Josh Frydenberg, who we understand are keen to see Finkel’s proposals taken up, could do worse than put this new idea on the table. They have to negotiate with parliamentary colleagues whose primary concern is the impact of household electricity bills on voters, as well as those who won’t accept winding back our emissions targets.

Reassuringly, the government can point to some precedent. Garnaut’s proposal is novel in Australia’s climate policy debate, but is reasonably similar to excise taxes on fuel, which in some countries vary as a function of fuel prices. If fuel prices decline, excise taxes rise, and vice versa. In this way, governments can achieve policy objectives while protecting consumers from the price impacts of those objectives.

The devil’s in the detail

Of course, even without the various ideologies and vested interests in this debate, many details would remain to be worked out. How should baseline prices be established? What is the hurdle to justify a more rapid carbon-reduction trajectory? What if prices tick up again, after a more rapid decarbonisation trajectory has been adopted? And what if prices don’t decline from current levels: are we locking ourselves into a low-carbon-reduction trajectory?

These issues will need to be worked through progressively, but there is no obvious flaw that should deter further consideration. The fundamental idea is attractive, and it looks capable of ameliorating concerns that rapid cuts in emissions will lock in higher electricity prices.

The ConversationFor mine, I would not be at all surprised if prices decline sharply as we begin to decarbonise, such is the staggering rate of technology development and cost reductions in renewable energy. But I may of course be wrong. Garnaut’s proposal provides a mechanism to protect consumers if this turns out to be the case.

Bruce Mountain, Director, Carbon and Energy Markets., Victoria University

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

Victoria is the latest state to take renewable energy into its own hands



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The Victorian government is aiming to boost renewable energy to 40%.
Changyang1230/Wikimedia Commons, CC BY-SA

Samantha Hepburn, Deakin University

The Victorian government’s intention, announced last week, to legislate its own state-based renewable energy target is the latest example of a state pursuing its own clean energy goals after expressing frustration with the pace of federal action.

The Andrews government has now confirmed its plan for 40% renewable energy by 2025, as well as an intermediate target of 25% clean energy by 2020. The policy, first flagged last year and now introduced as a bill in the state parliament, seeks to reduce greenhouse gas emissions by 16% by 2035.

At a general level, these actions are reflective of the increasing frustration states and territories have experienced at perceived inaction at the federal and even international levels. Neighbouring South Australia has also been pursuing clean energy, this month announcing plans to develop one of the world’s biggest concentrated solar plants in Port Augusta.

Victorian Premier Daniel Andrews has remarked that “it up to states like Victoria to fill that void”.


Read more: Victoria’s renewables target joins an impressive shift towards clean energy.


It is also, of course, a product of growing concerns regarding domestic energy security and investment confidence. Victoria’s climate and energy minister Lily D’Ambrosio said: “The renewable energy sector will now have the confidence to invest in renewable energy projects and the jobs that are crucial to Victoria’s future.”

National plans?

The Andrews government’s underlying objective is to reinforce, rather than undermine, federal initiatives such as the national Renewable Energy Target and any future implementation of the Clean Energy Target recommended by the Finkel Review.

But federal Environment and Energy Minister Josh Frydenberg has apparently rejected this view, claiming that the new Victorian proposals run counter to the development of nationally consistent energy policy. “National problems require national solutions and by going it alone with a legislated state-based renewable energy target Daniel Andrews is setting Victoria on the South Australian Labor path for higher prices and a less stable system,” Frydenberg said.


Read more: Finkel’s Clean Energy Target plan ‘better than nothing’: economists poll.


A nationally consistent plan is somewhat unrealistic in view of the current fragmented, partisan framework in which energy policy is being developed. The federal government’s apparent reluctance to accept Finkel’s recommendation for a Clean Energy Target is generating uncertainty and unrest.

In this context, actions taken by states such as Victoria and South Australia can help to encourage renewable energy investment. Given that Australia has promised to reduce greenhouse emissions by 26-28% (on 2005 levels) by 2030 under the Paris Climate Agreement, it is hard to see how boosting renewable energy production is inconsistent with broader national objectives.

The renewables target rationale

Mandating a certain amount of renewable energy, as Victoria is aiming to do, helps to push clean energy projects beyond the innovation stage and into commercial development. It also helps more established technologies such as wind and solar to move further along the cost curve and become more economically competitive.

