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Energy costs: Business-As-Usual No Cheaper Than 100% Renewables?
By Giles Parkinson on 5 August 2013 The Australian government quietly released the final version of the 100% renewables scenario prepared by the Australian Energy Market Operator on Friday – a report commissioned by The Greens but which has been shrouded in controversy over the way it was managed. The Greens wanted two questions to be addressed by the AEMO report: firstly, is it possible to achieve a 100% renewables scenario by 2030 or 2050. And secondly, how much will it cost, and how much that compares to business as usual. The answer to the first question was – yes, it can be achieved. And that is a crucial development. Even through the report is, as it admits, very hypothetical, it is an important first step . The difficulties with transforming to a low carbon future are mostly economic, rather than technical. The answer to the first part of the second question is between $219 billion and $332 billion over 20 or 40 years, according to the AEMO figures. But it is an unsatisfactory answer because it does not include elements that could make it more expensive (grid upgrades, land acquisition, closure of incumbents), some whacky technology cost estimates (the predicted 2050 cost of solar exceeds what most other countries are already achieving in 2013), and because it includes no comparison with business as usual. Just to add a little context, network upgrades in the last five years have totalled around $45 billion) The comparison with business as usual is the crucial element, because between 2030 and 2050, all current generation will need to be replaced. If the likes of Bloomberg New Energy Finance are right, then solar and wind are already cheaper than new coal and gas, and could account for 46 per cent of generation by 2030. As the ANU’s Andrew Blakers pointed, a simple cost substitution could see fossil fuels replaced by renewables by 2040. The fact that the AEMO was instructed not to consider cost comparisons with fossil fuels suggests the government was uncomfortable with such conclusions. But we know the answer anyway. AEMO tells us that the wholesale price of electricity will range from $111 to $133/MWh depending on the scenario – getting to the target by 2030 or 2050, and depending on the rate of economic growth and energy consumption. That figure is twice the current wholesale price of electricity, which sounds scary. But what is not considered is the price of new fossil fuels, and the impact of a carbon price – which between 2030 and 2050 could be significant if the world is serious about tackling climate change. AEMO says new transmission network infrastructure would add another $6-$10/MWh. The Greens note that the wholesale price of electricity by 2030 is expected to be around $110/MWh anyway, according to Treasury estimates, on a largely business-as-usual government policy scenario. The impact on consumer electricity prices would be an increase of between 6.6c/kWh and 8.5c/kWh, AEMO says. That’s about a 25 per cent increase, less than the increase experienced by most Australian consumers as a result mainly of grid upgrades in recent years. Missing from the AEMO equation is the extent to which network business models may change with the proliferation of rooftop solar and storage, and the migration to a predominantly distributed rather than a centralised model. That’s not surprising as no-one knows how that will pan out, although various studies point out that distributed generation will save billions in avoided transmission costs. As for what mix is envisaged in the AEMO document, it suggests that no single technology will dominate the fuel mix, and it suspects that it will rely on a significant amount of biomass that could drive open cycle turbines to fill in the “weather gaps”. It notes that biomass will not compete with food crops, but could compete with other industries such as timber. And here is a rough guide as where some of these technologies might be sited. AEMO says between 2,400 to 5,000 square kilometres of land will be needed, although some of that will be dual-use, as wind farms operate happily with existing farming activities. In practice, RenewEconomy would assume there would be more “distributed” generation closer to demand than is indicated here. Finally, here are the cost estimates. Again, solar seems to get a raw deal from AEMO estimates, as the solar thermal estimates seem way ahead of expectations, and the solar PV estimates for 2050 – for rooftop PV and utility scale PV – is what is already being achieved in many European countries, according to a recent report by Deutsche Bank. The cost of utility scale solar in Australia is likely to fall dramatically once the plants actually get built, and the costs of maintenance, construction and finance fall. Continue reading
MEPs Approve Proposals To Reduce Biofuels Emissions
