A panel at the Australian Clean Energy Summit covered all the rocky ground that lies ahead as renewables inevitably crowd out coal.
- Kane Thornton (chair), CEO, Clean Energy Council
- Dr Kerry Schott AO, chair, Energy Security Board
- Dr Alex Wonhas, chief system design and engineering officer, AEMO
- Catherine Tanna, managing director, EnergyAustralia
- John Titchen, managing director, Goldwind
Everyone longs for guidance from on high when times are tough, but the Australian renewables industry knows by now it’s too much to expect a guiding light from Capital Hill any time soon. Parliamentary confusion about clean energy is entrenched. Asked by the CEC’s Kane Thornton whether the National Energy Guarantee, for example, was on life support, Kerry Schott of the Energy Security Board said energy policy overall probably requires “severe intervention”. “I’m not very optimistic about making progress on that front any time soon,” she said, before airing some optimism about reliability obligations and advances among the states. “While we don’t have a national integrated emissions and energy policy, regrettably, it’s not that nothing’s happening.”
Goldwind’s John Titchen said the dramatic fall in costs over the life of the Renewable Energy Target means some projects can be expected to progress without incentives. “It’s uncertain what will be achieved if we don’t have a target,” he said. The issue is not so much deciding on a mechanism but simply deciding to do something. “The key is, don’t take too long debating mechanisms endlessly.”
Policy certainty leads to good outcomes, said EnergyAustralia’s Catherine Tanna, and the mechanism does matter. “I don’t think subsidies are needed any more,” she said. “And I don’t think it’s the right path for taxpayers to take on risk that private investment isn’t prepared to take on.” The states might have the best intentions, but who’s to benefit if they crowd out private investment and take on risks they don’t understand, she said. “We can find ourselves with a new world of pain in coming years.” In her view, the next wave of investment needs to be in flexible capacity: pumped hydro, fast-start gas, demand response and batteries at scale.
It’s crystal clear
Thornton raised the lurching nature of government influence over recent years: threatening to force AGL’s hand on Liddell, all this talk of a “big stick” to instil obedience in the incumbents. In Tanna’s mind, however, there are no distractions. “It’s crystal clear: we need to get millions of tonnes of carbon out and keep prices affordable.” The system needs to be kept stable as coal stations are retired – that’s the challenge. “I don’t think the big stick is the way to get there,” she said.
Consumers deserve a co-ordinated response that balances capacity with flexibility. “It makes absolutely no sense to be building large-scale renewable utilities that cannot be dispatched,” Schott said. Politicians are drawn into the fray when they suspect retailers are pulling strings to keep prices high. “If you look at the retailers in this sector, they really have behaved quite badly,” she said, concluding that their future is “questionable” as distributed energy resources become a part of consumers’ lives. Tanna conceded retailers played a part in the “confusopoly”.
Smaller and more of it
As new generation pops up all over the country like an outbreak of measles, the grid is being asked to perform a far harder task than it was designed for. AEMO’s Integrated System Plan suggests ways to strengthen the NEM as renewables fill the grid, and Alex Wonhas was eager to supply an update. “We see a huge opportunity to do more about distributed energy resources [DER],” Wonhas said, hinting that a blossoming number of smaller systems nationwide, including rooftop, is an easier problem to solve than the queue of large-scale plants. In Western Australia he said the rapid uptake of solar brings a threat of curtailment unless inverters are reset. “Those issues are manageable,” he said, underlining the role of DER. “We need the right standards in place … and that will get us a quarter to half of the journey there.”
There is so much solar in some parts of the country that midday demand can go negative, said Schott. “We’ve got to work out how to control that,” she said, going on to mention the possibilities of community batteries rather than units tied to households. “It makes it easier for the distributors to use them in an efficient way.” Distributed storage sounds good to Wonhas in any form, so long as data are made available and incentives encourage cooperation among owners and retailers. “Then we can unlock capacity we desperately need to make the energy transition work.”
Schott needs convincing. “We’re living in a dreamworld if we think more than a handful of people are interested in what’s happening to their battery,” she said. “They just want the thing to work.” If product providers or retailers make that easy, and offer a good deal for access to storage, then good.
Painful, not smooth
Households and businesses are increasingly working things out for themselves, by installing solar or buying clean energy directly, but some investors in large-scale projects have felt the pain from delays in connection or revenues struck down by marginal losses. Wonhas grimaced as he admitted the grid-connection process and marginal loss factors are evidence the transition to clean energy “isn’t at all smooth – it’s actually very painful”. There are things AEMO could do better, he said, pointing to rules about confidentiality of modelling that if revised would allow developers a much better idea about project success. But even then, he said, there’s no overlooking the physical challenges in the system. “Two out of three applications we are seeing are in very weak parts of the network,” he said. Instead, why not have a plan for how many renewables are required and then build and repair the system to accommodate them in a cost-effective way. “That’s what we are trying to do with the Integrated System Plan,” he said.
Titchen wondered how it’s come to pass that the industry has arrived at this state of congestion to satisfy a government target set well in the past. “Personally, I feel there was a lack of belief that … it was actually going to happen, because otherwise you would plan how to technically integrate,” he said.
World War III
The Australian Energy Market Commission is proposing changes that would deliver developers far greater certainty about selling generation into the market, and Schott predicts it will “start World War III”. “The battle between the incumbents and the new arrivals has been had before,” Schott said. “The new arrivals didn’t win, but I think this time they probably will.”
Owners of coal plants may choose to retire them early if they are rendered non-commercial by renewables, she said, and so much zero-marginal-cost power is already entering that investment is being affected. “We’re in danger of having capacity market wars in the same way we’ve had climate change wars.”