Yesterday (1 February) Prime Minister Malcolm Turnbull announced that Australia needed more synchronous baseload power, and that we would continue to use coal for many decades. He stated that “it is clear that the coalition stands for cheaper energy” and that “we are approaching this issue clear-eyed, pragmatic and objective.” Deputy Prime Minister Barnaby Joyce went further, stating “I reckon we should be building new coal-fire power stations.”

Batteries
Photo by Alvimann at Morguefile.com

On the face of it, and as the retired engineers penning letters to the editor of The Australian would argue, coal has the advantage of providing reliable baseload power. However, whilst this may be true now, its unlikely to remain this way for very much longer. Renewable power plus storage plus demand response plus energy efficiency can also provide reliable baseload power, and costs are inexorably on a downward trajectory .

This week in California, 70MW of battery storage systems were commissioned to help manage peak demand at the grid level, avoiding the need to build a natural gas peaking plant.

California is mandating that its utilities add more than 1.32 GW of battery storage by 2020. Most of this storage is likely to be used to manage peak demand, and not as baseload power. But it seems inevitable that eventually costs are going to come down to the point where renewable power plus energy storage will be cheaper than coal.

Ignoring the experience curves

There is a key difference between a coal-fired power station and solar panels/batteries that explains why it’s not if renewable power and storage will become the most cost-effective source of reliable 24/7 electricity, but when. This key difference is the rate of technological change and the rate of cost reduction.

A high efficiency coal-fired power station is a complex custom engineered machine. Typically it will take years to design, build and commission. As a result the experience curve that increases performance and drives down price is very, very slow.

Solar panels, on the other hand, are high tech mass produced items with incredible competition to drive down prices and improve performance. In 2016 there were several solar plants installed in different parts of the world with power purchase agreements to buy the electricity from these plants at less than three cents US per kilowatt-hour. That’s less than the wholesale price of electricity in Australia’s electricity market! In September a PPA in Abu Dhabi attracted a price of just USD $0.025/kWh. When they are producing electricity, renewable power sources can now provide cheaper electricity than fossil fuels and nuclear.

While storage batteries aren’t quite yet commoditized, they share similar characteristics to solar. They are modular. The can be mass produced. They require high-tech manufacturing processes. And perhaps they are where solar was seven to ten short years ago. Seven years ago it was unimaginable that solar plants could be built to supply electricity at less than the wholesale price of electricity in Australia, yet over that time the global price of solar panels has dropped by 85%.

So to assert that clean coal is the way forward reflects thinking that is focused on election cycles. Not everyone would agree that making long term economic decisions based on three year election cycles is being clear eyed, pragmatic and objective. In two to three elections from now its clearly possible that coal won’t be the most cost-effective source of reliable 24/7 electricity supply.

No certain demand for coal

Mr Turnbull’s rationale for a focus on high efficiency coal power plants is that it will help support the export of coal, which is good for our economy. But this is a dangerous game as most new power generation capacity around the world is now renewable. And as the economics of renewable energy improves faster than anything else, renewable power will account for more and more of new capacity installed.

  • In 2014 renewables represented around 58.5% of net additions to global power capacity.
  • In 2015 over 60% of net additions to global power capacity came from renewable energy.
  • Data isn’t available for 2016 yet, but with solar and wind prices continuing to drop its hard to see this trend not continuing, and the demand for coal slowing.

And if battery prices do plummet as quickly as solar has done, who will still want to keep running their coal-fired power stations? Every country on earth wants energy security. What is more secure than having energy provided by the sun or the wind, resources that no country needs to import, coupled with the storage capacity to manage the intermittent nature of solar and wind energy production?

Mr Turnbull’s big bet is that storage costs only decrease slowly and that renewable power is no threat to base-load power. But there is no compelling argument as to why storage costs will only decrease slowly. On the contrary, there is evidence that battery prices may come down in a similar way to solar prices.

Costs come down as volumes go up, due the combination of experience gained and competition.

And there is every indication that the amount of storage deployed will only grow rapidly.

Research just published by the International Finance Corporation and the Energy Sector Management Assistance Program (both part of the World Bank) estimates that the electricity storage market in developing countries will grow 40 fold over the next decade.

The market for electric vehicles provides some indication of the volume pressure that is building. In China EV sales in 2016 were up 85% on 2015 sales.

When Tesla announced its USD $35,000 Model 3, it had over 300,000 people globally pay a USD 1,000 deposit.

Six years ago Nissan and Mitsubishi were the only mass manufacturers of electric vehicles. Now many of the major car manufactures are scrambling to get their own EV models. The Chevvy Bolt, made available for sale in California in December, has beaten Tesla by over a year, perhaps more, in getting a 300 km plus all-electric vehicle to the market for less than USD 40,000. Competition is heating up.

In California utilities have asked the regulator for permission to collect $1b from their customers over the next five years to help support the construction of charging stations for vehicles, ranging from rapid charge stations for cars through to bus and truck charging stations. That’s not $1b for storage, but just for the infrastructure that will help enable the move to EVs.

EV charge point
Photo by fellowdesigns at Morguefile.com

Germany has voted for a call to ban the sale of internal combustion engines by 2030, a move several other European countries are looking to replicate, adding further motivation for vehicle manufactures to switch to EVs, and to keep on driving the cost of storage down.

In seeking to hitch Australia’s economic future to coal, Mr. Turnbull seems to be oblivious to the momentum that is building behind energy storage and the continuing downward trend in the costs of renewable power.  Its a dangerous gamble.

An alternative vision for Australia – become an enabler of fossil fuel free energy

An alternative vision, one that is better aligned with the steady rise of clean energy, would be to link our future to enabling fossil fuel free energy. Australia has expertise in liquid electrolyte batteries which are fantastic for long term storage (and well suited to baseload power), is developing expertise in demand-response, has some of the region’s best energy efficiency engineers, is good at building green buildings, and has good finance and IT capabilities that can support the transition to clean power. An alternate vision could even have us running transmission lines into South East Asia to export clean energy from our great solar and wind resources.

Mr. Turnbull’s dangerous gamble on base-load coal

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