Electricity prices fall: renewable energy deserves merit

By Dylan McConnell

Dylan McConnell is a Research Fellow at the University of Melbourne

Let’s be honest: the relationship between renewable energy and the electricity market is complex. So what does the latest report from Australian energy research firm RepuTex tell us?

Well, for a start, coal-fired power has reached a ten-year low.

The report, widely covered in the media, shows coal now makes up 74.8% of the National Electricity Market (NEM), down from 85.8% in 2008-2009.

At the same time the contribution of other energy, and renewable energy in particular, has risen. Hydro power makes up 8.7% of the market, with wind making up 3.8%, both record highs for these energy sources. This leads to the conclusion that greenhouse emissions in the NEM have also reached a ten-year low.

The RepuTex report indicates that both increased renewable energy generation and weaker demand is putting a “squeeze” on traditional generation.

This is ultimately reducing the market price of electricity as renewable energy competes with coal and other traditional energy sources. But, as said, the relationship between renewable energy, competition and market prices is complex.

Does renewable energy lower prices?

In 2011 the Victorian Auditor-General reported that the brown coal industry was concerned that the 10% renewable energy target would deliver too much too quickly which would reduce wholesale electricity prices and impact on brown coal generators.

We looked back and modelled the hypothetical impact of distributed solar photovoltaics (PV) on electricity prices in 2009 and 2010. Lowering the wholesale cost of electricity might offset the costs of renewable energy support schemes.

Using the model we estimated introducing 5,000 megawatts (MW) of solar would lower the market price of electricity by more than A$1.8 billion over 2009 and 2010. When we completed this analysis there was a minuscule 385 MW of solar in the electricity market. Now there is already 2,500 MW, making our estimate look conservative.

The Australian Energy Market Operator (AEMO) forecasts 12,000 MW to be installed by 2030 in their “moderate” scenario. The impact of PV on market demand is already starting to show on the market.

The average wholesale electricity prices for 2011-12 were the lowest (in real terms) since the market commenced in 1998. Even with the carbon tax, prices are not much above the long-term average of about A$50 per megawatt hour (adjusted to 2013 dollar terms). Recently, the Australian Energy Regulator (AER) reported that wind generation is moderating wholesale electricity prices in South Australia, and when there is less wind, prices are higher.

High-speed rail cost and timeline “laughable”

April 11, 2013

Researchers who have performed their own analysis of the high-speed rail link from Melbourne to Brisbane have today questioned the governments announced 45-year timeline and $114 billion costing.

“When John F. Kennedy saw a challenge worth taking he decided to get on with it as quickly as humanly possible, and in 8 years Neil Armstrong was walking on the moon. On the other hand, some would have us believe building a high-speed railway from Melbourne to Brisbane will take 45 years,” said Gerard Drew, high-speed rail researcher for climate solutions think-tank Beyond Zero Emissions.

“The economic windfall which high speed rail will deliver to Australia has finally been recognised by the Federal Government, and that's a good thing.

“But we fear that political delay and gold-plating could leave this as just a dream for another two generations of Australians.

“The rail network that was built all over the eastern states was built with picks and shovels over 100 years ago, much of it in less time than has been suggested for this project,” Mr Drew said.

“45 years is laughable.”

Beyond Zero Emissions have done their own study on the HSR route in partnership with the German Aerospace Centre (DLR). Their research, which will be published in full in May, indicates that the chosen HSR route could be built for under $70 billion, a lot less than the $114 billion quoted in the latest government study.

Solar panels reduce everyone's power bills


May 10, 2013

Australia's one million (and counting) solar powered households could be keeping everyone else's power bills down, by suppressing wholesale electricity prices.

That conclusion is drawn from a peer-reviewed paper recently published in the Journal of Energy Policy. The paper is a result of a joint research effort between the Melbourne Energy Institute and climate solutions think-tank Beyond Zero Emissions.

“Feed-in tariffs have been criticised by some, because all electricity users – with or without solar panels – pay the costs of the tariff on their electricity bill,” said Beyond Zero Emissions spokesperson Ben Courtice.

“However, the “merit order effect”, explained in this paper, offsets the cost of a low to medium feed-in tariff. It is often overlooked in setting policy in Australia, with the result that solar households aren't getting fair recognition, with feed-in tariffs being set too low.”

