Just like his broadband policy, Prime Minister Malcolm Turnbull has said he wants energy policy to be technology neutral. Perhaps he should re-examine his broadband policy before embarking on clean coal projects.
When Turnbull kicked off his 2017 by targeting Labor on energy prices and security, he said the government needed to be technology agnostic — meaning coal was just as good as wind farms and gas and solar. Or as Barnaby Joyce put it, he treats every electron as equal.
The line was familiar for anyone who had covered Turnbull back in the day when he was shadow communications minister because it was the exact same approach he adopted for broadband. Rather than continue the future-proof fibre-to-the-premises project, the Coalition decided to put a stop to it and to try to use a mish-mash of technologies to achieve faster (than currently available) broadband quicker, and at a lower cost. Labor is made of “fibre zealots” who only want one particular type of technology while the Coalition’s approach meant NBN Co could choose whatever worked best in a particular area.
Some components of his proposal, like the Optus and Telstra cable networks, could be upgraded quickly and everyone would be on it by the end of 2016, he claimed. In reality, it has been nowhere near as simple. The process of investigating alternatives that ultimately haven’t panned out has cost the company millions of dollars and delayed the promised upgrade by years.
In the company’s half-year report earlier this month, NBN said that the Telstra component of the cable network was only made commercially available in June this year, and that as of the end of December last year, is available to just 158,938, with only 14,615 houses actually connected to it. A far cry from the more than 3 million Turnbull had promised in opposition.
Worse still, as the leaked documents that led to an AFP raid on ALP headquarters during an election campaign revealed, the Optus cable was just simply not up to the job — something predicted by technology advocates before the election but ignored by Turnbull in his pursuit of the technology-neutral approach. NBN had wasted years and millions on it.
In response to a recent question on notice from estimates, NBN revealed it had spent $4.2 million on its trial for the Optus cable it ultimately abandoned. Some 24,000 homes will still be connected on this network, but another 95,000 will now instead be connected by a different type of technology. As of the end of October last year, just 4000 homes were accessing the internet on this service. That $4 million isn’t a huge amount in the context of a $50 billion network, but it raises questions about what the company could have achieved if it hadn’t been so focused on being “technology neutral”.
The cable network was supposed to be the easiest component of the network upgrade, according to Turnbull, but it now appears to have been one of the most complex.
Given the reluctance to fund the construction of new coal-fired power plants, and the potential high cost in retro-fitting existing coal power plants to be “clean”, the government could find itself having to put up the cash to fund the project — just like it did with NBN — and being left with something that just isn’t up to the job, just like the NBN.
In the NBN debate, Turnbull did his best to reframe it from being a debate about what technology would suit Australia in the future to one about what is the fastest way to improve Australians’ internet access today. The energy debate is headed in a similar direction. Invest in renewable energy for Australia’s long-term future, or focus on the immediate need for cheap and reliable power through risky investment in retrofitting old technology.
Meanwhile, ANU has released a new study arguing 100% renewables is cheaper than coal, via Reneweconomy:
A new study by energy experts from the Australian National University suggests that a 100 per cent renewable energy electricity grid – with 90 per cent of power coming from wind and solar – will be significantly cheaper future option than a coal or gas-fired network in Australia.
The study, led by Andrew Blakers, Bin Lu and Matthew Stocks, suggests that with most of Australia’s current fleet of coal generators due to retire before 2030, a mix of solar PV and wind energy, backed up by pumped hydro, will be the cheapest option for Australia, and this includes integration costs.
The report says that wind is currently about $64/MWh and solar $78/MWh, but the costs of both technologies are falling fast, with both expected to cost around $50/MWh when much of the needed capacity is built. With the cost of balancing, this results in a levellised cost of energy (LCOE) of around $75/MWh.
By contrast, the LCOE of coal is $80/MWh, and some estimates – such as those by Bloomberg New Energy Finance which adds in factors such as the cost of finance risk – put it much higher.
Blakers says his team did not need to dial that higher price of coal into the equation: “We don’t include a risk premium or carbon pricing or fuel price escalation or threat of premature closure because renewables doesn’t need any of this to compete,” he says.
Nor do his estimates include any carbon price, which will further tip the balance in favour of renewables. Nor do they include future cost reductions in wind and solar. “There is no end in sight to cost reductions,” Blakers says.
“Much of Australia’s coal power stations will reach the end of their economic life over the next 15 years. It will be cheaper to replace these with renewable energy.”
The two key outcomes of this modelling is that the additional cost of balancing renewable energy supply with demand on an hourly basis throughout the year is relatively small: $A25-$A30/MWh (US$19-23/MWh), and that means that the overall cost of a wind and solar dominated grid is much lower than previous estimates.
Indeed, the ANU team suggest that less storage is needed than thought. The optimum amount of pumped hydro is 15-25 GW of power capacity with 15-30 hours of energy storage.
This is based on more wind than solar. If Hwind and PV annual energy generation is constrained to be similar then higher power (25 GW) and lower energy storage (12-21hours) is optimum.
Total storage of 450 GWh +/- 30% is optimum for all the scenarios. This is equivalent to the average electricity consumed in the NEM in 19 hours.
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.
