The seas are dying

 By Fiona Katauskas.  The cartoon refers to the toxic bloom in the seas off South Australia.

The seas are dying.  The land is subject to extreme heatwaves, droughts, bushfires and flooding.  Insect populations are collapsing.

Yet still we do nothing.

The ecological disaster unfolding on Australia's coast

From Australia's public broadcaster, the ABC.

"This is potentially the start of the decay of the oceans, which is the start of the decay of mankind.  This could be the beginning of the end."

Carbon-neutral jetfuel

 

From RenewEconomy

British synthetic fuels developer Zero Petroleum is exploring the possibility of building a low-carbon sustainable aviation fuel production facility in the South Australian city of Whyalla, in collaboration with Qantas Airways.

The feasibility study is expected to take six months and will evaluate the technical, economic, and environmental viability of a facility which would be capable of producing up to 10 million litres of synthetic aviation fuel, gasoline, and diesel each year.

It will seek to tap into the state’s huge wind and solar resources – which already account for around 75 per cent of annual demand, and which are expected to reach 100 per cent net renewables by 2027 – and its emerging green hydrogen production facilities in the same city.

Zero Petroleum was founded in 2020 by former F1 racing engineer and executive Paddy Lowe and subject expert Nilay Shah, a professor of process systems engineering at Imperial College London.

Their company has developed and manufactures whole-blend and 100% fossil free synthetic fuels – including gasoline, diesel, and jet fuel – through a process utilising direct air capture (DAC) carbon dioxide and hydrogen from water electrolysis, all powered by renewable energy.

This is designed to create fuels which are intended for use in an array of hard-to-abate sectors – including the aviation industry and motor racing series such as Formula 1.

DAC is the process whereby CO2 is extracted from the atmosphere.  DAC is expensive, costing over $1000/tonne, although as its usage increases, and learning curve effects strengthen, it is likely to fall in cost.   DAC may be the right way to go for removing CO2 from the atmosphere, but it is prolly not the best way to make synthetic hydrocarbons.  The process used by Prometheus Fuels will (if it works) be much cheaper.  We are just at the beginning of learning how to make carbon-neutral fuels, so it makes sense to try several technological possibilities, to see which works best and which is the cheapest.  We shall see which process wins out.

Federal funds to push South Australia past 100% renewables

Goyder South wind farm

From RenewEconomy

South Australia has locked in federal funding to ensure that it becomes the first non-hydro grid in the world to reach 100 per cent net renewables.  [RenewEconomy is incorrect:  Scotland reached 114% renewables in 2022, and Mecklenburg-Vorpommern, a land (state/province) in northern Germany has been 100% renewable for nearly a decade}

The funding deal – through what’s known as a Renewable Energy Transformation Agreement – means that the federal government will underwrite a minimum one gigawatt of new wind and solar generation capacity and another 400 MW (1,600 MWh) of storage – to ensure it meets its target of 100 per cent net renewables by 2027.

South Australia already leads Australia – and the world – with a wind and solar share of around 70 per cent over the last 12 months. The addition of the new capacity, along with the new Project Energy Connect transmission link from NSW, will enable it to become the first in the world to reach 1`00 per cent net renewables based around wind and solar.


That does not mean it will be powered at all times by wind and solar. But the amount of wind and solar generated and stored each year will be equivalent to what it consume each year. The state will export power at times and import at other times, and can fall pack on existing peaking gas plants to fill in the gaps.

Reaching that milestone will be a landmark for the state, and for advocates of the renewable energy transition, particularly as conservative and legacy fossil fuel interests continue to push back on the idea that a modern economy can be powered by renewables and storage.

The irony about South Australia is that the target of 100 per cent net renewables was originally committed by the state Liberal government. The state Labor government merely accelerated it from 2030 to 2027.

And to underline the difference in federal politics, the announcement was made at Port Augusta, the site of a former coal fired power station that the federal Coalition wants to turn nuclear, but which has already become a hub for green energy and green industry.

South Australia has not added a new wind or solar project to the grid for around two years, although the biggest wind project in the state – the 412 MW Goyder South wind farm – is about to connect and send its first power to the grid.

Several new battery projects are also under construction – at Blyth, Hallett, Clements Gap and Templers and another, Tailem Bend, still waiting to be commissioned.

These projects will help propel the state towards 80 per cent renewables over the coming year, while the additional capacity of 1,000 MW of wind and solar, 400 MW of battery capacity (plus the minimum 200 MW included in the current CIS auction) will take it towards 100 per cent net renewables by 2027.

South Australia is also building the world’s first green hydrogen power plant at Whyalla, which will be accompanied by a 250 MW green hydrogen electrolyser and storage facilities, which will also be the world’s biggest when complete.

The state is also fielding [a] huge number of inquiries from industry keen to source zero emissions and low cost green energy – with the local transmission company ElectraNet reporting that more than 2 gigawatts of load inquiries have been made.

Federal energy and climate minister Chris Bowen says the signing of the Renewable Energy Transformation Agreement means that South Australia is the first state to lock in the funding required to meet its targets under the federal government’s Capacity Investment Scheme [CIS].

