Renewables – a visual primer

Johnathan Holmes has done another excellent 4 Corners program on energy and greenhouse issues, this time specifically on renewable energy. If you have a decent internet connection, the whole thing is viewable online, and if you’ve got a spare 45 minutes I thoroughly recommend it (and, indeed, the other programs he’s done on energy issues).

Television is not the greatest medium for discussing complex engineering and financial issues, but Holmes has given a nice survey of the potential, and the challenges, facing the sector.

For those who have been following this issue for a while, the technical highlight of the show was perhaps the discussion of solar thermal power, something that has come up a lot here before in discussions and one that deserves a post discussing the technology in more detail. Solar thermal power is the very simple idea of using mirrors to heat up something (usually a tube containing a liquid) which can then be put through a steam turbine to produce power. There were a number of bold claims from the director of Solar Heat and Power that their solar thermal power system will produce power at a cost competitive with coal-fired power very soon, and supports large-scale heat storage so the system can continue to produce power for 24 hours without direct sunlight (solar thermal needs direct sunlight to trap heat – if it’s behind clouds it simply doesn’t work as the diffuse light cannot be focussed on the collector).

Holmes, moreover, leads to the big question facing the renewables sector in the next few years. Emissions trading is almost certainly coming soon. However, the renewables sector (or at least the head of the renewable energy generators association here) claims it will require specific assistance, in the form of higher government mandated targets for renewable energy, if it is to expand. If there is no expansion of the MRET, even with an emissions trading scheme they won’t be able to compete.

If the claims of the geothermal energy and solar thermal people pan out, they shouldn’t have any problem competing in a carbon-constrained energy market. If they can’t, well, isn’t the point of the exercise to cut carbon emissions, not build renewable energy systems for the sake of it?

Disclosure: the 4 Corners program above made the writer a couple of hundred dollars richer. His Geodynamics shares went up a fair bit today…

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Posted in environment, Technology
39 comments on “Renewables – a visual primer
  1. Kieran says:

    I rarely watch 4corners as much as I should. Thanks for the tip, I’ll definitely be watching the repeat.

  2. hc says:

    Robert, I thought the claims regarding both solar and geothermal were very strong. Presumably the viability of each depends on the carbon price once it is set.

    I think there are two possible arguments for subsidies. One is just a learning-by-doing type of research argument – the Minister seemed to be getting a bit exasperated with this one. The other is that capital markets might not undertake the investments required if they believe oil prices will sag in the future. If this sounds fanciful recall it has happened many times in the past.

    I still think the nuclear option looks attractive given the much lower land requirements than solar. On Geothermal – it seems to me Geodynamics might prove a good punt! It is interesting that electricity from this source would probably connect to the grid via Roxby Downs!

  3. Harry, oil does not play a major part in power generation; it’s all about natural gas or coal.

    Natural gas does, however. That said, it’s hard to see natural gas prices dropping much in Australia, given that local supplies on the east coast are beginning to dwindle, and that global gas prices are much higher than they are here.

    With regards to the technology development issue, I think the Minister actually has a point. Wind turbines are a reasonably mature technology now, as far as I can see.

  4. tim says:

    Robert, agree it was indeed a solid program. I agree with the majority of what you say, but fundamentally disagree on the final point, that emissions trading should be enough and if renewables can’t compete, then they can’t compete.

    It comes down to a question of using economic instruments, which encourage lowest cost emissions reductions in the shortest timeframe, to achieve a major infrastructural shift. The point is, no new energy generation capacity with low to zero emissions, be it renewables or gas or even coal with geoseq (should it be demonstrated to work), can compete with coal unless the price on carbon is tremendous. Such a price, I believe, would be economic nonsense.

    Renewables need support now so they can develop to the point where they can compete directly. As Holmes and Susan Jeanes, the renewables industry rep you referred to, pointed out, probably the biggest barrier to renewables entering the market is that the current energy distribution networks are based around coal reserves, and has been built decades ago by governments. Now, the renewables developers are expected to pay for new distribution infrastructure themselves, an imposition which dramatically increases cost.