State governments in the last two years have been keen to slash the Feed-in Tariff (FIT) arrangements that guarantee a premium (or at least minimum) payment for solar electricity generated, saying they cost too much.

The merit order effect (see explanation below) means that solar power (and other renewables) displace more expensive forms of generation in the national electricity market, thereby lowering the wholesale price paid by all users. Failure to include this effect misrepresents the overall costs of solar support schemes.

“Contrary to state governments' assertions, feed in tariffs and solar PV may actually lower electricity prices paid by consumers. The current feed-in tariffs in several states are abysmally low and could be raised to a fairer level without impacting consumer prices,” said Mr Courtice.

The paper models the effect of up to five gigawatts (GW) of rooftop solar panels across the Eastern states' electricity network. This is about double what is currently installed in Australia. The researchers calculated the effects of from zero to 5GW of extra rooftop solar panels on the electricity market, over the years 2009 and 2010, based on the real electricity market data from those years.

The researchers' modelling suggests that the price suppression (merit order effect) resulting from 5GW of solar would have been worth $628 million in 2010, 8.6% of the total value traded that year. In 2009, the value could have been $1.2 billion, over 12% of the total value traded that year.

The lower electricity wholesale prices caused by the merit order effect should flow through to consumers in their electricity bills. This effect can offset the cost of support schemes and results in a wealth transfer from electricity generators to all consumers.

“When governments cite the cost of FITs but ignore offsets such as the merit order effect, they are effectively overstating the overall cost of supporting solar,” Mr Courtice said.

“Solar power is a cheap and effective way to reduce pollution, and it should receive better support so it can keep growing in Australia.”

True size of solar subsidies exaggerated, researchers say

By Peter Hannam

The true cost to consumers of subsidies to solar energy has been “somewhat exaggerated” because regulators have excluded the full benefits of solar photovoltaic panels, according to energy researchers.

While feed-in tariffs and upfront rebates have been criticised by officials and fossil-fuel fired generators for increasing consumers' electricity bills, a peer-reviewed research paper by researchers including Mike Sandiford at the Melbourne Energy Institute and Matthew Wright from Beyond Zero Emissions, found those costs are partly offset by lower wholesale power prices.

“By not considering this value, the cost of both feed-in tariffs and (Small-scale Technology Certificates) is somewhat exaggerated,” the paper, to be published this week in the Energy Policy journal, said. The contribution from solar in pushing down wholesale prices is "not recognised by the wider public”, the paper concluded.

The influence on wholesale electricity prices works via the so-called merit order effect. Under the National Electricity Market pricing scheme, the cheapest source of power gets preference. As more wind and solar energy gets added to the network, their negligible cost of production helps drive down prices across the network - a result that should benefit consumers.

"The question is whether we see that (saving) in the retail prices," Professor Sandiford said. "In an efficient market, we'd expect that to flow through."

Gas – is it a natural fit for buildings?

By Richard Keech

(Note: This article has been updated to correct leakage rate that cause the net climate effect of gas to double. The leakage rate is 2.6%, not 1% as originally published)

According to the Department of Climate Change and Energy Efficiency website, old electric-element-style hot water systems (that about half of households still have) “produce up to three times the greenhouse gas emissions of low emission technologies such as gas, solar and heat pump systems.”

The website recommends, that “changing your electric water heater for a low emission gas, heat pump or solar system, you can reduce your energy consumption, cut your greenhouse gas emissions and save money on your power bills.”

As far as heat pumps go, and electric or heat pump boosted solar, it’s hard to argue. But for fossil gas appliances, that “low emissions” tag is plain wrong. Now, we could just criticise it by asking whether “low emissions”  is good enough. Many think there’s enough scary climate science reports to mean that “low emissions” halfway measures are not good enough.

It’s true that at the point of combustion, fossil gas produces about half the emissions of coal for the same amount of energy. We could debate about whether the emissions cup is half full or half empty at this point, but that would be a diversion. In truth, if you look past the point of combustion, the cup is overflowing.

Previously, Beyond Zero Emissions have pointed to the fugitive/migratory emissions from coal-seam gas as a big question for just how low the emissions of future (and some current) gas supply will be. This concern is now gaining mainstream attention, as evidenced by the ABC TV Four Corners program last week. It’s a serious worry, given that CSG is the fossil gas industry’s future.

