There has to be a way to push the cost of solar 70% lower, the ARENA chief says, as surely as there are effective methods to capture and store carbon. But exporting hydrogen…?

The clean energy ocean liner is in motion. It took a while to get going and there is still some confusion on the bridge about how to steer it, but off its crashes through the waves of political friction towards a happy new world somewhere over the horizon.

Part of the enormous amount of propulsion required to get the ship moving came in the form of government funds, of course, and still does. To date, the Australian Renewable Energy Agency has committed almost $1.8 billion to more than 600 projects, with every dollar invested by the Commonwealth attracting more than three dollars of third-party funding. There is still a lot of ocean to navigate, and the agency last year was allocated an additional $1.62 billion to invest on the next generation of low-emissions technologies.

Over the past year renewables – primarily wind, solar and hydro – have made up between 25 and 30% of generation in the National Electricity Market. It’s a major achievement when compared against 2% in 2001 and 10% in 2011. But with coal still making up nearly 65% of the grid, those waves are still pushing against the hull.

“There is still a way to go before we can be confident we can get carbon out of the electricity system,” says ARENA chief executive Darren Miller. “There is more work to be done to get [solar, wind and hydro] integrated.”

Save it for later

The Genex pumped-hydro project attracted ARENA’s interest as a firmed solution. Photo: Michael Chambers.

Storage is high up the list of priorities at ARENA. As penetration of variable renewables nears 50%, storage will become ever more important. Enormous lithium-ion battery projects around the country – around 34GW announced or in various stages of planning and 800MW under construction – will help. But other solutions will be needed to store renewable energy between 6 and 8 hours, Miller says. “We’re going to need other solutions for that, as well as [to provide during] the solar and wind droughts that come around occasionally.” Events in the UK and Texas where energy supplies faltered are proof that back-up is always needed – there should be no surprise about that – “but that back-up needs to be renewable back-up,” Miller says.

There is always room for improvement in the science of renewables and even mature generation technologies are worth turning the screws on. Solar looks cheap today, sure, but ARENA is pitching for 30% efficiency (about 8 percentage points higher than today), which would see prices fall 70% to 30 cents a Watt – all by 2030.

“Unless we can get the cost of generating renewable energy right down, we can’t be cost-effective on some of the harder-to-abate areas,” Miller says. “Renewable electricity is the input into getting industry decarbonised … and making green hydrogen globally competitive.” The idea, he says, is to go beyond the target of a 100% renewable grid and turn more processes in the economy electric, lured by cheap power. “The commercial market will ultimately take over once we can get those costs down further.”

Demand-side participation

Big industry has to get wise about the role for renewables.

It isn’t Miller’s job to project manage the replacement of monolithic dispatchable plants with a legion of variable generation assets balanced by all sorts of storage, but you’d have to wonder if he’s a bit nervous the parts, including transmission, will be delivered in the right order. Not really, he says. “If we can’t have renewable storage come into the system then we’re just going to have a more important role for natural gas as the back-up fuel … providing 10-20% [of supply],” he says. “That’s just how things are going to have to be for a while longer.”

The energy system is changing from top to bottom, with the slow replacement of petrol-fuelled cars with electric vehicles, coordination of distributed energy resources such as solar and batteries and plans for electrolysers to manufacture hydrogen. The way electricity is used is as powerful a lever as supply, but industrial users have to understand their role. How can they get wise to the task and do something about it?

“We would have a cheaper and more effective system if we can be more flexible about when energy is used,” Miller says. “There is a role for using electricity when it’s available, in addition to storing it.

“If you have to store every electron and you are totally inflexible about when you use it, that’s a much more expensive proposition than being more flexible about when you run your processes and storing the remainder. That’s a lower-cost, better optimised system.”

Timing is everything

Darren Miller … “There are demand flexibility solutions right along the chain, from households to aluminium smelters.”

Households can be a part of the solution if consumers learn to respond to price signals when charging EVs or running heavy loads such as pool pumps or air-con. To do otherwise would only mean underutilised renewables and more expense on batteries and transmission, “and that doesn’t make much sense – we have to become more flexible about time of use.”

But will everyone want to play by the new rules? They should, Miller hopes, because a change in behaviour makes sense to cold economic rationalists as much as it does to all those altruists out there. Consumers may not all be engineers, but it’s “well understood that electrical processes are more efficient than combustion processes with fossil fuels”.

Energy managers of businesses or property portfolios who get wise about switching to heat pumps for air-con or heating water over the midday solar peak can make immediate savings. Solutions extend to mega-users at alumina refineries, who can move from gas to electricity and ramp up loads in sync with the sun. “There are demand flexibility solutions right along the chain, from households to aluminium smelters.”