    We need a cost on carbon to get industry moving in the right direction, particularly with energy efficiency and investment patterns. However, if we are to really develop a new energy infrastructure, we need specific support mechanisms to make it happen.

  5. steve says:

    The most significant exchange on costs was the Minister for Merchant Banking being interviewed by Tony Jones in this exchange on 15/02/07:

    TONY JONES: You would know this, though, that the experts’ rule of thumb – and I’m talking about the experts working on the technologies here in Australia – the rule of thumb is that, under the post combustion technology, power at the generator will be double the cost, when translated to consumers, that would be a 30 per cent increase in the cost of power. That’s the situation as it pertains now, if we can actually do it, is that right?

    MALCOLM TURNBULL: Well, look I’m not arguing with you about those quotes. I’ve seen a variety of quotes, that’s one of the higher ones. But I think the point of supporting these projects as demonstration projects is that, over time, the cost comes down. Every technology, doesn’t matter whether it’s solar panels, wind turbines, any form of energy technology, becomes cheaper as people learn more, as you build more of these units, and, over time, the costs come down. Now, the critical thing is to get it started.

    TONY JONES: As far as the experts are concerned, the costs could come down to 15 per cent more for consumers, as opposed to 30 per cent. That’s their rule of thumb, what they’re working on. Are you prepared, as a Government, to explain to people why 30 or even 15 per cent extra on their power bills is something they’ll have to face?
    full link here

  6. Tim, where I would disagree is that if the costs are going to be “tremendous”, they’re going to be “tremendous” either way. The question is whether the price of our power goes up because of carbon charging, or whether it goes up because of MRETs, or both.

    Even though I fully understand you might not like geosequestration and nuclear, you are also discriminating against other technologies which might do the job cheaper with the MRET – notably, energy conservation, microgeneration where the result isn’t sold back onto the grid, displacement of electricity by gas and solar heating, and natural gas (which, compared to brown coal, is a greenhouse miracle).

    What supporting an MRET does is actually push up the price of meeting greenhouse reduction targets by mandating a subset of technologies which may be (in fact, almost certainly are) more expensive than the alternatives.

    The counterargument is that the MRET is in some ways an industrial R&D fund – however, won’t putting a cost on carbon similarly spur innovation?

    Tim, a question for you – how much of your support for renewable energy is about the belief that renewables will result a more decentralized energy grid less dominated by multinational companies?

  7. Chris says:

    TONY JONES: As far as the experts are concerned, the costs could come down to 15 per cent more for consumers, as opposed to 30 per cent. That’s their rule of thumb, what they’re working on. Are you prepared, as a Government, to explain to people why 30 or even 15 per cent extra on their power bills is something they’ll have to face?

    I don’t think a 15-30% increase is as bad people might first think for the domestic consumer (certainly not “tremendous”). I would guess that most households could quite easily cut their consumption by that much to compensate. And a carbon tax could help subsidise the poorest section of the community who are unable to do so.

    One concern about the geothermal wouldn’t just be about having to build the infrastructure out to the middle of nowhere, but also about the amount of energy lost in transmission. What does the cost of electricity become when you start to take that into account as well?

  8. Energy loss in transmission is less dramatic than people think, thanks to HVDC transmission.

    The major cost is the capital and maintenance cost of the transmission lines. Some idea of the costs may be gained from the proposal for a South-east Queensland-Darwin transmission line, which was some 3000 kilometres long and would have cost around 1.3 billion dollars, apparently.

  9. observa says:

    Slightly off topic but here’s the logical end result of quantity controls http://www.smh.com.au/news/environment/carbon-credit-debate-gets-personal/2007/04/17/1176696838699.html
    The quantity control freaks like Carr, as opposed to the carbon taxers, are clearly getting logical cold feet over Kyoto type cap and trade systems, whereby they have to hand out the permits to big corpora to make their ideological position work. The only alternative is Carr’s administrative nightmare. Finally the penny should be dropping about where these communards are really at for us all.

