How Australia could reach 70% renewable energy by 2030

Print Friendly, PDF & Email

Getting high level of renewable energy in the electricity system will be easier and cheaper than most people think, particularly with battery storage costs falling so quickly.

Figure 2: A load shape pattern from AEMO 2013 study
Print Friendly, PDF & Email

In part 1 of this series we looked at some characteristics of the National Electricity Market and the volatility of wind and solar, and stated that the foundation stone of decarbonisation has to be an economy-wide carbon tax, because electricity is only about 36 per cent of Australian carbon emissions.

This time around we look at a couple of other attempts at modelling out high renewable penetration in Australia and see what’s changed. The University of NSW and University of Sydney believe it can mostly be done with wind and solar PV, with some minor help from other technologies.

None of the studies assume much of a role for lithium-ion battery storage and, as such, to my way of thinking, they are all a bit incomplete. The most thorough model is the AEMO study, but it assumed reliance on technologies that are nowhere near ready for prime time, and as every other study shows, aren’t necessary.

In part 3 we will try and look at the AEMO daily supply curves but use our own technology assumptions to develop a different supply mix. Part 3 may take a while.

Literature review by “Centre for Energy and Environmental Markets” UNSW

Fortunately, we don’t have to do our own literature survey as the UNSW has done one for us. This link is to a working paper from as recently as March 2016. Great minds think alike!

This summary of literature concluded that 100% renewables is possible, and would likely involve wind supplying 80 per cent of the energy. The generation cost of electricity would have a weighted average of between $100-$140/MWh (around last week’s pool prices). See Fig 1 below.

This paper was typical of most such studies, in that batteries are dismissed early on in the piece. The study had this to say on storage:

Do we need novel energy storage systems such as batteries?

Modelling to date consistently suggests that novel battery energy storage are not required to reliably operate a 100% renewable electricity system. There is sufficient geographical diversity in the wind and PV generation in Australia, sufficient firm renewable capacity available, and a host of other lower cost means for achieving system flexibility, that an affordable, reliable electricity system can be constructed without any need for electrochemical batteries at all.

However, if battery costs continue to fall, it may become cost effective to install some battery storage, particularly in cases where this can defer investment in distribution networks.

Batteries are likely to be important for facilitating larger quantities of PV generation (beyond those illustrated in Figure 5), since PV only generates during a relatively narrow window of time during the middle of the day [18]. This means that PV generation can tend to “saturate” at a level of 8-15 GW in the NEM, if batteries are not present [19, 20, 21, 22].

renew 1
Figure 1: Summary of cost of 100% renewables from previous studies: Source Riesz et alia, op cit

We include one graph from their working paper to indicate some of the studies that have already been done.

The 2012/2013 AEMO study

It was only five years ago, in 2011, that the government of the day announced its clean energy plan. That plan ultimately handed $750 million of only partly recovered compensation to brown coal generators in Victoria, left us with the CEFC and ARENA, and some nostalgia for what might and should still be a sensible policy.

The government-commissioned AEMO “100% renewables study”, as with all such studies, is only as useful as the assumptions it makes. Reading this work four years later, the main points to strike home are:

  1. Total capital cost at the time was estimated at $212-$332 billion. We will return to this later but we think that from today’s perspective that’s a very pessimistic assumption.
  2. The operational issues appeared manageable. Think about it. That’s a pretty encouraging comment from the AEMO
  3. More capacity relative to maximum demand was likely to be needed. The AEMO estimated that capacity more than 2X maximum demand would be needed.

AEMO methods outcomes

The AEMO report employed two methods of “least cost” supply, probabilistic modelling and time-sequential. The probabilistic model used Monte Carlo (random numbers) to generate 500 random days of supply and renewable output with hourly profiles. It was a requirement that current NEM reliability be maintained.

The point about this modelling is that AEMO had the demand profiles and took assumptions about supply “profiles”. Both Summer and Winter outcomes were modelled. The Chart below is reproduced from the AEMO study. Supply was modelled across 43 separate regions of the NEM. In other words it was a thorough model:

Figure 2: A load shape pattern from AEMO 2013 study
Figure 2: A load shape pattern from AEMO 2013 study

AEMO intended this graph to show load shapes, but what we see is that the baseload supply was coming from about 10GW of geothermal, about 4-5GW of biomass (burning wood and sugarcane), 2-3GW of wave energy and a small amount of onshore wind. In short, the vast amount of energy was being supplied by technologies that were not then, and are not today, even technically proven (bio mass excepted) let alone economically proven. Shoulder demand was met by CSP with storage, biogas and hydro (with pumped storage).

No rational person could commit to such a system today. And we don’t think it’s necessary. Far larger chunks of demand can be supplied by wind and solar. Whereas AEMO, using cost assumptions largely developed by others, ignored battery storage, to us it seems that battery storage both for power and for energy is a far more viable technology. Not only that, examples from around the world and in Australia, for instance the Coober Pedy and King Island plants, don’t use any of the AEMO technologies other than wind and PV.