Miller describes a portfolio approach at ARENA, where it backs technology knowing full well that all the due diligence in the world won’t shield it from experiencing the odd disappointment. In storage, the list extends beyond pumped hydro and lithium-ion batteries to flow batteries and concentrated solar thermal solutions. A compressed-air project in South Australia that didn’t attract enough financing has fallen by the wayside and only a couple of companies are working on investable concentrated solar thermal solutions, so it’s not always that easy to help these new solutions make it to market. Miller would love to “wish dozens and dozens” of new players to appear on his radar, but “we have to live with limited attention to these things … [although] there are probably no ‘bad’ ideas at this point, in terms of long-duration storage.” Gravity storage gets a mention, and flywheels for grid-balancing.

And then there is hydrogen…

Where there is hope…

Hydrogen production is likely to make more economic sense when the product is used onsite, Miller says, as the stuff is costly to export.

Whether Australia will become an energy superpower by exporting the second-lightest element on the periodic table is wide open to speculation, but that hasn’t stopped some politicians and leaders of industry from almost bragging about the possibilities. Miller is more straightforward. Yes, ARENA is interested in hydrogen as a medium of storage. It can be made using surplus solar and wind energy and stored in underground tanks, then used to replace some of the natural gas that supplies 10-20% of our electricity system. “We’ll only have an export opportunity if we can prove capabilities in Australia,” he says. “To do that you need to address a source of demand.”

Producers of ammonia and ammonia nitrate and gas networks that get on the bandwagon will be remembered as doing the country a big favour if the hydrogen story ends well. “Those are places hydrogen can be used at quite a large scale. If we can do that, the export opportunities will be open to us.”

Hydrogen boosters need to temper their pitch. The cost of compressing, storing and transporting the stuff is two or three times the cost of manufacture. “It’s by no means concluded we will be able to export hydrogen to South Korea and Japan, even though they are indicating their desire for it,” Miller says.

Nevertheless, it makes sense to push hard at solar as a lever to engineer hydrogen costs into economic reality. Australia is a leader in generating solar energy – that’s a fact – and if we can supply it well below the cost of offshore wind, say, then we have an advantage over our trading partners setting up domestic hydrogen plants. “It’s almost a little bit of a competitive arms race,” Miller says.

Catch it if you can

If there is hope about hydrogen, there is an equal and opposite despair – among the vocal general admission section of the clean energy crowd – about carbon capture and storage. For a start, they say, it doesn’t work. Next, the whole concept is a twisted way to wash away polluting generators’ guilt and keep them online to eternity and beyond.

ARENA has only recently seen its mandate expanded to include technologies that can separate and store CO2 from fossil plants’ ‘externalities’ or suck it out of the air to store underground, using industrial or biological methods. “The whole idea of net zero implies absolute zero is something that is maybe not possible – there may always be some emissions that remain,” Miller says. “Therefore, you need to capture carbon.”

It’s way too early to be specific about investment criteria for carbon capture but Miller reckons it’s safe to conclude it costs too much to think of attaching kit to coal plants. The emissions at the stacks are too dilute, he says, to make it worthwhile. Besides, coal is on the way out here and in advanced economies and maybe China, so why expend time and effort on a problem that’s going to solve itself. “We’re doing some careful thinking about what areas of carbon capture to enter,” he says.

It probably won’t be easy. Carbon dioxide is expensive to transport, so extraction should be matched to an extent with sequestration. Other solutions may turn out to be a cinch. Farmers who adapt the grazing habits of their livestock can see root systems naturally work harder at storing carbon in soil. “If done well, Australia could sequester between 30 and 140 million tonnes of carbon dioxide equivalent per annum,” he says, or between 7 and 30% of current emissions. “That’s a large opportunity. And there’s a lot of evidence showing farms that follow these practices are more profitable.”

Back in the land

The agriculture sector won’t want to miss out on the nation’s ambitions towards net-zero, he says, because it’s akin to farmers opting out of an offer to improve their businesses.

Similarly, the aluminium and steel sectors – which make up about 10% of global emissions – can comfortably see carbon levels pushed lower along the line from exploration for and extraction of ores to refinement, smelting and export. ARENA has been unbundling the supply chains of these major export products of Australia “to figure out where the big impact items are”, Miller says. Alumina production, for example, is a very energy-hungry exercise reliant on natural gas, and Australia turns out about 15% of global demand. “This is the right place for [alumina] companies to be innovating [by electrifying processes or using hydrogen], and if it can work here it can work anywhere. We can export that knowledge.”

On top of all that, ARENA was handed $193 million in this year’s federal budget to target the rollout of EV charging networks, support microgrids in regional areas and help inspire transformation towards clean energy and energy efficiency among industrial energy users. It’s all acknowledgment of the agency’s ability to turn sentiment into action, he says. “The government has given us more money and more jobs to do. And we’re pleased to be doing it.”

Until we get to net zero, he says, “we need to keep innovating”.