The state of Victoria has invited public consultation on its Renewable Energy Roadmap, available here: http://www.energyandresources.vic.gov.au/energy/sustainable-energy/victorias-renewable-energy-roadmap

My response to this consultation is below, focused on how 8020 thinking can be applied to achieving 100% renewable energy.

80-20 thinking applied to the Victorian Renewable Energy Roadmap

The Victorian government is to be applauded for its consultation on the Victorian Renewable Energy Roadmap (VRER) as government has the ability to create an environment that exerts tremendous leverage to create effective environmental, economic and social outcomes.

Below I briefly summarise the roadmap and provide an overview of an alternate pathway, using 80-20 thinking and analysis.

The Victorian Renewable Energy Roadmap is in fact a Renewable Electricity Roadmap, and does not consider natural gas or transport fuels. It states a target of 20% renewable electricity supply by 2020, largely based on the roll out of wind farms which are near “shovel ready”. It also seeks to address some of the barriers to distributed generation and storage, seeks to support community investment in RE, and looks at government’s role. It is couched in terms of Victoria reassuming a leadership role in the supply of RE and in “being on the front foot” globally when it comes to the emerging carbon-free economy.

The 80-20 principal states that cause and effect are unbalanced, and that it is important to focus on the important few (causes/policies/regulations) from the trivial many (causes/policies/regulations) when wanting to achieve an outcome. The 80-20 process involves understanding the current situation and what the objectives are, identifying and analysing causes, effects and consequences, then out of this proposing a few small high impact actions to focus on. Below I apply 80-20 thinking and analysis under the headings of leadership, key constraints, and solutions.

Leadership

Unfortunately the VRER fails from the beginning to define a set of objectives that match the aspiration to be a leader and “on the front foot”. The proposed pathway is, with only one or two exceptions, largely a proposal for a few small changes that fails to engage or excite Victorians about the potential for clean energy and will fail to position Victoria as a leader.

To put the Victorian 2020 target of 20% in context, Australia’s national renewable energy target (RET, electricity only) is around 23.5% by 2020. South Australia, next to Victoria, had already achieved 20% by 2011 and has set a 50% RET by 2025. The Australian Capital Territory has a 90% RET by 2020! Clearly the Victorian target is unambitious. To its credit the roadmap does seek input on what a suitable 2025 RET should be.
Australia, along with many other countries, has made a broad commitment to cut emissions by 80% by 2050, 35 short years away. To put this in context, the Hazelwood power station has now been in operation for 45 years.

In this regard a leadership position could be considered to be one which has a zero carbon energy supply before 2050. Indeed a range of other countries have this aspiration.

On this basis I would suggest that a suggested target and vision is for Victoria to commit to at least 100% renewables in our electrical energy supply, balanced over a year, by 2030 (or perhaps by 2035), and by 2040 (2045?) at least 100% renewables, balanced over one year, in our total energy supply.

Essentially this means firstly, moving from coal-fired power to renewable power, then moving off gas-fired heating to renewable heating, and also moving away from petrol/diesel/LPG to renewable, carbon-free transport energy.

Constraints

The 80-20 process involves identifying a few core constraints, and then focusing intently on solving these. 80-20 thinking means doing a few high impact things very well, rather than trying to do lots of things, some of which have minimal impact.

So what are the key constraints to moving to 100% renewable energy? It would have been great to have had discussion on this in the VRER consultation, rather than have participants rank the merit of 22 different actions that had little stated linkage to cause and effect.

As I see it the 4 key constraints are:

  1. The energy marketplace rules are not suited to RE as the dominant supply.
  2. Victoria’s legacy coal fired power stations provide electricity at a lower cost, and more reliably, than renewable energy.
  3. The most economic renewable technologies do not produce electricity that is easily dispatched.
  4. Victoria uses much more energy in winter than it does in summer.
Energy marketplace rules are not suited to RE as the dominant supply.

The marketplace rules for Victoria’s electricity supply industry were developed around 18 years ago when electricity assets were privatised, and are based on a model of centralised, competitive generation, and regulated monopoly distribution. The marketplace has been effective in providing low cost electricity generation. In a global context, however, distribution and retail charges are high.

The existing rules are designed in a way that they can be tweaked to grudgingly let in some renewable supply. But they are totally inadequate when it comes to an economy that has 100% renewable energy.

The rules as they stand, are based on an outdated model. A state powered by renewable energy will have both centralised and decentralised generation and will have both distributed storage and centralised storage (some of which already exists in the form of pumped storage). It will have a strong demand management focus, seeking to shape demand to suit the renewable supply. Because the existing set of marketplace rules are not based on this model, they represent a structural barrier that small tweaks and changes, as proposed by the roadmap, will do little to overcome.