Renewable energy targets aim to stimulate demand for clean energy, thereby ensuring that these technologies have better economy of scale. Under both the federal and Victorian frameworks, electricity utilities must source a portion of their power from renewable sources. They can comply with these requirements with the help of Renewable Energy Certificates (RECs), of which they receive one for every megawatt hour of clean energy generated.

Independent power producers can sell their RECs to utilities to earn a premium on top of their income from power sales in the wholesale electricity market. As well as buying RECs, utilities can also invest in their own renewable generation facilities, thus earning more RECs themselves.

Victoria’s situation

Victoria’s proposed new legislation will serve an important purpose following the retirement of the Hazelwood coal-fired power plant. Renewable energy currently represents about 17% of the state’s electricity generation, and the Andrews government is aiming to more than double this figure by 2025.

This year alone, Victoria has added an extra 685MW of renewable generation capacity, creating more than A$1.2 billion worth of investment in the process. If the new legislation succeeds in its aims, this level of investment will be sustained well into the next decade.

Under the bill’s proposals, D’Ambrosio will be required to determine by the end of this year the minimum renewables capacity needed to hit the 25% by 2020 target, and to make a similar decision by the end of 2019 regarding the 40% by 2025 target.

In mandating these milestones, the state is aiming to set out the exact size of the state’s transitioning energy market, in turn giving greater investment certainty to the renewable energy industry.


Read more: Closing Victoria’s Hazelwood power station is no threat to electricity supply.


Victoria’s renewable energy scheme is designed to work coherently with the federal Renewable Energy Target, which given current usage projections is aiming to source 23.5% of national electricity consumption from renewables by 2020.

The federal government is yet to decide on any clean energy policy beyond the end of the decade, whether that be a Finkel-recommended Clean Energy Target or something else. In the absence of confirmed federal policy, the states have assumed the responsibility of accelerating renewable energy production through legislative initiatives designed to sustain and progress market development. This is consistent with federal commitments to global climate change imperatives.

The ConversationIt is hoped that these initiatives will act as a stepping stone for the eventual introduction of comprehensive state and federal clean energy regulation, and the advent of some much-needed national cohesion.

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

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

Solar is now the most popular form of new electricity generation worldwide


Andrew Blakers, Australian National University

Solar has become the world’s favourite new type of electricity generation, according to global data showing that more solar photovoltaic (PV) capacity is being installed than any other generation technology.

Worldwide, some 73 gigawatts of net new solar PV capacity was installed in 2016. Wind energy came in second place (55GW), with coal relegated to third (52GW), followed by gas (37GW) and hydro (28GW).

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Together, PV and wind represent 5.5% of current energy generation (as at the end of 2016), but crucially they constituted almost half of all net new generation capacity installed worldwide during last year.

It is probable that construction of new coal power stations will decline, possibly quite rapidly, because PV and wind are now cost-competitive almost everywhere.

Hydro is still important in developing countries that still have rivers to dam. Meanwhile, other low-emission technologies such as nuclear, bio-energy, solar thermal and geothermal have small market shares.

PV and wind now have such large advantages in terms of cost, production scale and supply chains that it is difficult to see any other low-emissions technology challenging them within the next decade or so.

That is certainly the case in Australia, where PV and wind comprise virtually all new generation capacity, and where solar PV capacity is set to reach 12GW by 2020. Wind and solar PV are being installed at a combined rate of about 3GW per year, driven largely by the federal government’s Renewable Energy Target (RET).

This is double to triple the rate of recent years, and a welcome return to growth after several years of subdued activity due to political uncertainty over the RET.

If this rate is maintained, then by 2030 more than half of Australian electricity will come from renewable energy and Australia will have met its pledge under the Paris climate agreement purely through emissions savings within the electricity industry.

To take the idea further, if Australia were to double the current combined PV and wind installation rate to 6GW per year, it would reach 100% renewable electricity in about 2033. Modelling by my research group suggests that this would not be difficult, given that these technologies are now cheaper than electricity from new-build coal and gas.

Renewable future in reach

The prescription for an affordable, stable and achievable 100% renewable electricity grid is relatively straightforward:

  1. Use mainly PV and wind. These technologies are cheaper than other low-emission technologies, and Australia has plenty of sunshine and wind, which is why these technologies have already been widely deployed. This means that, compared with other renewables, they have more reliable price projections, and avoid the need for heroic assumptions about the success of more speculative clean energy options.

  2. Distribute generation over a very large area. Spreading wind and PV facilities over wide areas – say a million square kilometres from north Queensland to Tasmania – allows access to a wide range of different weather, and also helps to smooth out peaks in users’ demand.