The CIS aims to contract an additional 32GW of renewable generation and storage across the country to help it deliver most of the capacity needed to meet its 82 per cent renewable energy target by 2032.

The first tender of 6 gigawatts of new wind and solar capacity has been flooded with interest, with more than 40 GW of projects showing interest, while the first storage tender – for 600 MW, 2,400 MWh in Victoria and South Australia – was also heavily oversubscribed with some 19 GW of proposals.

California reaches 100% renewables

I think I might have mentioned that, in Australia, the State of South Australia is showing the world how to move towards a 100% renewables grid, with wind and solar in the State frequently exceeding 100% of demand.  California, which is a 20 times larger economy, is also showing the same thing. 

Both economies are located in the mid-latitude sunbelt.  High latitude economies without hydro might struggle to reach these figures.

From a toot by Renewable Energy.  (Read the comments and replies, which are interesting)

Truly amazing record run of renewable energy carrying 100% of California’s grid for portions of the day:

43 straight days — and 67 out of 73 days — where clean energy exceeded 100% of demand.

5th largest economy on the world, 39 million people and over a million EVs on the road here.

Right now renewables are producing 103% of demand and it’s 3:30pm here. It’s just amazing and should bring immense hope around the world!

Note: "hybrids" means generators with two or more power sources,
such as, for example, combined wind and solar on the same site.
Also, exports to neighbouring States are not shown in the chart.

Flexible export limits for rooftop solar

From RenewEconomy

South Australia has become the first state in Australia, and possibly the first in the world, to roll out flexible export limits for homes with rooftop solar panels at scale.

On July 1, new rules came in that mean all new solar systems must be technically compatible with flexible export limits of 10kW.

The new system requires modern inverter technology to be installed with rooftop panels so that exports can be remotely controlled and ramped up and down, to better suit the needs of the grid and manage new concepts such as minimum demand.

Flexible exports are promoted on the basis that distributed network service providers (DNSPs) can avoid switching them off altogether, as is being proposed in Queensland, or proposing hard and inflexible limits on rooftop solar exports, which has been usual practice around Australia.

The new system does not apply to existing rooftop solar systems nor will it apply to those which export nothing to the grid.

Exemptions apply for battery storage systems until March 1, 2024, SA Power Networks says.

Currently, all homes in Australia with rooftop solar can’t send more than 5kW of electricity back into the grid. These fixed limits were to prevent rooftop PV from overloading the grid during the day.

A trial, first mooted in 2020 by SAPN and rolled out in 2021, showed that most customers were capable of exporting up to 10kW of electricity 98 per cent of the time. The other option instead of flexible limits was a hard cap of 1.5kW at all times.

The remaining 2 per cent of the time when the local network became congested, the energy regulator could scale back exports.

It also means during emergencies, such as storms affecting electricity distribution, SAPN may not need to rely so heavily on the Big Solar Button, the Remote Disconnection and Reconnection (RD&R) emergency backstop for rooftop solar as remote control gives the DNSP more options.

Solar Analytics CEO Stefan Jarnason expects Victoria to be the next to shift to flexible exports he hopes by late 2024 — provided Western Australia doesn’t make a surprise move first — followed by New South Wales or Queensland in the next two years.

Solar Victoria said in May that it wants all new inverters sold through its Solar Homes rebate program to be flexible exports-ready from 1 March next year.

“The main thing it opens the door to is larger solar systems. Previously people were putting on 5kW solar systems, now the average is 9kW,” Jarnason says.

“When you electrify your own home, an electric car, hot water, air conditioning, cooking, ideally you want 20kW. This opens the door to that, and on those days when there’s too much in the grid that can be throttled back. There is literally no downside, unless you own a coal power station.”

The new rule won’t suit everyone: it won’t benefit people with rooftop systems smaller than 5kW, but anything over 7kW is definitely better off, Jarnason says.

Rooftop solar even with export limits has been the largest source of downwards pressure on power prices over the last five years.

Jarnason expects the new technology, which will let even more 5-10c/kWh electricity into the South Australian grid, will be even more influential on local power prices.

It has taken South Australia time to introduce the new rules, as investor manufacturers needed to be given time to build appropriate software.

The rule was supposed to come in on 1 December last year but was delayed to give inverter manufacturers more time.

At the time only a handful of inverter models from a small number of manufacturers met the requirements for flexible exports, using the SwitchDin Droplet, but companies Fronius and SMA were designing “native” inverter software for their inverters.

Chinese inverter company Sunglow got its compliance tick in May.

South Australia gets 18.6% of its electricity from rooftop solar, one of the highest percentages in the world, with all renewables totalling 60.3% so far this year.

Australia's first commercial vanadium grid battery

From the ABC (Australian Broadcasting Corporation)

Australia's first commercial vanadium-flow battery has been completed in South Australia's mid north and is expected to be running and exporting power by August.

Yadlamalka Energy has been undertaking the Spencer Energy Project at Bungama, outside of Port Pirie, where the 2-megawatt/8MW-hour battery is connected to a grid of solar panels.

The battery will store around 10 gigawatts of dispatchable solar power each year and charge from excess electricity produced by the solar panels when the sun is at its peak.