Influential Environment Committee backs cap on crop-based fuels and moves to include indirect emissions in EU directives By Will Nichols 11 Jul 2013 EU parliamentarians have approved proposals to limit the contribution of conventional biofuels toward its green transport targets, in a move producers labelled “complex and ineffective”. MEPs in the influential Environment Committee (ENVI) voted 43-26 – with one abstention – to set a cap for fuels made from food crops at 5.5 per cent and include emissions arising from indirect land use change (ILUC) factors such as clearing of forests, wetlands or grasslands in the Renewable Energy Directive and the Fuel Quality Directive when calculating official emissions impacts. The commission had already proposed a five per cent cap, roughly equating to current levels, but the EU Industry, Research and Energy Committee (ITRE) said last month this should be raised to 6.5 per cent and recommended ILUC factors not be included until the methodology for measuring indirect emissions is more reliable . The cap is designed to accelerate the development of so-called second-generation biofuels, which derive from materials such as waste, agricultural residues or algae, which in theory do not compete with food production but have yet to reach industrial levels of production. The Committee approved proposals that such advanced biofuels should account for at least two per cent of overall consumption by 2020 and, to boost the market share of electric vehicles , electricity produced from renewable sources should also account for two per cent. Green groups have blamed biofuel production for rising food prices and point to a number of research papers that suggest ILUC emissions mean that some forms of biofuel, particular biodiesel made from palm or soybean oil, are worse for the environment than the petrol and diesel fuels they are designed to replace. However, producers argue the science around ILUC calculations is still in its infancy and that the EU should not undermine a £14bn industry on such a premise. Moreover, they argue there is a real threat the EU will not be able to meet its goal of using 10 per cent green energy in transport by 2020 by effectively ruling out 80 per cent of EU biofuels, and warn that by changing the goal posts the move could deter investors in next-generation fuels. Kåre Riis Nielsen, director of European affairs at Danish company Novozymes, which manufacturers enzymes for both first- and second-generation producers, branded the proposals “a complex and ineffective package”. He said the proposals in the ITRE report would be a better way of promoting the best performing biofuels while addressing ILUC issues in a “practical manner”. “Limiting the share of conventional biofuels to 5.5 per cent prevents further growth of the industry and ignores the strong contribution conventional ethanol makes to decarbonise the transport sector even when ILUC is accounted for,” Nielsen said in a statement. “The ENVI Committee has ignored the opinions provided by other Parliamentary Committees… that recommended a more balanced approach allowing conventional biofuels to develop sustainably while incentivising further innovative advanced biofuels. “Today’s vote fails to provide the needed long-term and stable policy framework for industry and investors and would jeopardise the future of best performing biofuels including advanced biofuels industry.” Kenneth Richter, biofuels campaigner at Friends of the Earth, gave the measures a cautious welcome, but argued that they represented a “timid step” when bolder action was required. “The introduction of ILUC factors is an important decision to ensure that only biofuels that benefit the climate are being supported,” he said. “But it’s disappointing that the committee has not set a trajectory for phasing out the use of food for fuel, but instead chose to cap it at a level that is even higher than current use. “It’s crucial that when the parliament’s plenary votes in September, it must not further water down the current proposal.” Giuseppe Nastasi of ClientEarth, was equally circumspect, arguing a five per cent cap is still too high to prevent ILUC emissions, “Moreover, MEPs voted to subsidise some advanced biofuels made from environmentally dangerous materials such as industrial and municipal waste (with the exception of a few waste streams), plus forestry and agricultural residues whose use endangers biodiversity and soil fertility,” he added. “This will have to be corrected by Parliament on 10th September.” However, Nusa Urbancic, clean fuels manager at campaign group Transport & Environment, said the proposals would promote the production of “genuinely emissions reducing transport fuels” including advanced biofuels and renewable electricity for electric vehicles. “It is encouraging to see that MEPs in charge of protecting our environment finally addressed the elephant in the room by fully accounting for indirect emissions in the EU biofuels policy. This vote will pave the way for truly sustainable transport fuels, which actually reduce emissions , as of 2020,” she said. “The full European Parliament now needs to uphold in September the science-based decision made by the Environment Committee. Otherwise, public support worth at least €10bn a year will continue to be wasted on harmful biofuels that in many cases pollute twice as much as conventional fuels.” Continue reading
