Wind and solar power, and their place in the energy mix, are at the epicentre of the upheavals in Australia’s power industry.
And while Prime Minister Malcolm Turnbull and US entrepreneur Elon Musk have trumpeted a range of quick fixes, the turmoil is far from over.
Jon Stretch, managing director and chief executive officer of ERM Power, sees the controversy over renewables as partly a problem of misplaced expectations.
“The overwhelming communication around renewables has been that it is the cheap and sustainable option,” he says.
Many are just beginning to understand that renewable energy cannot be directly substituted for power from coal and gas-fired generation.
As well, during the transition period, the volume of conventionally generated power is diminishing faster than equivalent amounts can be created from renewable sources.
Nonetheless, Stretch argues, “we have a Renewable Energy Target for critical environmental reasons – we want to decarbonise the energy sector.
“Strategically this is going to be the most exciting thing. But we have to get there over 20 years. Those who try to solve it tomorrow will find there’s no simple solution.”
Australia’s RET sets out the goal that by 2020, power generated from renewable sources will amount to 33,000 GWh and 23.5 per cent of national energy consumption.
To encourage progress towards that target, renewables are subsidised through the trade in Large-scale Generation Certificates (LGCs), which are created by large-scale renewables plants and sold to distributors and retailers.
“A commercial and industrial user has to pay an additional 12.5 per cent of its energy bill in order to purchase LGCs,” says Stretch.
“So, if you’re running a renewable generation plant, you not only get the price of selling into the market, you also get the subsidy.
“Consumers spent almost $3 billion subsidising renewables in 2015-16, so a funding stream already exists to support the shaping of a reliable system around renewables.”
That’s a good thing, he says. “But the unintended consequence is that it forces coal-fired and gas-fired power stations to stop operating, and they do provide a really important part of the energy mix.”
There are many complex reasons why renewable energy cannot be directly substituted for power from conventional fuels.
“Probably most challenging for the energy market is that renewable energy – solar, wind – simply doesn’t work when it’s not sunny or windy,” Stretch says.
The predictable cycle of day and night, and the less predictable weather, mean that four 50MW wind or solar farms do not equal a 200MW coal-fired power station, which can run 24/7.
Integrating energy from renewables into the power system also involves technical challenges.
The conventional power generation system – for all its hulking plants, statuesque cooling towers and high-voltage transmission lines marching across the countryside – is as delicately engineered as a Swiss watch.
The Australian power system grid runs at a frequency of 50Hertz (3,000 rpm). Every conventional generator consists of synchronous machines that need to be spinning at precisely this speed before they can join the grid.
Once set spinning, a generator tends to keep going at the same speed until an outside force slows it down (a property known in physics as inertia).
Wind and solar energy, however, are unable to contribute either frequency or inertia to the grid, and integrating their output requires extra layers of technology.
“There’s a range of exciting technologies in front of us, but they aren’t all yet mature or economically viable,” says Stretch.
Future consumer behaviour is just as difficult to forecast. Total demand for power from the grid could rise, as people start using electricity for heating, where they once would have used gas, and for charging electric vehicles.
Or it could fall because of power-saving devices, battery storage, and “virtual power stations” based on community generation and pooling of power.
It’s also possible that total demand could fall but peak demand could rise, if consumers go off the grid for their daily needs but tap in en masse during extreme events because their home-based generation systems aren’t adequate.
“We’ve got a couple of years of high prices in front of us, then if the right policies are put in place we’ll see that start to moderate,” says Mr Stretch.
“The government has realised it’s not just about the environment. There needs to be an appropriate balance with affordability and security.
“But it’s a national problem and it needs a national solution. We need enduring policies that bring together the whole of government, federal and state, and provide predictability for business to encourage investment.”
*Article as published in the Australian Financial Review on 29 March 2017