  3. Build interconnectors. Link up the wide-ranging network of PV and wind with high-voltage power lines of the type already used to move electricity between states.

  4. Add storage. Storage can help match up energy generation with demand patterns. The cheapest option is pumped hydro energy storage (PHES), with support from batteries and demand management.

Australia currently has three PHES systems – Tumut 3, Kangaroo Valley, and Wivenhoe – all of which are on rivers. But there is a vast number of potential off-river sites.

Potential sites for pumped hydro storage in Queensland, alongside development sites for solar PV (yellow) and wind energy (green). Galilee Basin coal prospects are shown in black.
Andrew Blakers/Margaret Blakers, Author provided

In a project funded by the Australian Renewable Energy Agency, we have identified about 5,000 sites in South Australia, Queensland, Tasmania, the Canberra district, and the Alice Springs district that are potentially suitable for pumped hydro storage.

Each of these sites has between 7 and 1,000 times the storage potential of the Tesla battery currently being installed to support the South Australian grid. What’s more, pumped hydro has a lifetime of 50 years, compared with 8-15 years for batteries.

Importantly, most of the prospective PHES sites are located near where people live and where new PV and wind farms are being constructed.

Once the search for sites in New South Wales, Victoria and Western Australia is complete, we expect to uncover 70-100 times more PHES energy storage potential than required to support a 100% renewable electricity grid in Australia.

Potential PHES upper reservoir sites east of Port Augusta, South Australia. The lower reservoirs would be at the western foot of the hills (bottom of the image).
Google Earth/ANU

Managing the grid

Fossil fuel generators currently provide another service to the grid, besides just generating electricity. They help to balance supply and demand, on timescales down to seconds, through the “inertial energy” stored in their heavy spinning generators.

But in the future this service can be performed by similar generators used in pumped hydro systems. And supply and demand can also be matched with the help of fast-response batteries, demand management, and “synthetic inertia” from PV and wind farms.

Wind and PV are delivering ever tougher competition for gas throughout the energy market. The price of large-scale wind and PV in 2016 was A$65-78 per megawatt hour. This is below the current wholesale price of electricity in the National Electricity Market.

Abundant anecdotal evidence suggests that wind and PV energy price has fallen to A$60-70 per MWh this year as the industry takes off. Prices are likely to dip below A$50 per MWh within a few years, to match current international benchmark prices. Thus, the net cost of moving to a 100% renewable electricity system over the next 15 years is zero compared with continuing to build and maintain facilities for the current fossil-fuelled system.

Gas can no longer compete with wind and PV for delivery of electricity. Electric heat pumps are driving gas out of water and space heating. Even for delivery of high-temperature heat for industry, gas must cost less than A$10 per gigajoule to compete with electric furnaces powered by wind and PV power costing A$50 per MWh.

Importantly, the more that low-cost PV and wind is deployed in the current high-cost electricity environment, the more they will reduce prices.

Then there is the issue of other types of energy use besides electricity – such as transport, heating, and industry. The cheapest way to make these energy sources green is to electrify virtually everything, and then plug them into an electricity grid powered by renewables.

A 55% reduction in Australian greenhouse gas emissions can be achieved by conversion of the electricity grid to renewables, together with mass adoption of electric vehicles for land transport and electric heat pumps for heating and cooling. Beyond this, we can develop renewable electric-driven pathways to manufacture hydrocarbon-based fuels and chemicals, primarily through electrolysis of water to obtain hydrogen and carbon capture from the atmosphere, to achieve an 83% reduction in emissions (with the residual 17% of emissions coming mainly from agriculture and land clearing).

Doing all of this would mean tripling the amount of electricity we produce, according to my research group’s preliminary estimate.

The ConversationBut there is no shortage of solar and wind energy to achieve this, and prices are rapidly falling. We can build a clean energy future at modest cost if we want to.

Andrew Blakers, Professor of Engineering, Australian National University

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

The electricity sector needs to cut carbon by 45% by 2030 to keep Australia on track


Amandine Denis, Monash University

Our new ClimateWorks Australia report, released today, shows that the electricity sector needs to deliver a much greater cut than the 28% emissions reduction modelled in the Finkel Review if Australia is to meet its overall climate target for 2030.

When Australia’s energy ministers meet this Friday to discuss (among other things) the Finkel Review released last month, they will hopefully consider its recommendations for the electricity sector in the broader context of developing a long-term national climate policy.

