Clean energy future a house of cards

By Peter Cassuben

Where will our electricity REALLY be coming from 20 years from now?

Despite the European downturn, the production of renewable energy in Germany is growing faster than previously forecast and is now expected to account for almost half of the country’s electricity production within a decade.

According to Stephan Kohler, who heads up the government-affiliated agency overseeing Germany’s electricity grid, the current boom in new installations of wind, solar and other renewable power sources will easily eclipse the official target of 35 per cent by 2022 – instead reaching as high as 48 per cent.  It’s hoped to reach 80 per cent by 2050.

Here in Australia the Gillard Government’s release of the new energy white paper appears to be more about maintaining the appearance of achieving a 20 per cent production of renewable energy by 2020 than demonstrating how it’s to be done.

Despite countless thousands of words spoken in parliament and through the media, we are no closer to knowing precisely which technologies are to deliver the government’s renewable energy target.  Nor do we know the locations of many of the projects and which companies and investors are genuinely prepared to dig deep enough to first build and then wire them into the grid.

Meanwhile, a number of Australian coal and gas fired generators, who alone carry more than 90 per cent of the burden of national electricity consumption, are now scaling back, or putting on-hold, plans for new investment. These utility operators, whose industry credibility and commercial expertise is so sorely needed in the emerging renewables sector, have begun withdrawing – many feeling battered, bruised and unappreciated. Shedding jobs, they’re now seriously asking, why bother?

Depending on whose figures you trust, Australia’s renewables sector currently comprises up to 10 per cent of the electricity supply market.

At present much renewable energy comes from hydro, but as the sector grows over the next two decades this share is set to slip dramatically with the other renewables, including wind and bioenergy taking up most of the load.  However, the question of how big a role solar may play is a little more complicated.

The new energy white paper heralds a massive future role for solar in all its forms. Careful not to call them ‘forecasts’ or even ‘predictions’ the white paper bases its compelling ‘solar-to-the-rescue’ scenario on projections published, not inconveniently,  just weeks ago by the government’s lead energy economics forecasting agency, the Bureau of Resources and Energy Economics (BREE).

And this is where it all gets a bit interesting. As recently as last December, BREE concluded that, taking into account carbon pricing in 2012, by 2034 Australia’s energy supply and distribution will still be 91 per cent reliant on fossil fuels, with the renewables sector growing from the current 5 per cent to perhaps 9 per cent. Of this, BREE determined that even with a carbon price and substantial government grants, solar would at best make up only a miniscule 1 per cent or so of renewable energy. The Bureau instead tipped wind to become the biggest non-fossil energy contributor, at about 14 per cent of overall supply.

That was December 2011 – and BREE wasn’t alone in its pessimistic outlook on solar. A year earlier, the team over at the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) had also been crunching the data and came to much the same conclusion: that solar would supply only about 1 per cent of Australia’s energy requirements by 2030.

Given the high levels of public expectation already created, with solar routinely held as a pin-up, these projections flew in the face of the government’s pledge to achieve a renewable energy target of 20 per cent a full ten years earlier!

Already under fire for allegedly wasting bucket loads on failed energy schemes, ministers would surely have been alarmed to discover that, of the $1 billion or more so far invested in making renewable energy technologies more market competitive, by far the most (upwards of $800 million) has so far been tipped into solar – apparently without even touching the sides.

Other species of renewable energy suppliers have asked, “Why on earth is the government pouring virtually everything in the renewable energy budget into solar, when their own forecasters are telling them solar will be all but useless in helping meet the renewable energy target as late as 2034 let alone our deadline of 2020?”

For the Australian Renewable Energy Agency (ARENA), which still has some $3.2 billion to invest in renewable energy, it’s a key issue over which potential for considerable awkwardness appears to have been avoided.

Since effectively having panned solar, it has taken BREE less than six months to completely abandon its dire 20 year projections and to replace them with a vastly sunnier outlook.

BREE now says that solar (and wind) will deliver Australia the cheapest forms of energy by 2030 – with solar PV dramatically less costly than all other energy forms by 2050.  So, in the space of an economic forecaster’s heartbeat, the energy strategic significance of solar has skyrocketed from virtually zero ‘to hero.’ By any estimation – it’s a stellar turnaround.

In part, BREE explains this by saying “costs of solar photovoltaic technologies have dropped dramatically in the past two to three years as a result of a rapid increase in the global production of photovoltaic modules.” That prices have plunged is beyond dispute. But have BREE and the authors of the energy white paper looked deeply enough into why prices are so low and how sustainable they are?

Though Australia’s longer-term solar ambitions go well beyond PV and include potential for large state-of-the-art solar thermal facilities (with and without storage), low PV prices cannot be separated from allegations of Chinese manufacturers’ dumping of PV panels on the world market at well below cost to capture current and future global markets.

Milan Nitzschke, president of EU ProSun, an alliance of European solar firms says that if the EU does not face-down Beijing over its export of below-cost solar panels, all its green technology and manufacturing will be lost, and the costs for greenhouse gas mitigation will disappear. EU ProSun, which claims to represent the majority of solar manufacturing companies in Europe, argues that its members cannot compete with “the state capitalism of the People’s Republic of China”.

Since gaining a recent foothold in the EU market, Chinese companies have captured more than 80 per cent of the EU market for solar products from virtually zero, says Nitzschke, “due to illegal subsidies and destructive dumping of Chinese solar products below their cost of production.”

Nitzschke claims that such practices have so far led to more than 20 major European solar manufacturers going out of business in 2012 alone and that “if China destroys the EU solar industry where labour accounts for less than 10 per cent of production costs, then virtually all European manufacturing sectors and jobs are under threat.”

Germany’s meteoric rise in renewable energy use, including rapid take-up of roof-top solar, has set a benchmark that is the envy of Australia’s renewable energy devotees, me included. Still, Germany has a major job on its hands to integrate its myriad of new renewable energy supplies with its already behemoth national electricity grid.

To cope with the challenge, the agency estimates that Germany still needs to build another 5000km of high voltage lines – at an estimated cost of some €20 billion (AU$26 billion).

Interestingly, Herr Kohler stresses that for Germany to reach 50 per cent of supply from renewable energy, the nation still needs to build more “conventional power plants – for example, gas-fired plants” – to ensure backups are in place to provide a steady stream of power when the wind doesn’t blow or the sun doesn’t shine. Whatever your flavour in renewables, it’s hard to argue with that.

Peter Cassuben is a former Howard Government Advisor who now runs a Sydney based communications agency.

Previous articleInterconnector upgrade to benefit NEM
Next articleOrigin Energy reports 10 per cent drop in quarterly production