Mixing it up with renewables

Renewable energy sources are projected to account for about half of Australia’s electricity generation by 2049-50, according to the ‘Australian energy projections to 2049-50’, released by the Bureau of Resources and Energy Economics (BREE). Wind will be the largest source of renewable generation (21% of total generation), while solar is projected to be the second largest (16%) and is the fastest growing over the projection period. Sustainability Matters talks to Ivor Frischknecht*, CEO of the $3.2 billion Australian Renewable Energy Agency (ARENA), about the current and future trends for the renewable energy mix in Australia.

The share of renewable energy generation has been growing fairly rapidly in Australia. Currently, around 10% of Australia’s electricity generation comes from renewables, with the greatest portion of this coming from hydro at around 66%, wind 23%, bioenergy largely from sugar cane-based generation and some wood waste generation at 8% and solar 3% (although recent solar growth may not be fully captured in these statistics).

What technologies will be the winners?

There will be default technologies that provide the best economic fit but we don’t want to be prescriptive about the types of technologies that are best. The future for renewables in Australia will be a mix, each technology is potentially competitive in its own context. In the long term, wind and solar will obviously be competitive with fossil fuel-based generation and already are in some areas, but they can also complement and offset one another and provide a multitechnology solution.

Solar thermal is more likely to be competitive when you have a direct use for the heat (eg, steam for industry process or heating) or if you need to store energy as it’s much easier to store energy from heat than it is to store electricity. Solar thermal is not as well developed as solar PV, so it will require more investment and have a longer development time frame before becoming commercial.

Earlier-stage technology such as wavepower (ARENA is supporting four different wave technologies) is currently in the demonstration phase and nowhere near being commercially viable. This technology is around 10-20 years away from being viable but it could potentially be a competitive alternative to wind one day.

Geothermal is relatively valuable if you need base load-type energy. Our grid of course doesn’t currently need base load but we would not want to rule out geothermal. There may be a particular site where geothermal is the best solution, such as an island or a mine site that has a good geothermal source and needs a dispatchable base load energy.

There are also many other pieces to the puzzle that must be taken into account: What are the control systems? What are the storage systems? How reliable is the sun? We can even look at the use of longer power lines to solve peak demands. For example, we could have a solar plant in western NSW linked to central Sydney and that will give you an extra half hour to an hour of sunshine to cover the peak demands of Sydney.

We’re focused on outcomes rather than the technology. Our view is to identify the problem and then look for a renewable solution but not necessarily to specify the technology. For example, we have identified a problem around off grid, particularly off grid mines, which have been paying huge amounts for diesel energy. We are now trying to find solutions that will be cheaper for them, if not immediately, hopefully over the long term. Given the fastest growing consumer of primary energy out to 2034-35 will be the mining sector (BREE 2011 Australian Energy Projects Report), this is an area where ARENA can have a big impact.

What are the constraints and barriers?

One constraint at ARENA is that we don’t have enough money to build the capital-intensive plants; we can’t buy renewable energy. What we can do is catalyse change and try to break down the barriers so that renewable technology and solutions that are not commercially viable today become commercially viable in the future.

With the early-stage technology we are supporting, this will be in the distant future. For others, it will be in the not-so-distant future. One such example is the flat panel solar system which we believe is now very close to being commercially viable.

In Australia, the barriers for renewables have been a lack of experience with large-scale solar farms and EPC (engineering, procurement and construction) costs that are significantly more expensive compared to US and Europe, even adjusting for labour costs. Contingency costs are also a factor, as we have to allow for learning and training costs, supply chain constraints and the cost of financing such capital-intensive projects. However, as the industry becomes more mature, these costs will come down.

What about grid parity?

If you are talking about the homeowner and what we call ‘socket parity’, then we’re there. The monthly cost of getting solar energy from your roof with solar PV is currently less expensive than buying electricity from the grid. But there is the problem of having to pay the $5000-$10,000 up front to install the panels. This is an area where we can think about new business models. For example, in North America, the panels can be bought through a leasing scheme which has a similar payment stream to your electricity bill. However, instead of paying the energy company you’re paying the solar panel leasing company.

For large businesses and large-scale wind and solar farms, grid parity is not quite there yet in most situations. The costs are still higher than generating power from coal and gas. However, if you include the value of the renewable energy credit and you’re talking about building a new coal-fired power station or a new wind farm, then a wind farm has achieved that parity. In fact, in some circumstances the wind farm is cheaper even without the certificate value factored in.

A solar plant is probably about four or five years away from parity in most circumstances. However, the price of solar is coming down more rapidly than any other technology and even though wind is a relatively mature technology, its price continues to fall.

What will happen to coal-fired power stations?

The costs of a new coal-fired power station are going up because of all the emission controls and associated costs. Demand for base load energy is also going down particularly on the NEM (National Energy Market) and a lot of renewables are being put in. As a result, a number of older coal-fired power stations are being decommissioned and shut down. What we have been looking at is not only how to make use of existing infrastructure but how to make current plants more renewable and give them a new lease of life.

We have an existing project at the Kogan Creek Power plant in Queensland, run by CS Energy, which is putting in a solar thermal farm attached to the coal-fired plant to generate 44 GWh of additional electricity using the same amount of coal.

In another project, the Collinsville coal-fired power station in Northern Queensland is in the process of decommissioning and is investigating options to redevelop the site with one or more new forms of electricity generation, including solar thermal, solar photovoltaic and gas generation. The owner has been funded by ARENA and other sources to study the conversion to hybrid solar/gas while at the same time trying to re-use as much of the current infrastructure as possible, including connection to the grid, the boiler and other infrastrucuture. By doing this, the costs will be significantly reduced.

Plans for the future?

We are looking at mechanisms to make renewables more reliable and more valuable. In the longer term, we are focused on dispatchability [dispatchability is the ability of a power plant to be turned on quickly to a desired level of output] and how we can achieve this with renewables. We are thinking much more broadly than just storage, the key issue is that renewables have to be reliable and dispatchable and whether you achieve this with storage, integrated demand management or another option is still an open question.

One of the projects we are funding is the King Island Renewable Energy Integration project. Until recently, most power on King Island was provided by a single power station running four diesel generators. The project will integrate wind and solar energy and energy storage to provide both base load and peak power. A key feature of the system is the diesel uninterruptible power supply that allows existing diesel generation to be shut off during high wind periods. A trial will also test biodiesel use with one of the existing diesel engines. This is an important project that will provide a working, replicable example of high-penetration renewable energy power, for both grid and off-grid.

The Regional Australia’s Renewables program is a new initiative that has just passed the consultation stage. It aims to demonstrate the viability of renewable energy in regional and remote locations and is mainly looking at diesel fuel replacement, which is costly in these areas.

Our existing Emerging Renewables Program is constantly evaluating new technologies and new programs are on the way. ARENA is also flexible and has the capacity to pursue strategic one-off projects.

ARENA was established on 1 July 2012 as an independent statutory authority tasked with the objectives of improving the competitiveness of renewable energy technologies and increasing the supply of renewable energy in Australia. Grant funding is available through ARENA for investment in the research, development, demonstration, deployment and commercialisation of renewable energy and related technologies. Further information is available at www.arena.gov.au.

*Ivor Frischknecht commenced as ARENA CEO in August 2012.He brings experience as former Investment Director of Starfish Ventures, which is a venture capital firm that manages $400 million primarily on behalf of Australian superannuation funds. His key activities included responsibility for the firm’s cleantech investment activities, including renewable energy.