Kohler drops energy grenade into loon pond

From Alan Kohler today:

Sorry Richo, but I’m right.

On Monday a little company named ReNu Energy announced that it was putting solar photovoltaic panels on the rooftops of four shopping centres owned by SCA Property.

RNE will own and operate the solar plant and sell the power to the retailers in the centres. Cost, $4.3 million; annual cash return to RNE’s investors, $700,000, or 16 per cent. The four centres, starting with the Griffith Plaza, will become 11 if all goes well.

Every shopping centre owner in the country is now being approached by firms like RNE wanting to put solar on the roof for “behind the meter” deals, where the power is consumed within the centre. In its statement on Monday RNE said retirement villages and office buildings are also attractive to both debt and equity funders.

This is happening simply because solar photovoltaic (PV) has come down in price, and the average price of electricity in the eastern states, produced by the coal generators, has been $100 per megawatt hour for the past few months. That’s killing businesses that rely on electricity, and is roughly twice the price of the power from solar, which is just the cost of financing the plant, since the power itself is free.

…In The Australian the other day, Graham Richardson said he hoped I was wrong that a flood of renewable energy investment would spell the end of coal. He’s in good company, and not just about that.

A lot of people, myself included, had hoped that newspapers wouldn’t be disrupted by the internet, but it happened — and now there’s a Senate inquiry impotently looking into the future of journalism.

Nice work, Alan and quite right. And it’s only going to accelerate. We’re only a few years short of the renewable energy “killer app” when batteries will be added to those solar panels shopping centres along with everyone else will exit the grid en masse. Not only that, MB numbers suggest that grid level renewables plus storage will be cheaper than coal inside five years:

There is a range of different outcomes we could see for prices.

Two base case scenarios are solar+battery costs fall at 10% per year for the next five years, another at 20%.

In the last 5 years costs have fallen around 20% per year. Given how low solar costs are, the more important assumption is battery prices.

ice_screenshot_20170314-141553

Rooftop Solar

I have deliberately left Rooftop Solar out of the above table, as they are less comparable than you would think. Roof-top solar has costs of around $0.14 which is much higher than the costs above.

But that is not important. Rooftop solar is not competing with a coal plant, or even with utility solar.

Rooftop solar is competing with grid power + grid infrastructure. It is an important distinction.

I don’t care whether my rooftop solar produces cheaper than the local coal-fired power station, I care whether it produces at a cheaper rate than I pay for power – and it does:

ice_screenshot_20170314-142244

The issue is that panels produce power during the day when everyone else’s panels are also producing power, and so unless I use it myself to offset the above charge, I get paid a fraction of what the power company will charge my neighbour for using my spare electricity. Also, the peak rate (in the evening) for time of day pricing is much higher than during the day.

At $0.44 for partial shifting (which is basically generating enough power to get you through the evening peak), having some batteries is very close to being profitable for anyone on time of day charges. A lot of this price comes from the discount rate, so if you are prepared to accept a lower return (and lock in electricity prices) then partial shifting can be worth it at current prices.

But batteries aren’t yet a “no brainer” cheaper option.

Looking at the 10% cost reduction and 20% cost reduction scenarios again:

ice_screenshot_20170314-142802

Rather than celebrate this market triumph, the loon pond response is bizarre. As we know, it’s desperately seeking to build new coal power plants with public money, has blamed renewable power for everything from blackouts to the death of Elvis and today it launches broadsides against the RET, via Judith Sloan:

Let’s be clear: the RET spins off a carbon tax. Anyone who says we don’t have a carbon tax doesn’t understand economics. It is an outright subsidy of a huge magnitude to renewable energy.

It sidelines other much more efficient forms of power generation, such as gas and new coal-fired plants, both of which have much lower emissions than our ageing coal-fired power stations. It accelerates the closure of existing coal-fired power stations.

And if that isn’t bad enough, there is no charge on renewable energy for the negative costs it imposes on the grid, both in terms of stability and reliability.

If Hunt had understood these things, he would have realised that the higher the proportion of electricity generated by renewable energy, the greater are these risks.

Most countries with substantial renewable electricity generation have limited its penetration to well below our target of 23 per cent. And these are countries — think Denmark and Germany — that can import cheap electricity from neighbours when it’s needed. Australia cannot.

And superloon, Nick Cater:

The [Finkel] review is unlikely to recommend, nor is the government willing to countenance, the abolition of the RET, attractive as that may seem to energy market ­rationalists.

