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    Let’s pretend we have the tech for stable power supply

    September 9, 2022 - Stephen Anthony


      Policymakers in many developed nations are learning hard economic lessons because they have tried to decarbonise energy grids without ensuring adequate dispatchable backup power is in place. This failure turns the transition challenge into a rollercoaster ride that affects living standards, death rates from heat and cold, and economic growth.

      In much of Europe there is a crippling power shortage brought about by over-reliance on renewables and generation from Russian gas. Subdued wind and hydro generation has been compounded by gas shortages. This situation is already hurting people and the economy but it will have dire consequences come the winter.

      In Britain Tony Blair’s former chief adviser says tens of thousands of people could die because they can’t heat their homes. New Prime Minister Liz Truss says she will cap power bills, which are expected to double or triple this northern winter.

      These economies and others have pursued the wholesale decommissioning of fossil fuel and nuclear generation without adequate contingency planning. Now authorities are switching old fossil-fuel generation back on and deferring the closure of nuclear power plants.

      What about Australia? While politically convenient for some to argue that we are a laggard when it comes to emissions reduction, Australia has charged ahead at breakneck speed in its uptake of solar and wind generation. But we are doing so without anywhere near adequately planning our backup power strategy.

      Australia has managed to cut its emissions by about 20 per cent in the 17 years since 2005. But to make the stated goal of 43 per cent emissions reductions by 2030 will require finding another 150 million tonnes in eight years.

      Reducing emissions by that much will require electricity to continue doing the heavy lifting. The government’s own analysis suggests this will require 82 per cent renewable electricity generation by 2030. Worryingly, the scale of this adjustment requires grid-scale technologies and processes that do not exist right now.

      As a result, energy expert Matthew Warren has termed the Australian adjustment path a “white-knuckled ride” with policy choices magnifying uncertainty and risking divergent, unsustainable outcomes, policy missteps and embarrassing reversals. So we look set to outdo Germany, Britain and even Texas in winter 2021 by playing an extreme version of the game of “let’s pretend”.

      The forcing of more and more wind and solar generation cap­acity into the grid in recent years has occurred via state governments and environmental, social and governance-conscious corporations. In return for renewables investment, generators received fixed-price contracts for power whenever the sun is shining or the wind is blowing. Typically, this places downward pressure on daytime wholesale spot power prices, which may even turn negative at points in the day. This leaves “firm” generators unprofitable, so they are progressively exiting the sector, as intended by policymakers.

      The problem with the haphazard closing of unprofitable baseload power stations so quickly is that it is challenging the reliability of power supply, a situation unthinkable in modern, developed economies only 20 years ago. It may overwhelm our generation system in coming months and years. Then where will we be? Working-class and middle-income Australians facing second world living standards.

      Inevitably, governments and market operators such as the Australian Energy Market Operator will need to subsidise sufficient fossil-fuel-burning baseload generators and firming gas-fired generators to counter the effect of the subsidies afforded to renewable generators. This is so at least until energy storage can adequately complement intermittent renewable generation.

      While some states have concerns that strengthening Retailer Reliability Obligations (to ensure adequate dispatchable power is maintained at all times) is an impediment to investment in renewables, the need to ensure reliability of power supply is a political and economic necessity.

      So who pays the cost of all these subsidies? To date it has been consumers and that’s unlikely to change. With subsidies becoming fundamental to renewable and fossil-fuel gener­ation and storage, don’t expect to see a reduction in power bills in the foreseeable future. And this is before the vast investment in grid re-engineering to support renewables. The estimated cost of eliminating the 25 gigawatts of firm generation currently in the system will be at least $150bn, but could be much more.

      Increasingly, the only purpose for maintaining the wholesale spot market price will be to allow governments and corporations to quantify the size of subsidies they need to pay generators on an ex-post basis, renewable and/or fossil fuel generators alike.

      The latest subsidies to be offered are in long-duration storage, with the NSW government tendering for 600 megawatts of storage of at least eight hours of supply. Indeed, long duration storage is critical to decarbonising the grid. To date in Australia, the only storage technology being deployed that offers meaningful volumes of long-duration dispatchable power is pumped hydro.

      Snowy 2.0 and Genex’s Kidston in Queensland are under construction, while Tasmania’s Battery of the Nation project is being planned with the support of the federal government.

      Pumped hydro clearly will have a significant role to play in addressing the long-duration storage challenge; however, the bulk of capacity to be deployed in coming years will need to come from other technologies because of the scarcity of appropriate sites and our propensity to drought.

      That leaves another key technology, thermal storage, which can harness the potential of solar and wind while providing a network backup. This entails super heating bricks or pits containing molten salt or graphite that can power up existing steam turbines at conventional power plants, thus eliminating the need to burn coal or gas.

      The Australian Renewable Energy Agency and the CSIRO’s Australian Solar Thermal Institute are supporting the trial of some thermally based technologies aspiring to deliver long-duration dispatchable power.

      The challenge faced by these technologies is that to sustain grid-scale turbines, they must be able to maintain constant temperatures of at least 600C. While some can achieve these temperatures for a short period, most cannot sustain them for long, limiting their use to short-duration generation dispatch and industrial heat applications.

      One can only hope the federal government and bureaucrats appreciate the basic technical necessities and seek out those few global suppliers that could meet the challenge of grid-scale, efficient, long-duration storage. This is the difference between power uncertainty for working Australians and an affordable pathway to net zero. Stephen Anthony is managing director of Macroeconomics Advisory and an adjunct professor at the University of Canberra’s faculty of business, government and law.


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