The struggle for power

The first decade of Australia’s renewable energy scramble shows we need a comprehensive national plan and less hot air.

The Clean Energy Finance Corporation says the market needs to better understand the trade-off between accessing higher quality and more geographically balanced renewable energy resources and increasing investment in transmission.

The first decade of Australia’s renewable energy scramble can be likened to a modern-day gold rush.

Scouts of prospectors swarmed potential sites for wind farms with little regard for the impact they would have on unwary rural communities or the electricity system as a whole. The hills from South Australia to Queensland are littered with tales of sharp practices where neighbours were pitted against neighbours to sign up wind-farm development sites.

Often leading the charge were small companies that sold the sites and development approvals to bigger organisations with the deep pockets needed to build.

A report by the National Wind Farm Commissioner acknow­ledges the history of community division, unfair contracts, inadequate communication, potential conflicts of interest and disregard for complaints of human suffering. The Wind Farm Commissioner set out a road map for how the industry could clean up its act. And the renewables industry insists that lessons have been learned.

But the legacy of initial haste bears all the hallmarks of any gold rush from yesteryear.

In the drive to mine generous renewable energy subsidies and deliver on a bipartisan renewable energy target, companies were set loose without any overarching long-term plan needed to replace a vastly different electricity network based on continuous baseload generation, primarily from coal.

To save costs, wind farm sites were chosen that easily could be connected to the existing electricity network.

State planning laws became a work in progress as jurisdictions fought with each other to attract a bigger share of the commonwealth-funded RET.

History shows that after years of an energy surplus being tightened by the removal of generation and a lift in household demand, the impact of renewables snapped sharply into focus.

GRAPHIC: Range of potential renewable energy zones

In the wake of South Australia’s statewide blackout in September 2016, the states and federal energy ministers enlisted Chief Scientist Alan Finkel to take stock.

One of the key recommendations of the Finkel review was for development of a comprehensive national plan.

“Incremental planning and investment decision-making based on the next marginal investment required is unlikely to produce the best outcomes for consumers or for the system as a whole over the long-term or support a smooth transition,” the Finkel review said.

The Australian Energy Market Operator is preparing an inte­grated system plan for the National Electricity Market.

The plan will consider transmission, generation, gas pipelines and distributed energy resources with the initial report due out in June.

Submissions to the AEMO review highlight the deep divisions between various stakeholders that underscore the rent-seeking behaviour that has allowed the system to reach crisis point.

Conflicts include the future role of distributed energy, the need for new transmission lines, the future role of gas, coal and nuclear and whether renewable energy projects should be clustered in special zones where they can do most good.

The contradictory stakeholder positions are being played out in the AEMO inquiry.

A key issue is whether to change the method under which additional transmission infrastructure is approved and funded.

Under the existing system’s regulatory investment test for transmission, investment in transmission infrastructure is approved “just in time” to match already committed increases in generation.

The Clean Energy Council describes it as a “chicken and egg” dilemma because proposed generators cannot ensure financial viability for a new project unless connection is assured.

In its submission, the CEC says: “It is clear that new transmission capacity must be delivered through a strategic, co-ordinated approach, rather than incrementally through the RIT-T.”

Transmission companies like the idea of building more capacity, which is no risk to them because the cost, plus margin, of any development is passed straight through to energy users.

NSW distributor TransGrid argues the RIT-T application guideline should be updated to ensure it is not a barrier to delivering strategic transmission projects.

AEMO has highlighted areas it believes are best suited for future rollout of large-scale wind and solar in each state.

Electric energy generating wind turbines are seen on a wind farm near Palm Springs, California.

TransGrid has blown the whistle on how wind farms risk being built in the wrong places simply because the cost of accessing the distribution grid is cheaper.

It says the present rules risk “generators with access to high-quality resources being crowded out by those accessing lower-quality resources closer to load centres”.

TransGrid argues the strategically planned connection of large-scale energy zones, supported by greater interconnection, will provide consumers with the lowest priced energy and system security.

“Where possible, energy zones should be located to enable reuse of existing transmission infrastructure (as existing generation retires) to minimise transmission costs and maximise optionality, while facilitating low-cost renewable generation,” TransGrid says.

The company has identified large-scale energy zones in NSW where it believes the wholesale market benefits of connecting lower-cost generation more than outweigh transmission investment to connect the zone.

TransGrid says there exists a misalignment of incentives between generation and transmission.

Generators are incentivised to develop renewable projects near existing transmission lines, where connection costs are lowest, despite often not being in areas with highest quality resources.

Lower-voltage systems are less able to support intermittent generation and are unable to efficiently deliver the scale of generation required by major load centres.

The system costs of inefficiently locating renewable investments are ultimately borne by consumers

The Clean Energy Finance Corporation says the market needs to better understand the trade-off between accessing higher quality and more geographically balanced renewable energy resources and increasing investment in transmission.