The market is speaking and Lithium storage is happening

Globally, there are about 1.2GW of storage already installed, with another 1.6GW in the planning stage. AES in the USA is among the leading global suppliers of storage solutions to utilities. Its larger projects are mostly in the 20-40MW scale at the moment, with the purchaser using the technology for frequency control as much as energy storage.

AES states that by 2024 global manufacturing capability of grid ready batteries will exceed 130GW (per year). Remember global PV installations are only about 50-60GW per year right now.

Our single biggest point here is that lithium storage is a technology that is available today, where global volumes are going to be growing at 20-100 per cent a year for a decade or more, and where unit costs are likely to fall 15-20 per cent per year for that same decade.

Speaking of the cost of lithium storage the best price point I have seen yet is that LG is selling cells/batteries to General Motors for next year’s Chevvy Bolt for – wait for it – $US145/kWh. A discussion of exactly what this price refers to can be found here.

We did some calculations around this and it suggests household storage could be done for $A55/MWh. I’ve ignored round-trip efficiency losses and each and all my assumptions can be questioned, but the bottom line is when the cells are at $145/kWh from LG many things are possible:

Figure 3: General Motors is confirmed to be buying high cost cells for $145/KWh
Figure 3: General Motors is confirmed to be buying high cost cells for $145/KWh

Geothermal, currently just a pipe dream

By contrast geothermal plants are technologically unproven, economically unproven, require in Australia vast amounts of transmission support and thus seem like a bad bet. Maybe someone will prove this wrong one day, but not in the time-frame required to avoid the 2°C by 2035 scenario.

Wave energy not ready for prime time

Wave energy is a small bit further down the track and in theory might be located closer to load centres. ASX listed Carnegie Wave owns, according to its presentation, the only operational wave farm project in the world, but we can’t see even 1MW operating by 2018. Carnegie, itself, has turned part of its focus to microgrids incorporating solar and lithium-ion battery storage. The concept is these microgrids will be available to, say, Pacific Islands and will be backwards compatible with the wave energy when its ready.

Concentrating Solar, not my choice but might be a goer

Concentrating solar plants with storage remain the enigma of the renewable world. By their nature they are large utility-scale projects and, as such, monitoring cost and performance is a case by case exercise. Generally its believed that they can produce power at $US200/MWh. The poster child for the industry is possibly the Crescent Dunes project in Nevada, which had a budgeted and we think actual cost of around $US1 billion for a 125MW plant with 10 hours storage. This project broke ground in 2011 and became operational in November 2015, although originally scheduled for 2013.

Best monthly production so far was 9.1GWh in February 2016. A 40 per cent capacity factor should mean about 36GWh per month so commissioning is clearly going very slowly. The project has a contract to sell electricity for $US135/MWh, but we don’t see how it can earn its cost of capital at that price. The Ivanpah project in the US (which does not include storage) has been operating longer but its capacity factor is significantly lower than modelled and the project is at some risk of not meeting its contractual output commitments, according to some media reports.

Spain, as of 2013, had 2.3GW of CSP installed, mostly without storage, and would have trouble delivering dispatchable power, month by month.

However, recent plants in South Africa and Chile may be doing better. CSP plants can apparently easily be impacted by dust and, as we understand it, require constant direct sunlight. It seems reasonable that this technology is still very early in its life cycle. However, by its nature big utility plants like this have less opportunities to scale up and come down the learning curve for costs when compared with PV and lithium batteries.

That said, the promise remains that CSP can produce on demand power for around $250-300/MWh. The study that looked at this in the most detail is here.

David Leitch is principal of ITK. He was  formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.

Print Friendly, PDF & Email

  1. David leitch 4 years ago

    Let me be the first to point out that I didn’t include the inverter in the storage calculations. Also there is more to be said about CSP.

    • Eb 4 years ago

      Yes, much more to be said on CSP. The on demand ~$250/MWh is from a 2012 study. Last year’s CSP with storage, EoI bids to SA’s ‘Low Carbon Electricity Supply and Services’ are rumoured to be significantly lower. Seeing this EoI closed in Dec 2015, has anyone seen published data or an update?

  2. Tim Forcey 4 years ago

    Pumped hydro is another energy storage option that could economically fit in the mix. An older article here and a less-old article here:

  3. wmh 4 years ago

    It’s not necessary to configure all the storage as batteries. 60% of domestic energy (perhaps a goodly proportion of industrial energy too) is required as low grade (<100 C) heat, so why not store energy as heat? Much cheaper to store than in batteries.

  4. Peter F 4 years ago

    Please make a clearer distinction between energy and electricity.
    If we are talking about electricity then 70% is easily achievable; if we have the will. A slightly (actually much) harder problem is 70% of total energy use.
    We should be aiming for 70% of total energy but addressing electricity first. If we get a bit more aggressive about energy efficiency we should be able to reduce demand by about 1.5% per year. This would bring NEM demand to about 160TW.hrs. of this 20TW.hrs is already generated by renewables so we have to find 0.7 x 160 – 20 = 90 TW.hrs 90,000 GW.hrs.