Coal fired power is cheap and reliable

A key cause as to why there is comparatively little renewable electricity supply in Victoria is our old, fully depreciated brown coal fired power stations which can produce electricity cheaper than anywhere else in Australia – at as low as $0.03/kWh – and supply over 80% of the state’s electricity. Basically renewable energy, along with its intermittency challenges, fails to compete with coal on price and dispatch-ability.

The most economic renewable technologies do not produce electricity that is easily dispatched.

Wind and solar are the most economic renewable technologies. Unfortunately the supply cannot be dispatched easily to match demand.
Solar production in Victoria in winter is around two and a half times less than in summer, and produces no energy at night time and negligible amounts in early morning and late afternoon.

Wind energy does not demonstrate the same extreme seasonal imbalance as solar, being lower in autumn and higher in spring and summer, but the wind does not necessarily blow all the time that electricity is needed.

Its generally understood that up to about 40% supply of wind and solar is easily managed without large amounts of storage and load shifting, but beyond that lack of dispatchability is a huge barrier to going 100% RE.

Victoria uses much more energy in winter than it does in summer.

There has been little discussion about Victoria’s massive winter-summer imbalance in stationary energy use and the implications of moving away from natural gas.

Converting electricity data from MWh to GJ to have constant units (and assuming none of the dispatched gas is used in electricity production, which would be double counting), Victoria’s stationary energy use over a 12 month period is graphed below.

Figure 1 - Victorias approximate stationary energy consumption by month, based on AEMO data
Figure 1 – Victorias approximate stationary energy consumption by month, based on AEMO data

As most of gas use is for heating, and assuming (simplisticly) that 1 unit of electricity can substitute 3 units of gas (as electric heating can be provided by heat pumps), the graph below shows a potential seasonal stationary electricity load profile if all stationary energy use in Victoria came from electricity.

Figure 2 - Victorias approximate stationary energy consumption by month, if all from electricity and no change in demand.
Figure 2 – Victorias approximate stationary energy consumption by month, if all from electricity and no change in demand.

For an economy in which electricity substituted transport fuels, the demand for electricity would be even higher (I haven’t been able to access data to graph this), but on the reasonable assumption that transport energy use showed little seasonal variation, the overall seasonal imbalance would remain.

The challenge in moving to an economy powered 100% by renewable energy, assuming that this is predominantly provided by wind and solar, is the large seasonal imbalance between supply and demand.

Solutions

Due to the inter-relationships between the four key constraints identified above, the solutions don’t exactly align with each of the constraints, as there are overlapping effects. As I see it, the solutions are:

  1. A new set of energy market rules
  2. Shut down coal power and develop a transition plan for the Latrobe Valley
  3. Become a leader in matching demand to renewable supply
  4. Develop a transition plan from natural gas and fossil fuel transport energy to RE
  5. Don’t do it alone
A new set of energy market rules

Victoria has a deregulated energy market place, however this marketplace and its rules were established before decentralized renewable generation and storage became possible, and make it difficult to effectively transition to a decentralized clean energy future. Furthermore the existing rules were established before today’s IT capabilities existed, and before the smart meter roll-out, capabilities which enable demand and load management down to the household level and make it easier to match demand to supply.

Accordingly we need to undertake a complete and thorough review of our energy marketplace regulation and introduce a new set of rules.

This will include enacting legislation to change the authority of the Essential Service Commission and the Australian Energy Market Operator (AEMO) to regulate in a way that effectively drives the fast transition from centralized coal powered generation to renewable distributed energy generation, storage and demand response. This review will also pave the way for a transition away from natural gas and oil as energy sources, to renewably sourced electricity.

A key feature of the new rule is that they won’t just enable a 100% RE supply, they will actively drive it.

Shut down coal power and develop a transition plan for the Latrobe Valley

The only way to address the challenge posed by coal is to elevate the environmental benefit of renewable energy, and take a strong leadership position to transform Victoria to be a state of clean energy, not remain the dirtiest state in the country with the highest per capita carbon emissions in the OECD. This involves setting a timeline to phase out coal power, developing a transition plan for the Latrobe Valley and people employed in coal based generation, and creating a regulatory and marketplace environment that drives innovation in RE such that it can substitute coal, including addressing intermittency challenges.

At its core, addressing coal means putting a stake in the ground and taking a strong leadership position to transfer to RE, knowing that this is in the mid to long term interest of the state, but acknowledging the possible short term pain in doing so.

Become a leader in matching demand to renewable supply

Matching demand to renewable supply is a massive challenge that is faced across the world, and I believe an area where Victoria is well positioned to become a leader.

Realistically the opportunity for leadership in the manufacture of solar and wind technology is probably lost. Similarly Australia is likely to find it hard to compete internationally in the manufacture of batteries.

However we already have a number of advantages that can be built on.

Victoria is unique in Australia with the smart meter rollout complete. There is significant opportunity to use our IT capabilities to control energy loads at small intervals to be able to better match demand to supply.

