In recent times we’ve seen a horrible debate emerge around the energy transformation underway in South Australia.The issues are twofold:
first, base load power has become overly reliant upon too few gas producers which are gouging in moments of stress necessitating NEM reform, and
second, over the longer run gas power is too expensive anyway as the gas cartel sends it all to North Asia and gouges the locals.
Amid all of the government’s grandstanding around energy security, there have been hints that it really knows what is needed. From Do-nothing Malcolm’s recent Press Club address:
Increasing gas supply in Australia is vital for our energy future and vital for industries and jobs, but State bans on onshore gas development will result in more expensive and less reliable energy.
And without gas, or substantial new forms of energy storage, where will the firming power come from to support intermittent renewables like wind and solar?
We are willing to sit down with the states to determine the right incentives to enable desperately needed sustainable onshore gas development.
Energy storage – long neglected in Australia – will also be a priority this year.
Last week, at my request, ARENA and the Clean Energy Finance Corporation (CEFC) agreed to work together on a new funding round for large scale storage and other flexible capacity projects, including pumped hydro.
I have also written to Alan Finkel asking him to advise on the role of storage and pumped hydro in stabilising the grid.
Large scale storage will support variable renewables like wind and solar, it will get more value out of existing baseload generation and it will enhance grid stability. And we are getting on with it.
Advertisement
There was also the drivel about clean coal which was largely political and can be discarded by the rational. Still, Do-nothing Malcolm repeated his intention to boost energy storage yesterday in door stop interview. So, how do the economics of pumped hydro stack up? The Melbourne Energy Institute has just released a paper on it:
Pumped hydroelectricity energy storage (PHES) is by far the most significant form of large-scale energy storage in use around the world today with approximately 130 GW of generation capacity installed. PHES facility construction is resurging globally as evolving electricity supply systems place greater value on stored energy. Australia has approximately 1.5 GW of PHES capacity; however, no large-scale facilities have been installed in the last 30 years. This paper examines opportunities for the construction of additional large-scale PHES facilities in Australia.
With PHES, energy is stored by pumping water from a lower reservoir to a second reservoir at a higher elevation. This stored potential energy is later converted to electricity by passing the stored water through an electricity-generating turbine and returning the water to the lower reservoir. Used overseas since the 1890’s and in Australia since 1973, PHES has in recent decades been used to balance times of low and high electricity demand in grids that employ constantly-loaded nuclear or coal-fired electricity generation.
Now, in today’s rapidly-evolving and increasingly renewables-based electricity supply systems, PHES is used to balance times of low and high electricity supply from variable energy sources such as wind and solar-photovoltaic. PHES can also assist grid frequency regulation and voltage support. These modern benefits might apply especially where renewable energy sources are located on the fringes of a constrained electricity grid. Growing PHES construction activity overseas may indicate that PHES can find economic application in Australia.
Further Australian PHES deployment, beyond the capacity already in place, has not received adequate attention. This is because of the perceived lack of economic need and also because suitable PHES development sites are thought to be rare. This University of Melbourne Energy Institute (MEI) study sought to deepen Australian-specific PHES knowledge by:
• reviewing the technological and economic state of PHES deployment globally,
• developing high-level cost estimating and mapping tools that can be used to quickly identify potential PHES sites,
• analysing the economics of new PHES facilities at specific Australian locations operating within Australian electricity markets.
This MEI study found that as an alternative to using natural valleys, there is potential in Australia to construct artificial reservoirs, known as “turkey-nest” type dams, for PHES service. “Turkey-nest” type dams are already widely used around the world as a component of PHES facilities. Further, this study found that coastal seawater PHES, which uses the ocean as the lower reservoir, may have economic application in Australia.
The combination of coastal seawater PHES and a “turkey-nest” type storage reservoir exists at only one place in the world. It has been operating successfully since 1999 (14 years) at Yanbaru on the island of Okinawa, Japan (see Figure 1). Technical details of this facility, obtained during an MEI site visit, are described in this paper. Elsewhere in the world, coastal seawater PHES is being examined for Sonoma County California, and has also been studied for Hawaii, Ireland, and Latvia.
MEI’s scoping-level capital cost estimates for seawater “turkey-nest” type PHES facilities are within the range of PHES capital costs found in the literature, and could be as low as A$ 100,000/MWh to A$ 200,000/MWh. Some results of MEI’s terrain and cost mapping for the Spencer Gulf region of South Australia are shown in Figure 2. The white and red contours depict potential seawater “turkey-nest” type PHES sites located along the coasts of the Eyre and Yorke Peninsulas. This high-level site analysis considers parameters such as site elevation, distance from the coast, and construction costs, while ignoring parameters such as seawater quality, conservation values, and competing land-use and ownership constraints.
This report also describes the results of MEI’s economic analysis that explored the value new PHES facilities may have in today’s Australian electricity markets. MEI’s energy arbitrage analysis looked back over the last nine financial years. Amongst all states in the National Electricity Market, the highest value was found in South Australia during the financial years 2007-08 and 2009-10 (see Figure 3). Arbitrage value has declined in more recent years possibly due to the lower incidence of heat waves that result in high electricity-price excursions.
MEI calculated simple payback periods for new PHES facilities (excluding tax considerations). As shown in Figure 4, payback periods ranged from as low as eight years to over 25 years, depending on assumed costs and arbitrage value.
Further, MEI investigated the benefits of co-locating new PHES and wind generation in situations where there exists a fixed-capacity electricity transmission connection. No significant co-location benefits were found. Rather, limited electricity transmission capacity may be best used solely by wind generation at sites where the wind resource is good, and solely by PHES at sites suited for that technology.
A carbon price would of course improve the business case considerably and probably knock gas out of the running altogether which would be super. Full report.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