  10. observa says:

    “Every time you buy fuel at the garage or pay a gas or electricity bill or get on a plane, carbon will be deducted from your account.

    “Let me say very quickly there are a lot of difficulties with this idea, a lot of difficulties of treating people who live in rural NSW and have to travel by necessity long distances by motor vehicle the same as someone who lives in the city and has access to public transport.”

    Not to mention what sort of carbon credit a company sales rep gets to fill up the company car, or the Observa gets to split between business (serving others)and personal use. Sweet Jesus and we’re going to be led by these quantity control freaks.

  11. Observa: I agree. Such a system would be an administrative nightmare. Happy now?

  12. observa says:

    Robert, I just have to keep to keep telling myself over and over again- He’s Howard with Hair and he’ll keep em all in line.

  13. observa says:

    Good God! Carr’s got me stuttering on the keyboard.

  14. Dalek says:

    There was some very special pleading in that program, so beware.
    That said, it was a useful synposis. Are we all aware that the coal industry has enjoyed, and continues to enjoy massive subsidies for infrastructure; roads, ports, railway lines; and entire towns, roads etc.
    Two of the generators in Queensland get their cooling water from the Brisbane supply at mates rates. The list goes on and on.
    Australia has an old decaying electrical distribution asset that is basically 60 years old and not really coping. Guess who is asking for grants to fix it? There is a very good finacial case to be made for the mandatory installation of PV on the roof of every new home in OZ as well as certain energy efficiency measures.
    Dalek

  15. tim says:

    Robert, in answer to your direct question: “how much of your support for renewable energy is about the belief that renewables will result a more decentralized energy grid less dominated by multinational companies?”

    None at all.

    My support for renewables is due to my desire for energy generation that has minimal environmental impact. Neither coal with geoseq nor nuclear can provide such a thing. Same goes for large-scale hydro, very large scale bioenergy cropping, tidal power in insensitive siting, etc.

    I would have thought that my explicit support for centralised solar thermal and geothermal would indicate that I’m not a decentralised energy freak. I like the idea, sure, but I think that large-scale centralised renewables are the way to decarbonise our energy generation fast.

  16. steve says:

    Robert, seems to be a cached version of the ABARE report the Minister was referring to here. It is setout in such a way as to be difficult to read but the chapters I have read so far are intriguing.

  17. Dalek, no there isn’t.

    You can easily price such a system yourself. It very quickly becomes clear, even when you compare it to buying green power, that it’s not something you’d do for financial reasons at the moment.

  18. tim says:

    I guess my point, Robert, is that if we are to cut emissions deeply and steeply – say by 30% below 1990 by 2050 as the EU is heading towards if others come on board – a simple cost on carbon is too blunt an instrument to do that. The serious danger is that it would plunge the economy into a deep freeze as people search for the cheapest short term way of reducing emissions – reducing economic activity.

    The best medium term to long term solutions to climate change are not necessarily the ones that are cheapest today. I believe there is a role to played by deliberately picking winners and helping them break into the market to start replacing coal.

    And, by the way, as I have previously posted here, I think, I don’t actually think MRET is the best option. It is also a terribly blunt instrument, favouring only the cheapest renewables (wind and solar water heating), but not the solutions that can make the biggest impact on emissions in the medium to longer term. For my part, feed-in laws are the ultimate.

  19. tim says:

    For some reason my previous comment seems to have disappeared…

    As near as I can reconstruct, I said, in response to Robert’s direct question: “Tim, a question for you – how much of your support for renewable energy is about the belief that renewables will result a more decentralized energy grid less dominated by multinational companies?”

    None at all.

    My support for renewables is based purely on my belief that energy inffrastructure, like anything, should have the smallest environmental impact feasible. For mine, that rules out coal with or without geosequestration, uranium, gas, large-scale hydro, large-scale bioenergy cropping, tidal in insensitive areas, etc.