Beyond Zero Emissions’ Buildings Plan researchers have put together a short briefing paper drawing on the available research into the various problems of using gas, and conclude that gas use should be phased out (in buildings in particular) – based primarily on its climate impact.

The key reason is that all gas networks leak, not just at the well head. The only question is how much. There is some limited data out of South Australia that suggests the gas networks’ leakage there is in the order of 7%, whereas official government figures put it at around 1.5% nationwide. In reality, in most areas, it’s probably somewhere in between.

Clean electricity makes fossil gas redundant

Climate solutions think-tank Beyond Zero Emissions have today published a briefing paper on the use of gas as a fuel in buildings. The evidence shows that fossil gas' reputation as a clean, safe and cheap fuel needs to be re-considered.

Beyond Zero Emissions have criticised the fossil gas industry for increasingly using dirty and controversial coal-seam gas (CSG) for both export and domestic gas supply.

CSG has raised questions about leaks of the gas from and around the gas wells, as documented on Four Corners last week.

However, even traditional fossil gas mains and distribution networks leak.

CSG wells

The briefing paper was prepared by Richard Keech, who is working on the Zero Carbon Australia Buildings Plan for BZE.

Mr Keech explained that “In the production and distribution of gas there's leaks all along the way.

“There was some limited data out of South Australia that suggested it was in the order of 7%, but the official figures put it at around 1.5%. In reality it's probably somewhere in between.”

Fossil gas is methane. Mr Keech said “The 20-year climate effect of methane is currently understood to be about 105 times that of CO2. It only takes about 2.6% leakage to effectively double the net climate effect of gas.

“With any technology that carries some risk, we weigh the hazard against the benefits.

“That balance has now shifted, especially as fossil gas supply is now moving to CSG. We're seeing that the hazard is much greater than it was once seen as, and the benefit much less.

“Ceasing gas use in buildings is the low-hanging fruit of a larger fossil fuel phase out that is ultimately necessary if a climate catastrophe is to be avoided.

“BZE concludes that clean electricity now makes fossil gas redundant.”

BZE will release the Zero Carbon Australia Buildings Plan in mid 2013. The plan will outline how replacing buildings' gas appliances with renewable electricity powered heat pumps and induction cooktops can make a large reduction on carbon emissions and energy use.

This statement has been changed to correct the leakage rate to double the climate effect of methane, which is 2.6% not 1% as we had erroneously stated.

Download the briefing paper here (PDF) http://media.bze.org.au/nogas.pdf
Richard Keech interview on Radio Beyond Zero (podcast) http://bze.org.au/media/radio/richard-keech-130407

VIC - BZE Film Night - 'White Water, Black Gold'

After a brief hiatus, Beyond Zero Emissions film nights are back...and we're pretty excited about it!

Join us for a screening of the multi-award winning film 'White Water, Black Gold', which follows filmmaker David Lavallee on a three-year journey across Canada to document the environmental and social impacts of the world's most energy intensive oil industry: the tar sands. The industry is expanding right at a time when the world needs to be moving away from its heavy reliance on fossil fuels.

What's any of this got to do with Australia?

Well, business is booming for the oil and gas industry here as well, with the development of unconventional fossil fuel projects increasing along the eastern seaboard. Stick around after the film for some light refreshments and to hear more about this from our guest speakers from Friends of the Earth/Quit Coal...our audience may be particularly interested to hear about the doings of a company called Lakes Oil in Gippsland, backed by none other than one Mme. Rinehart.


Location: Kindness House, 288 Brunswick Street, Fitzroy, 3065

Date and Time: April 11th, 6.00pm

Transport: Tram 112, Stop 16 (Corner of Johnston and Brunswick Street)

Price: $10

BUY TICKETS AT THE DOOR OR ONLINE: http://www.trybooking.com/CQGZ  

NSW should call CSG industry bluff, go to zero gas

Threats that the NSW government's restrictions on the coal-seam gas industry will cause a price rise are a bluff that NSW residents should call, according to climate solutions think-tank Beyond Zero Emissions.

“The gas industry has no real commitment to domestic gas supply, and certainly not to cheap supply,” said BZE spokesperson Ben Courtice.

“The gas companies are not desperate to frack NSW for more CSG because they care about the NSW gas supply. They need it for their LNG export trains and contracts with Asia.”