Generation heavyweight AGL is not convinced. It says “transmission investment should not necessarily be implemented to drive generation development but, rather, should be considered in parallel by demand for energy and new projects”.

“We consider that it is still important to objectively evaluate proposed transmission infrastructure investment against other credible network or non-network alternatives such as local generation, storage or demand management, and other new emerging technologies,” AGL says.

“The test for investment in transmission assets should fundamentally remain a detailed case-by-case assessment of projected investments under a revised and improved RIT-T process.”

Dow Chemical has told AEMO that to focus solely on renewable energy misses the point. “Renewable power sources alone cannot resolve Australia’s trilemma issues (affordable, reliable and low emissions power),” Dow Australia president Louis A. Vega says.

“The size of the task, the costs involved and the difficulty of attaining reliability by overcoming the inherent intermittent nature of renewables must not be underestimated.

“As technology develops over the coming decade, Australia may achieve a system with little or very limited fossil fuel-fired power.

“Unfortunately that technology is not commercially demonstrated at the national level today,” he said.

Many within the renewables industry point to the increased role that will be played by distributed energy resources such as rooftop solar, an area where Australian households lead the world.

But TransGrid says while DER will play a growing role, it will not be able to adequately supply energy-intensive industries and densely populated urbanised areas with high demand relative to rooftop area.

Vega says to maintain grid reliability along with affordability, a proven mix of intermittent renewable power (wind and solar) and dispatchable power (gas and hydro) must be established by the regulator and allowed to evolve over time as cost-effective technologies come to the fore.

“Deliberate selection of natural gas as the bridging power source should become the foundation of a multi-layered energy approach toward achieving sustainability,” Vega says.

The alternative approach of “hands off — let the market decide” would look very similar to Australia today with incrementally based solutions to the power and gas supply market based on a sundry patchwork of sub-optimal initiatives.

The Electric Energy Society of Australia has told AEMO lower-cost alternatives to the renewable energy zones need to be considered. These zones would require large investments in transmission extensions and augmentations.

“Under our regulatory regime these investments would lead to ongoing increases in network service charges that would be borne by electricity customers for 40 years or more,” EESA says.

“Alternative schemes that better utilise existing transmission assets and provide equivalent or better outcomes need to be explored as part of the planning process.”

The group says alternative schemes should include measures that improve the efficiency of the existing fossil fuel fleet.

“One such option is to progressively replace selected old high-CO2-producing generators such as brown coal plants with new highly efficient combined cycle gas generation,” it says.

Proposals of this type will have the potential to save on network charges while providing dispatchable capacity and lower CO2 emissions.

“Other options such as geothermal, nuclear and gas firming capacity for renewables may well be economic and viable in the future and need to be considered in the planning process,” the group says.

It says there are some limited benefits accruing from wind and solar during times of high output.

“At times of low wind and solar (photovoltaic) generation output, aggregate outputs still fall at times to negative, zero or near zero values despite the effects of diversity across the NEM,” it says.

Snowy Hydro also has raised a concern that even targeted zones that may contain wind and solar generation are vulnerable to prolonged wind and solar droughts.

“Germany has experienced issues with the impact of prolonged multiple consecutive days of low wind and solar,” it says.

“For instance, in December 2016 a winter high-pressure system with dense fog throughout Germany left the wind and solar generation at extremely low levels for several weeks,” Snowy Hydro says.

With about 20 per cent of Germany’s generating capacity coming from wind and solar, these variable renewable energy sources were able to generate only less than 1 per cent of the total generation mix during relevant periods in December 2016.

In 2015 in the US, California, Oregon, Washington, Nevada, Arizona, southeast Texas and Florida were among the regions reporting their lowest recorded wind levels in more than 25 years.

“The key point is without adequate large-scale storage, the effectiveness of these renewable energy zones would be greatly diminished, thereby compromising energy affordability, emissions and security and reliability objectives,” Snowy Hydro says.

Supporters of nuclear power who argue small nuclear reactors can replace dependable coal-fired power with zero emissions are struggling to get out of the starting blocks.

Legislative change is needed before nuclear can even be considered in Australia.

A Nuclear Fuel Cycle (facilitation) Bill 2017 put forward by Australian Conservatives senator Cory Bernardi is waiting to get a place on the parliamentary agenda. Passing the bill would not mean that nuclear power plants would be built in Australia but it would enable nuclear to be considered on its merits.

Sydney-based consultant SMR Nuclear Technology says modern, small, modular reactors could supply all of Australia’s needs for reliable, low-emissions, affordable energy.

“There is bipartisan support for ‘technology neutrality’ in energy policy but this cannot be effective whilst nuclear remains arbitrarily prohibited,” SMR says.

What is clear from the AEMO deliberations is that Australia’s renewable energy transition was set loose with no idea what it would look like or how it would evolve.

There remain vast differences of opinion on where things are headed — and even whether it will work.