    I would have thought that my very loud support for large-scale solar thermal and geothermal would demonstrate that I am not a decentralised energy at all costs kind of guy. I certainly like the idea and think it has a lot to offer. But the best and fastest way to decarbonise energy generation is to replace coal with centralised renewables.

  20. Chris says:

    The serious danger is that it would plunge the economy into a deep freeze as people search for the cheapest short term way of reducing emissions – reducing economic activity.

    Is reducing economic activity the “cheapest” short term way for most businesses though? For example for many technology based companies, server consolidation through virtualisation in many cases would be a much better alternative than doing less work. There’s a lot of computers out there doing absolutely nothing most of the time. And in these sort of cases, it increases economic activity as companies invest in new technology.

    The best medium term to long term solutions to climate change are not necessarily the ones that are cheapest today. I believe there is a role to played by deliberately picking winners and helping them break into the market to start replacing coal.

    The trouble I have with picking winners is there is no one out there that I’d trust, not to be swayed by ideologies or their personal financial investments. Eg picking “clean coal” because they’re backed by mining companies or opposing nuclear on a reflexive fear, rather than through experience and knowledge.

    A gradual increase carbon taxes (and the future increases should be known well in advance) should not lead to panic reductions and allow people to invest in new technology. Is a 30% reduction over 40 years really that significant?

  21. What kind of bizarre carbon trading market, or carbon taxation scheme, are you envisioning, Tim?

    Sure, imposing drastic cuts in a few years might cause a recession, but if you gradually tighten the screws over the next few decades according to a publicly-known plan there will be plenty of scope, and incentive, for transition to new and better long-term technologies.

  22. By the way, 30% over the next 40 years almost certainly isn’t steep enough. We’re looking closer to 60% cuts by 2050, or even 80%.

  23. tim says:

    Sorry, to clarify, Robert, I actually intended to type 30% by 2020. The EU have recently committed to 20% cuts on 1990 levels by 2020 and have publicly stated that, if others join them, they will up that to 30% by 2020.

  24. observa says:

    It would be quite feasible to raise carbon taxing whilst at the same time reducing other taxes such as income tax. Although reducing income tax would to some extent ameliorate the price increase, there would nevertheless be a substitution effect which would be largest for the worst emitting types presumably(eg coal). This process could be ramped up or slowed down to suit the overall ability to adapt. OTOH, it’s clear that Kyoto quantity caps have failed dismally to date. Simply everyone realised the threat of caps and fudged the starting point accordingly. How much simpler would it have been to get agreement on the phased increase in carbon taxes across the signatories and implement a minimum agreed level of tax immediately?

  25. swio says:

    I recently changed my electricity to 100% renewables. When researching it I was struck by how cheap renewables actually are. We have gas hot water and cooking and live in a unit so our electricity costs are lower than normal, but still, the price was about an extra 5c a kilowatt hour over the normal 12c rate. That works out to an extra $50 a quarter for a two person two bedroom unit, or about $6 a week per person, $2 billion a year for the whole country or about 0.3% of GDP. These are relatively pretty small numbers here. Most Australian’s can afford this kind of change pretty comfortably. If nuclear works out to about the same sort of cost it looks like we could cut our emissions drastically for a very reasonable amount of money.

  26. Brian says:

    Robert, Flannery also has shares in Geodynamics. I don’t, for two reasons. One is that I usually invest in well-established companies that consistently pay dividends.

    The second reason is that I’ve learnt by experience that it takes more than a good idea to make a successful company.

    I don’t want to be negative about Geodynamics, because I haven’t researched it as a company. In general terms I’d see it at the risky end of the spectrum, so wouldn’t put much into it. If it goes, though, it could be very good indeed.

    Steve, there’s a pdf copy of the ABARE report here. I hope to comment on it in a later post.

    I friggin’ went to sleep the other night, I think as soon as MacFarlane came on. I saw enough of the pics. I’ll read the transcript before I comment further.

