Fibs about the renewables transition—and the cost of energy

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By Phil Kreveld, electrical engineer

A fib is not a lie—a fib is a way of avoiding an unpleasant truth.

We are inundated by claims and counterclaims about the cost of a kilowatt hour, come the revolution—the renewable one. The answers depend on what you would like that cost to be. Name the desired kWh cost and the particular technology of generation selected, and your consulting company will build you the appropriate case to prove it as the outcome of your choice.

The ‘elasticity’ accompanying multiple energy cost claims and their technology scenarios depends on where the cost accounting boundaries are set. Take coal-fired generation as an example. In addition to the energy and cost of digging up a ton of coal there is the processing and transportation to the boiler’s firebox, and having the less than ideal Carnot cycle deal with it to generate steam.

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Now account for in-house pumps, etc., the efficiency of the turbine, the generator, the transformer losses, and the transmission energy loss costs transporting it to the customer and you have a base minimum cost of electrical energy. In the case of coal, the boundaries within which the costs are collected have not been in dispute for well over a century (with some current externality issues, for instance removing CO2). But pick renewables and the accounting game opens up to a broad landscape—sufficiently broad that various, earnestly calculated kilowatt hour costs are, well, rubbery, at best.

So let’s posit an approach—a ‘least regrets’ one. Or admit that we cannot be sure that we have picked the right scenario and therefore, from time to time, have to re-examine it against changing circumstances. Tony Abbott’s erstwhile commissioner for wind generators, Andrew Dyer, opined that a co-ordinated engineering development plan is needed, one which would fix allowable REZ locations, presumably their capacity limits, and the ratings of the connecting transmission links. It hardly seems novel but never mind, there is nothing of the sort happening. It is in many ways precluded because in the absence of some central authority, we rely on a meeting of the minds of AEMO, AER, AEMC, and transmission and distribution companies.

Given the above, we have put our faith in the operation of ‘the market’, a suitably nebulous concept given the oligarchical nature of much of the electricity game. However, as is well evident, there is a slowdown in new connections and new investment—and political interference, lately by the promotion of nuclear energy. This is not to diminish it as an option but certainly to make the obvious point that it is a discouraging sign for wind and solar investors.

A centrally co-ordinated engineering plan would perforce be accompanied by geographical locations where investment in generation could take place, with the required generation technology, and it would specify requirements such as reactive power capacity in addition to the provision of active power. Designs for the transmission links to zone substations would take account of extreme minima and maxima of power flow and voltage and voltage angle sensitivity.

The fibs that cloud Australia’s renewable energy journey

They are as follows:

  1. Renewables have zero marginal cost. With the exception of VRE continuing to supply megawatts while prices are negative only for the purpose of gaining the legally required large-scale energy certificates, VRE generators will have to charge for capacity, i.e., MVA, even at low power factors as well as for standby capacity, e.g., batteries.
  2. Installing more rooftop solar will reduce the cost of electrical energy for consumers. It still does reduce cost at present, but will not by the time AEMO’s ISP 2050 projections become fact. By then (unless the national electricity system is redesigned as an integrated one), DNSP will have to charge higher network charges in order to keep inverters operating for their owners.
  3. There is no transition without transmission. This appears a logical outcome of having more remote renewable energy zones with VRE. However, as revealed by the ISP, by 2050 about a third of the projected capacity will be for self-consumption and expected transmitted power flow is forecast at about one seventh of total projected capacity to account for twice the total of today’s annual energy consumption. Transmission charges as a proportion of energy delivered will therefore have to rise as a result of transmission companies having to recoup their investments.
  4. Gas, coal or nuclear generation capacity will be required when the sun doesn’t shine and the wind doesn’t blow. Given a projected over-capacity of 85% by 2050 according to the ISP, that requirement vanishes.

Having dismissed the fibs, the question remains as to how we get to realise the ISP projections (assuming, of course that we don’t want to relinquish our renewable targets). The one essential requirement whether or not the 2050 target is met, is security, if we don’t want to grow the standby generator market. The cost of security follows a rectangular hyperbolic curve which plots the number of interruptions to energy supply against cost. Zero loss of power, ever, has an infinitely high cost.

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A nationally coordinated design would have to be agreed on and would have to be based on nationally (as opposed to a renewables race mounted by the states and territories) agreed targets for X capacity of wind, solar, pumped hydro and whatever other technology proves to be practicable. Such a plan would allow for cost projections and would provide a base for tariff predictions.

Without that plan we would slide towards higher and higher costs where the zero marginal cost advantage of wind and solar would be swamped by standby capacity and transmission costs, not to mention costs in distribution networks having to cater for uncontrolled expansion of rooftop solar. Alinta CEO Jeff Dimery, somewhat more carefully phrased, made these points in his National Press Club address of 10 April 2024.

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