    If half the new generation is wind then we need 90,000 x 50% = 45,000 GW.hrs. New generation wind turbines are about 3-4GW.hrs/yr/MW. New turbines range between 2 and 3.5MW but the average size is increasing. Gamessa has just certified a 5MW onshore unit and others are building 8MW offshore units. Assuming a weighted average of 3.5MW, we need around 3,700 additional wind turbines. Given that Germany has 30,000 wind turbines and the UK 6,000 space is not an issue.

    Then if we turn to solar, it can be divided into rooftop, fixed ground mount and tracking ground mount, at capacity factors of 15%, 20% and 25% respectively and an average of 20% that means we need around 26GW of solar. We currently have about 5GW so an extra 21 GW sounds like a big stretch. However if you count it in solar modules there are about 26 million panels already installed. Because of gradually increasing panel output, the number of new panels is around 95 million. In our peak year we installed about 6-7m panels so a 15 year target for 85million is no problem in a growing economy. Italy whose economy is only about 1/3rd larger than ours installed 56 million panels in one year and China is installing 80m per year

    While it is true that biomass, geothermal and Solar thermal with storage are expensive they are still much cheaper than battery storage plus additional wind solar. So while I do not know what the mix is, I believe that the final mix will have 8-15GW of other renewables and 3-6GW of enhanced hydro/pumped storage and 2-5GW of batteries

  5. Ian 4 years ago

    Thank you David, you have identified a couple of problems/desperately required needs. Before renewables can advance to the point of providing 100 % of our electricity requirements we need storage. Our overall energy use needs to be converted to renewable sources.

    People dream of an opportunity to make their fortunes by inventing or supplying a need as ubiquitous as the toothbrush or the telephone or the light bulb. ” if only I could invent something that everyone needs, I would be mega rich!”

    Here it is the opportunity of the century, of the millennium. What could anyone want that has not already been exploited. What’s the next penicillin or viagra?

    Enough already, the answer is Electric Vehicle batteries, lithium batteries. We don’t have enough and they are too expensive. Build the factories, make the batteries.

    Look how cheap this can be : tesla is a forerunner in this field. Their gigafactory points the way . $5 billion for a 30 GWH a year manufacturing facility. Enough for 1/2 million 60 KWH cars. The cost of manufacturing could probably be divided as such: factory and equipment 20 % materials 20 % other expenses 60%. Apparently the materials cost for lithium batteries is about 10 to $20/ KWH. What is the cost of the facility? $5 billion @5 % for 30 GWH/year= $8.00/KWH $28 for factory and materials, how much for the rest? <$100/KWH is not inconceivable. A price premium of $6000 on a top of the range sedan or SUV of EV over ICE is very palatable.

    What sort of market are we looking at, what is the extent of the opportunity?

    100 million cars manufactured in the world each year, 1 million a year sold in Australia alone. That's 200 gigafactories needed in the world. Only one struggling to get built. Australia needs two of these factories to cover just its new car market. We consume 18 billion L of fuel in passenger cars a year $9 billion sent off shore , the cost of building 2 gigafactories.

    There is a Paradox in the design of EV: they need a decent range , over 200 miles to be marketable , but the average daily commute in Australia is only 30 km . Out of a storage capacity of 60 KWH only 7 KWH is actually used. The rest is up for grabs. Grid connected EV, completely electrified personal transportation systems, suddenly the need for electricity storage is more than adequately met. 43KWH per vehicle available for grid storage , 1 million new EV a year that's 43 GWH of new storage a year at a one-off cost to the country of US$10 billion, not too shabby, eh ?

    • Ian 4 years ago

      David, you are financial analyst, look at these figures, look at the viability of what I am saying. Our state governments should be bowling each other over to attract lithium vehicle battery manufacturing. This really is the missing link in decarbonising our energy future and it really is not that expensive.

      • Ian 4 years ago

        Fossil fuel exhaust pollution is the major cause for asthma. Get rid of oil and coal combustion and minimise asthma. What is the cost of asthma to Australia ? reports the cost of asthma to Australia in 2015 to be $27.9 billion . $10 billion to save $27.9 billion.

        • Ian 4 years ago

          If the government paid a subsidy of $500 million to cover that interest payments on battery factories to produce enough battery packs for 1 million passenger cars a year . How does that compare with other countries? Germany’s subsidy $1.3 billion a year, UK $4500 a car. Ubiquitous grid connected EV and or cheap stationary lithium batteries means rural communities can have reliable minigrids. Producing batteries in Australia could achieve rural self reliance for electricity needs, the subsidy of battery manufacturing could be offset by savings on rural electricity transmission subsidy.

          Nevada gave Musk $1.3 billion in subsidies to site his factory on their soil purely because of the knock-on effects to wealth creation in their state. Australia needs manufacturing and job creation in the populated areas and here is their biggest opportunity ever.

  6. Tom 4 years ago

    Spot on. I would also point out the super cheap solar thermal going up in Mid. East.

Comments are closed.

Get up to 3 quotes from pre-vetted solar (and battery) installers.