Export commitments, and the move into costly and dirty shale and coal-seam gas, are already driving gas costs up. From $3-4 per gigajoule now, prices are expected to soon rise to as much as $10/GJ.

But gas companies are desperate to secure reserves. For example, gas company Santos' total proven, probable, possible and contingent gas reserves (known in the industry as “3P + 2C”) fell 26% in the last two years, indicating they are struggling to meet their commitment to GLNG export contracts (See PDF)

Image: walking the CSG pipeline (from Friends of the Earth/flickr)

Conflicting opinions have been voiced on NSW gas supply security. Despite numerous announcements that shortages could come as soon as 2015, the head of BHP Petroleum chair Michael Yeager recently said “it's more important to let the citizens of Victoria and NSW and to some degree even Queensland (know) there's plenty of gas to supply those provinces indefinitely"

Whatever the truth of this matter, it is already clear that no new gas power stations are required, with electricity demand falling in Eastern Australia for the last three years. AGL recently put on hold their proposed 1000MW gas power plant at Dalton for the foreseeable future.

Zero gas: the way forwards

“Gas corporations want to access NSW' coal-seam gas at all costs, but is NSW really at risk of shortages? Not if we move towards zero gas use – which our analysis shows is the logical step, from an economic as well as environmental perspective,” Mr Courtice said.

“At the prices we are going to be seeing, no-one will be building new gas power stations in Australia, and households will be hurting at the hip pocket if they rely on gas appliances.”

“NSW can do better than allow itself to be bluffed and bullied by the gas companies. NSW could tomorrow begin to transition away from dirty fossil gas and implement efficient electric technologies powered by renewable energy.”

BZE's research has identified that the technology to replace fossil gas use is now cleaner, more efficient and cheaper to run:

  • Household heat pumps and induction cooktops can replace fossil gas appliances with greater efficiency and safety, and lower operating costs and greenhouse emissions;

  • An energy efficiency program as simple as changing halogen light globes across Australia for new LEDs could reduce electricity demand by as much as one large coal power station;

  • Fossil gas and coal power stations can be replaced with a combination of wind farms, solar panels, and large solar-thermal power plants with molten salt heat storage for backup to run at night.

High speed rail cheaper than Albanese thinks

Transport minister Anthony Albanese is trying to derail the promising High Speed Rail option before it even leaves the platform, according to climate solutions think-tank Beyond Zero Emissions.

“Mr Albanese appears to have decided to write off this nation building project before even releasing the report which he has been sitting on for four months,” said BZE's Zero Carbon Australia Transport researcher Gerard Drew.

“It is time to allow the public to consider the proposal. It’s unacceptable for the government to dismiss this publicly financed research before the costs and benefits have been shown.”

BZE, in partnership with the German Aerospace Centre (DLR), has analysed high-speed rail route options for Melbourne to Brisbane to arrive at a significantly lower cost figure than the Phase 1 AECOM study for the government, released in 2011.

“Based on the first study, we think that a price tag at the lower end of AECOM's costing range is what we should expect from the high speed rail network”, said Mr Drew.

“Mr Albanese has declared that the alignment 'has got to be in a straight line' which is certainly false. This assumption can inflate the project cost by a huge degree by unnecessarily forcing it through adverse terrain. For example, a kilometre of tunnel can cost more than 10 times as much as track on flat ground.

Image: Mapping the path of least resistance (dark blue) and precise route with optimised horizontal curvature (light blue), including bridges (purple) and tunnels (dark red)

Don't waste solar energy on coal

Port Augusta is the ideal location in South Australia for a solar thermal power plant, due to its very good direct annual solar radiation and its proximity to a strong piece of grid infrastructure that services the old lignite burning power plants that are located there, owned by Alinta.

There has been a campaign for some time to repower Port Augusta, after the town was named as one of 12 key power generation sites in the Zero Carbon Australia stationary energy plan.

This campaign has garnered a lot of support and gained a great deal of momentum.

But now we're at a turning point where we may get a type solar thermal plant that is of little use in promoting a shift away from fossil fuels.  A plant that will not create an inspiring vision, nor support greater understanding and learning-by-doing that will shift us from a 19th century fossil fuel economy, to a 21st century renewable-powered, cleantech economy.

The plant being proposed is a cheaper option being proposed by electricity company Alinta. But buyer beware - you get what you pay for.

Coal train bound from Leigh Creek mine to Port Augusta

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