According to our analysis, the electricity sector should cut emissions by at least 45% by 2030, as part of a move towards net zero emissions by 2050. This is well beyond current government policies, but is crucial if Australia is to meet its climate obligations in an economically responsible way.

Climate commitments

The federal government has agreed to cut emissions by 26-28% on 2005 levels by 2030. As a signatory to the Paris climate agreement, Australia has also committed to global action to limit global warming to well below 2℃ – and as a developed nation, that means reaching net zero emissions across the whole economy by about 2050.

Our analysis suggests that the electricity sector will need do a larger share than other sectors of the economy, because it has more technical potential to do so and can support emissions reductions in other sectors. In practice, reaching net zero emissions means shifting from coal and other fossil fuels to zero- or near-zero-carbon energy sources such as renewable electricity and bioenergy. Coal or gas will only be feasible if fitted with carbon capture and storage. Achieving near zero-emissions electricity is a key step in the transition to a net zero-emissions economy, not least because of the future importance of electrically powered transport.

The good news is that our previous research has shown that this is achievable with existing technologies, thanks to Australia’s rich renewable resources.

CSIRO and Energy Networks Australia have also shown that the electricity sector can reach zero emissions by 2050 while still maintaining security and reliability, and that this will actually save households an estimated A$414 a year compared with business as usual.

The 2030 target matters

Cutting emissions faster now will make it easier and less economically disruptive to reach net zero by 2050. Yet the latest government emissions projections forecast that Australia’s emissions will grow by 9% by the end of the next decade, from 543 megatonnes of carbon dioxide equivalent (CO₂e) in 2016 to 592Mt CO2e in 2030.

If the impact of existing policies (such as the National Energy Productivity Plan, the phase-down of hydroflurocarbon emissions, and state renewable energy targets) are taken into account in the projections, emissions could drop to 531Mt CO2e in 2030. This still leaves an 82-megatonne gap to reach even the minimum emissions reduction target of 26% percent below 2005 levels.

Time to do more

Our report, Power Up: Australia’s electricity sector can and should do more to deliver on our climate commitments shows that Australia’s electricity sector can cut emissions by up to 60% below 2005 levels by 2030. This is nearly six times more carbon reduction than is expected to be delivered by current policies, and could by itself fill the whole emissions reduction gap.

However, should the electricity sector only make a 28% reduction in its emissions, in line with the Finkel analysis, then it would only reduce emissions by 6Mt CO2e beyond current policies, leaving most of the effort of reducing emissions to other sectors such as buildings, transport, industry, waste and land management, where cutting carbon is likely to be significantly more expensive.

To reach this level of emissions reductions in the land sector, for instance, we would need to increase forest planting by more than three times the amount estimated to be delivered by the federal government’s Emission Reduction Fund in 2018, its peak year.

In its defence, the Finkel Review focused exclusively on the electricity sector and its analysis did not look at the impact that limited change in this sector would have on the required effort from other parts of the economy.

We therefore modelled various other scenarios, including one in which the share of renewables increases from 40% to 50% by 2030. This could enable the electricity sector to achieve double the carbon reductions delivered by efforts in line with the Finkel review.

Our third and fourth scenarios are aimed at meeting the more ambitious emissions target range recommended by the Climate Change Authority, corresponding to a more progressive and therefore economically responsible trajectory towards net zero emissions. This requires Australia achieving a 45-60% reduction in emissions from the electricity sector by 2030.

Expected emissions reductions by 2030 (in megatonnes CO₂ equivalent) in four different policy areas under four different electricity scenarios.
ClimateWorks Australia, Author provided

The long view

Like the Finkel Review, our report recommends that the federal government defines a specific emissions-reduction policy for the electricity sector, which in Finkel’s case was the Clean Energy Target. This will help to ensure a smooth shift to reliable, affordable, low-carbon energy.

Our report outlines the key principles that Australian governments need to consider in order to make effective decisions on climate change policy, with a view to achieving net zero emissions by mid-century.

These include providing clear long-term direction to support the industry’s investment decisions, and ensuring that decision-making to 2030 is compatible with reaching net zero emissions by 2050.

Climate policy should also be flexible so that it can be scaled up to meet future targets and allow a range of solutions, including the uptake of emerging technologies to make the transition faster and cheaper.

The ConversationGiven that net zero emissions is the ultimate goal, we need to move faster and achieve greater emissions reductions by 2030 to help deliver a fully decarbonised electricity system, on time and on budget.

Amandine Denis, Head of Research, ClimateWorks Australia, Monash University

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