  27. philip travers says:

    Most of the writers here are obviously in the comfort zone about all this.Dalek said something that was good then he muffed it,cosmic muffin style.Look be participators rather than investors,commentators or observers.If the grid is sinking all hands on deck,Australian innovation may not even need speculative capital but workers working and solving problems as they emerge.You cando a lot with all sorts of wire and steel mesh,including blowing new types of concrete through it around existing poles,or ancient rusty steel pylons.Timber is still a goer,benignly harvested and waste duly considered along eco lines.Plastic mobile extrusion machines.Blow a problem away by filling in the mold ,the mold being part of the problem.Take my advice,think,And participate,find the companies you want to invest in,then go do the labor.This is The new IR people opting out of the office to try physical work,because they are making a killing by working that which they have shares in.Unfortunately it is all to new,like the problem as a adult,of everyone thinking someone else was born yesterday.Rail systems can have solar panels on them ,and just move off the rails to allow the coal train to pass.A full on extractive coal industry isnt the enemy of any other technological development.The problems with coal has been its damage via emissions,rail and jobs and towns and water use are all symbols of the need for greater ingenuity not less,in the coal industry.To know your alternatives is fine,but to know your stuff doesnt require a decision that imperils others livelihoods.

  28. Brian says:

    observa, Peter Christoff, Coordinator of Environmental Studies at the School of Social and Environmental Enquiry at the University of Melbourne made an interesting comment on carbon trading the other day. Following Phillip Adams’ lead, he said that we were “mesmerised” by carbon trading and other measures such as taxes should also be considered.

    He said that the EU system may eventually cover 45% of emissions. He said that credits and trading were more suitable for stationary generation, such as the grid, possibly for transport, but hopeless for diffused emissions like you get in agriculture.

    He and his mate Tim Bonyhady were very strong on the need for targets to set a framework for policy. They said that there was a draft of the PM’s working party floating around that had a “dangerous silence” on targets.

    BTW in the transcript of the Four Corners program Garrett gives a definite “yes” to both carbon trading and mandatory targets for renewables.

  29. Without turning this into a stock market discussion board, I’m well aware that Geodynamics stock is a high-risk punt.

    But that’s OK, I have other much more boring companies in the portfolio as well 🙂

  30. observa says:

    Brian, you just look at the problems with cap and trade and the compromises you need to make for administrative simplicity and it quickly lacks attraction. Carbon credit cards for all or trying to impute carbon content in everything has to give anyone admin nightmares as well. Now to get serious with carbon taxing and get real substitution will take some serious price hikes. The extreme would be to imagine a constitutional marketplace that taxes only carbon, but that’s immediately too radical and you quickly jump to the logical next step, that other resource use should be taxed as well to aid their conservation. If you make using new resources costly then clearly we will naturally conserve and reuse and recycle. Quality not quantity becomes more imperative.

    Now to get really serious with such taxing you would want to drop income tax completely(and indeed others like payroll, stamp duty GST and the like). After all when you think about early feudal times, income and consumption were almost synonymous. eg how many sheep, cows, bushells of wheat produced and what proportion of that was due to his lordship. That is a far cry from the 10000 pages of income tax act nowadays to try and pin down the income earning entity and exactly what that income is. Much too hard, compared to resource taxing. So, if the left are prepared to give up income taxing to enable serious resource and cabon taxation, what will they want in return?(especially considering we all need to take a cut in material well being presumably to save our planet)Or are you all entirely satisfied that resource and carbon taxing would do the trick, equity wise? After all there’d be a fair bit of equity in the carbon tax component surely?

  31. swio says:

    Swapping carbon taxes for the removal of existing taxes sounds like a very reasonable idea. The left has much less of an interest in removing existing taxes than the right, so perhaps the its natural to expect the right to suggest a priority list of which taxes should be removed first and then with a bit of luck we could get some sort of bipartisian consesus on what that swap should be.

  32. Brian says:

    I really don’t know what the best strategy is. At the moment I’m favouring a tax and subsidy approach on the analogy of what I heard about Vancouver traffic recently.