It should, however, help us recognise that putting most of the burden on the electricity grid to deliver Australia’s promised carbon emissions reduction was a ghastly mistake. It has neither assisted the reduction of carbon emissions nor encouraged the development of new technology.

Even Ross Garnaut, the Rudd government’s professor of choice, called for it to be phased out. The RET “does not necessarily encourage the lowest cost means of reducing emissions”, he wrote in 2011, “nor does it encourage innovation: it favours the lowest cost established technologies that are eligible within the scheme”,

…The review also presents the opportunity to end the sacred treatment of wind and solar and to share subsidies, if subsidies there must be, with low-emission thermal energy production such as gas and clean coal. It would not fix the gas shortage but at least it would give the owners of mothballed gas plants a little more confidence of a return on investment.

If common sense is allowed to intrude, we will no longer pay subsidies of about $85 a megawatt hour for the fitful supply of unstable energy using subprime technology of windmills.

…What could go wrong? After all, Alan Kohler assured us in his column in The Weekend Australian that wind and solar are at the point of becoming cheaper than coal and gas, and batteries are just around the corner. We are about to see a flood of renewable investment that will spell the end of coal.

A clear-headed readjustment of the RET will allow us to test that somewhat brave assumption. Oh, and help us keep the lights on.

The RET is inefficient, yes. A carbon price would be much better. But the loons killed that off so the RET is still better than nothing given it at least prices the implicit subsidy to dirty power while boosting competition for it.

But that’s really all a by the by. The key point highlighted by Kolher is that these days the carbon mitigation argument has moved well passed policy anyway. It’s now driven by market pricing on two fronts. The cost of dirty power is rising as carbon externalities are priced into risk assessments by markets and alternative energy R&D is driving massive price falls for clean technology.

It’s over. Get over it.

Comments

      • Indeed the answer is bizarre – What’s RET got to do with the subject at hand anyway? Kohler didn’t mention the RET, mainly because it was kind of irrelevant to the point he was making .. So the loon kooks raise a straw man and they burn it down good.

        Mission accomplished!

      • One factor I have been pointing out, is that “renewables” have by far the most potential “at the site of consumption”.

        One of the biggest vested interests in carefully controlling the way the whole industry reforms, are the “grid” incumbents who do not mind coal being replaced as long as THEY still own all the wind farms and PV farms, and feed the grid.

        Going renewable, and going “free market”, are perfect complements to each other. George Reisman’s hypothesis is the enlightened one.

        https://mises.org/library/environmentalism-refuted

        Unfortunately, most “environmental concern” these days is synonymous with top-down Statist views.

      • drsmithyMEMBER

        One factor I have been pointing out, is that “renewables” have by far the most potential “at the site of consumption”.

        But this is not inherent to renewable energy sources, it is your ideological preference.

        It is simply that certain kinds of renewables – mainly solar + batteries – happen to align with your ideological preference.

        Unfortunately it is a preference that leaves the majority of people for whom local solar + batteries is impractical at best, impossible at worst, in the dust.

  1. reusachtigeMEMBER

    I’d much rather support building our own mini coal fired power generators in backyards and on shopping centre roofs than have this commie driven new age “renewables” come into general use! Australia has a natural advantage with coal that no one else has and it’s a way bigger advantage than shite renewals like solar.

    • But if it makes sense “on site”, as in the example in this article, people should go for it. I am with you on fandangled big subsidised “feed into the grid” turbine farms and PV farms. It is the “national grid” per se that is becoming the endangered species.

      • Better men than you have tried to make Reusa break character… You will fail like many others before you! 😀

        Reusa is the mask.. There is no person behind the mask. 😀

      • It is about time we all woke up to the painful reality that the sharp blades on wind turbines cut oxygen chains into little pieces making it hard to breathe. Shredded oxygen chains are really hard to fix because the bits are so small.

        The charts above show wind is by far the cheapest electricity source – but only if we disregard the oxygen damage.

        Yes, wind farming is harmful – and with attendant harms proven, highly investable.

        Disclosure: IFN:AX

    • Oh Reusa, you are so transparent.
      Multiple mini coal plants means greater global warming, more sea level rise and inundation of seaside neighbourhoods. i.e. Restricted land area, but more seaside properties = Big Price Rises!
      What could go wrong LOL.