Victoria is also unique in that it has also recently passed the Local Government Legislation Amendment (Environmental Upgrade Agreements) Bill 2015. This enables Victoria to develop world leading capacity in the legal and financing aspects of rooftop solar energy and energy efficiency, further building on our already strong capacity in finance and banking.

We also have a strong tertiary education sector, attracting a large number of overseas students.

Finally, we are nation of early adopters of distributed solar generation. We may not be good at manufacturing RE products, but we are pretty good at installing them.

All of this means that we have the potential to apply our IT skills, legal and financial skills, and solar installation skills, to develop a leadership position and exportable services associated around this. We can become leaders in:

  • Demand shaping – matching demand to suit supply, through a combination of directly switching loads, particularly heating and cooling loads for short-interval load matching, and managing distributed storage.
  • The deployment and management of grid level and centralized storage to provide intra-day load shaping.
  • Financial and legal models that attract a wide range of investment streams, from mums and dads through to large institutional investors, in renewable energy, energy storage, and energy efficiency.
  • Know how, standards and systems around the deployment and installation of distributed RE and storage.
Develop a transition plan from natural gas and fossil fuel transport energy to RE.

As shown in figures 1 and 2 above, there is a lot of energy associated with stationary gas use, and even more than this if electricity is to substitute fossil fuels in transport. Transitioning away from fossil fuels to renewable electricity is a large transition involving:

  • Renewable electricity generation capacity several multiples larger than that required for renewable electricity alone.
  • Replacement of gas using appliances and equipment, requiring substantial investment.
  • Building a distributed electric vehicle charging network.

Industries that will be adversely affected by this include the natural gas supply and appliance supply, installation and servicing industry and the engine tuning and maintenance trades.

Whilst it appears that the most cost-effective way to transition to a renewable energy economy is through energy efficiency, demand management and load shaping, and wind and solar based generation, and electric vehicles, any plan needs to have the flexibility to take advantage of other sources of renewable energy that may emerge.

Don’t go it alone

Large seasonal energy imbalances and the national electricity regulatory environment mean that Victoria cannot go it alone.

Clearly Victoria needs to be engaging with other states, including supporting the construction of additional interstate transmission networks. We could also collaborate on extension of transmission networks into South East Asia a, which does not have the solar and wind resources of Australia, and then through to China. Potentially an Australia – Asia transmission line has the ability to capture solar electricity from both hemispheres, and across different time zones.
The coast of Victoria has very good energy resources, and Bass Strait has the best wind energy resources in Australia. This represent possibly another opportunity for Victoria, and we could become a exporter of wind energy.

Victoria has experience in offshore structural engineering through its oil and gas operations in Bass Strait, experience which could be applied to offshore wind development – and also contribute to the transition pathway for the Latrobe Valley.

We need to work with other states and at the federal level to change the rules of the national energy market to not just enable, but actively drive the uptake of RE.

Summary

The Victorian Renewable Energy Roadmap unfortunately fails to effectively portray a vision of a transition to clean energy in Victoria. Adopting a position of true leadership that will position the economy well for a carbon constrained future involves setting ambitious targets, to first go to 100% renewable electricity and then 100% renewable energy. To be able to realise the economic benefits such leadership would bring, we need to commit to 100% renewable energy before 2050.

Moving towards 100% renewable energy effectively requires addressing four key constraints: (a) an outdated regulatory framework that favours the status quo; (b) the (presently) relatively high cost of renewables in comparison with the very low cost and predictable brown coal power supply in Victoria; (c) the intermittency challenges of the most economic renewable technologies; and (d) seasonal energy imbalances.

These constraints can be overcome through (a) creating a new set of electricity market rules; (b) taking a strong leadership position and environmental stand to phase out coal and developing and implementing a transition plan for the Latrobe Valley; (c) becoming a leader in matching demand to RE supply; (d) developing a transition plan from natural gas and fossil fuel transport energy to RE; and (e) not going alone, engaging with other states and countries and building transmission networks to help address seasonal imbalances in renewable energy supply and energy demand.

 

Bruce Rowse, September 2015

Bruce founded energy efficiency company CarbonetiX in 2002, selling the business at end of 2013. In 2014 he worked as a policy advisor on building sector energy efficiency to the government of Malaysia. He now consults through 8020Green.

He represents the Australian Institute of Refrigeration Air Conditioning and Heating on Australia/New Zealand Standards Committee EN001 – Energy Management. He is the author of Carbon Policy – How robust measurement and verification can improve policy effectiveness. Bruce manages the LinkedIn Climate Policy Group.

8020Green is dedicated to the success of green energy business making our world more sustainable. Bruce provides consulting services around policy, strategy and business development.

8020 thinking applied to achieving 100% renewable energy

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