    Instead of building freeways they whacked on a congestion tax on motor vehicles and put all of the proceeds into public transport.

    This has a the approach, as observa has observed, of being flexible as we go.

    I’m cautious about getting rid of income tax for another reason. The object of the exercise is to get rid of undesirable CO2 emitting activities, so if you are successful down the track there would be nothing left to tax. That wouldn’t do, would it?

  33. Dalek says:

    Robert, PV on new homes.
    A 2kW PV system would add about $20,000 to the mortgage on a new home, say 4-5%. Given the projected rise in costs of electricity the energy generated (about 8 kWh/day in Brisvegas) would just about offset the costs of the mortgage increment. After 7.2 years the home will be sold and the benefit will pass to the new owner.

  34. Mind you, the net result would probably be that house and land packages drop in value by roughly $20,000, so the money will probably end up coming out of developers’ pockets rather than homeowners… 🙂

  35. observa says:

    “I’m cautious about getting rid of income tax for another reason. The object of the exercise is to get rid of undesirable CO2 emitting activities, so if you are successful down the track there would be nothing left to tax.”

    Notwithstanding alchohol and tobacco excise and gambling taxes, with resource taxing predominantly, that wouldn’t be true. It would be quite simple to tax mining and quarrying to any degree necessary, down to fractions of a cent per kilogram. However resources would have to include a tax on land use to some extent(essentially rates replacement), with an important proviso. Whilst you would tax concrete, bitumen and glass covered land at a much higher rate than say cropping or grazing land use, you would want to exempt totally, natural land would you not? After all that was the main objection to Henry George’s ideal tax. You need to exempt natural land to make sure there is no incentive whatsoever to get an economic return from it. That rule would need to be fundamental and sacrosanct.

    Now if there were a powerful inbuilt incentive to create more such natural environment, a la John Walmsleys Earth Sanctuaries Ltd, then that would be heading further in the right direction compared to the present marketplace, would you all agree? There is such a way, with one more plank in our ideal constitutional marketplace. Can you see it? I’ll give you a clue. Brian’s not entirely comfortable with ditching income tax totally. What would the left want to trade that off? Are you all completely comfortable with the envisaged equity of carbon/resource taxing here, or is there still some unfinished business with equity concerns, in such a greener but decreasing materialist world? I am of course assuming here, that substantially decreased fossil fuel use in particular, will see real incomes/consumption lowered generally.

  36. That said, I think you’re a bit optimistic on your pricing. See this page – they estimate $27,800 for a similar system to what you describe.

  37. steve says:

    The congestion tax in Vancouver seems to have fired up the business community somewhat. There is nothing more sacred than a shopping centre parking lot apparently.

  38. steve says:

    Where have I heard this argument before?

  39. BilB says:

    Well! It certainly was the best expose of the renewables possibilities to date. As to David Mills elaborate claims…why shouldn’t he be forwardly optimistic. Every other technology proponent is being unimaginably staggeringly unrealistically optimistic about the possibility of making their carbon/radiation vanish forever. The reality is that we do not yet know how the costs of concentrating solar will pan out. The running cost picture to date is based on nonoptimised plant size, full repayment of investment, and proper maintenace/operational management. This is compared to the Australian coal scenario of fully written off publicly funded production/distribution plant, minimum maintenance programme, and state owned subsidised fuel. And the whole comparison completely ignores the carbon accumulation issue (a minor problem).

    The future is, however, looking brighter as the proper debate gets underway, and the real thinkers come into the forum with real solutions. The only caution…how much damage can the fading stars, the Howards the Turnbulls the Albaneses do promoting their ill though out cling-to-the-past solutions as they are nudged of the stage.

    Some things to look forward to:

    Assuming that the information is correct the Tesla style car: http://www.teslamotors.com/display_data/21stCentElectricCar.pdf

    Solar airconditioning: http://www.broad.com/english/products/pro_bj.asp
    and their Australian agent:
    http://www.arbs.com.au/visitor/exhibitor.aspx?m=view&CompanyId=226

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