    • I dont think you really thought that through, if you waste land on a coal fired plant, you couldn’t sell off the 240m2 for an executive residence 🙂

  2. DarkMatterMEMBER

    It will be interesting to see if Elon Musk’s Solar Tiles work out to be economical. Either way, with the cost of solar panels falling there is a huge amount of “rooftops” to use them on. Down the track a bit, the potential to use carport roofs with EVs will make a big difference. For city commute you only need about 20-30 KWh a week, and even with a 1KW panel you come close to meeting that. No rocket surgery or breakthroughs required – just a modified inverter to suit the EV and a battery to collect energy when the car is not plugged in. The energy is more or less free, so it doesn’t really matter if you lose some energy in the battery round trip. A cheap bulky Flow Battery built into the carport would be ideal.

    If we started moving private vehicles to this solar/EV model you actually would not need to place extra load on the grid, and even if you needed to suppliment the solar charge, it would be at night time when the power is off peak.

    • There are other manufacturers out there.

      Whether they are economic in the sense of payback times, I do think their capitalised value as part of the overall home will make it worthwhile.

  3. Simón Bolívar

    They still think global warming is a hoax. Honestly – who do you think you are talking too ?

    • The comments under Kohler’s article are very entertaining. Hard to imagine anyone – even if they are a climate skeptic – not being impressed at how quickly solar and batteries etc are becoming a major disruptive force but there are plenty losing their minds at the suggestion and insisting that there will never be an alternative to coal.

      At the very least the possibility of not having to operate dangerous and ugly coal mines is a massive bonus. Check out Google maps for the Hunter Valley in NSW for some serious open cut earthworks.

      Tends to confirm that the climate debate arouses passions that often have little to do with the climate.

      • mild colonialMEMBER

        Yeah, they accuse scientists of making it up but when the beloved market shifts right in their face they close their eyes and cry at observable reality.

      • You make a good point Pfh007. I consider myself a relative climate skeptic (which in climate believe terms makes me the antichrist) but in general (if it comes to pass) this is excellent. If it works out cheaper lets do it!

        I think that the cost of fossils will come down too however if this really starts to gain traction but that’s only another positive really.

  4. HadronCollision

    The big money is going to be financing batteries + smart inverters + panels on “no interest” or leasing or whatever to SOHO, resi.

    WTF is Jabba the Richo on about “n The Australian the other day, Graham Richardson said he hoped I was wrong that a flood of renewable energy investment would spell the end of coal. He’s in good company, and not just about that.”
    Typical f$cking leaning Boomer. Keep polluting the planet. Obviously hasn’t got kids he cares about or exercise enough outside to value fresh air. Obviously doesn’t have to manage weeds on the roadside or on a farm that love nitrogen rich air.

    What a clown. Sooner he drops off his perch the better

    if there’s one thing we can take heart from, it’s that the next few generations might actually fix the planet

    • Richo has at least one son.

      Funnily enough, at USyd he attended a few classes with Nick Greiner’s daughter

  5. Shame you left of this conclusion to the Kohler article:

    But electricity prices should fall as a result of that, not rise, and the coal miners will find something else to do, along with the journalists and the other workers disrupted out of their jobs.

  6. Damn, and I was about to sell my ReNu shares to crystallise a loss (they used to be Geodynamics in a previous life).

  7. Tassie TomMEMBER

    The AEMC needs to move swiftly to change the rules that the AEMO operates under so that rooftop solar and batteries can be embraced as part of the solution, rather than allowing an electricity death spiral.

    The AEMO has Audrey Zibelman as its CEO – she is awesome – she gets it. However, although she has a voice, she doesn’t actually have any power. The AEMO only runs the electricity (and gas) networks by following the rules that the AEMC sets for it.

    So, who is the AEMC? Check out these links to who its chair, commissioners, and senior management team members are.

    http://www.aemc.gov.au/About-Us/About-the-AEMC/Chair-comissioners
    http://www.aemc.gov.au/About-Us/About-the-AEMC/Senior-management-team

    Any conflicts of interest here?

    • >Any conflicts of interest here?

      No, no conflict of interest here… I asked Andrew Robb, and he said it’s all clear! Now run along… there’s nothing for you to see here. The adults are in charge, don’t you worry about that.

      Besides, they’ve been in politics for so many years – they know how to behave!

  8. Conservatives are supposed to be a frugal bunch, but they’ve given it all up to just score points against the Left in a bizarre culture war they’ll never win. The economics of energy is going to leave them in their beloved coal dust.