The power will be delivered to households at night when the grid loads are high from demand and when no solar generation is available.

Yadlamalka Energy chairman Andrew Doman said this would also be the first commercial use of the battery in the Southern Hemisphere.

"This is a battery that has significant advantages over lithium-ion ones; the most important one is the duration of this battery is four hours, unlike lithium batteries which typically last half-an-hour or two hours," he said.

"Introducing vanadium batteries will reduce peak energy prices in Australia.

"When electricity prices are negative, we'll be buying the electricity and that will help stabilise the grid, and when prices are high, we'll be selling power into the grid — that margin will have the effect to reduce prices.

The vanadium-flow battery was invented at the University of New South Wales during the 1980s.

Mr Doman said vanadium was ethically sourced as it was more widely abundant in Australia than other critical minerals like copper, nickel and cobalt.

The vanadium is then converted into an electrolyte which holds the ions and stores the electricity inside the battery.

University of Adelaide associate professor Nesimi Ertugrul will be monitoring the battery's performance and said the main difference between vanadium and lithium batteries was that the electrolyte could be replaced in a vanadium battery.

"That replacement simply makes them last longer," he said.

"Companies claim different life cycles for lithium batteries, but those life spans depend on environmental conditions as well as operating patterns.

"Lithium batteries last five to 10 years and vanadium batteries claim to last up to 20 years."

Associate Professor Ertugrul said lithium batteries were better for mobile objects like vehicles whereas vanadium was better suited to stationary conditions.

The vanadium-flow batteries are also non-flammable and are almost completely recyclable.

This text below is taken from the company's website:

Yadlamalka Energy comprises of co-located Vanadium Flow battery energy storage (2MW – 8MWh AC) and Solar Photovoltaic (PV) farm (6MWp DC), integrated behind a DC-coupled inverter. We want to commercialise breakthrough technology to help meet Australia and the world’s future energy needs.

Our first project Spencer Energy is located near Bungama Sub-Station, Port Pirie, South Australia, an area with very favourable solar radiation.

Spencer Energy Project will supply a combination of solar power and battery storage services to the grid. The vanadium flow battery will take advantage of the significant intraday price variation in South Australia to time shift power from midday to peak periods in the evenings and mornings.

The Project will also participate in the Frequency Control Ancillary Services (FCAS) market which helps maintain stability of the electricity system.

Through using breakthrough technology in the form of vanadium flow batteries, Spencer Energy Project, can deliver strong, economic infrastructure benefit to South Australia and at the same time support a low carbon economy.

Vanadium flow batteries are fully containerised, non-flammable units reusable over semi-infinite cycles, able to discharge 100% of the stored energy and do not degrade. In the words of Barack Obama “They are the multi-mega watt energy solution” and “one of the coolest things” he has ever spoken about.

Vanadium flow batteries have significant advantages over lithium in longer duration time shifting applications. The batteries will be able to discharge at a power of 2MW per hour for four hours. They are suitable for heavy cycling because, unlike lithium, they do not degrade.

The plan is to fully charge and discharge the battery at least once a day and possibly twice, depending on pricing conditions.

Spencer Energy Project, will contribute to solving the distributed and intermittent energy problems that exist in South Australia, which are expected to intensify as renewable energy sources are relied on more and more.

Yadlamalka Energy will monitor and report on the progress and outcomes of the first project, with the aim to continue to expand across Australia using this innovative breakthrough technology.

Largest vanadium-flow battery in the southern hemisphere.
Source: RenewEconomy

 Port Pirie is about 200 k's north of Adelaide and 50 k's south of Port Augusta (where a concentrated solar power plant is being built)  It all looks very green because it's mid-winter here in Oz, and it's the rainy season in the southern half of the country.

South Australia reaches 77% renewables

 So far this year, 77% of South Australia's electricity has come from renewables.   The percentage tends to be higher in the first quarter of the year, and falls in Q2 and Q3.  But last year in Q1, it was 69.3%, and the year before in  Q1, 64.2%.  In 2008, renewables totalled 5.8%, and the percentage has risen every year since then.   The state's last coal power station was closed in 2016.  SA is very well-endowed with wind and solar, like many places in the mid-latitudes, and its government plans that it will end up producing 5 times its own electricity needs, exporting the surplus to NSW and Victoria.  It is likely to exceed an annual average of 100% renewables in 4 years.  It will have taken 19 years to go from zero to 100%.  

It shows you what can be done.  At every step along the way, the Right mocked the state's renewable ambitions, and blamed every blackout on renewables, even when it was storms which blew down electricity pylons.  Yet renewables have triumphed.

For the whole NEM (national electricity market), the percentage of renewables (including hydro) is lower than in SA, but it is rising fast.  In Q1, it was 38.4%, compared with 33.7% in  Q1 last year and 29.6% in Q1 2021.  Victoria's offshore wind farms will likely push that state's renewable percentage over 100% by 2030, and NSW has ambitious renewables targets too.  

[The data and the chart come from OpenNem]

Pale yellow = rooftop solar
darker yellow = utility-scale solar
green = wind
orange = gas
purple = imports
(Source)
Chart is clearer if you click on it.  No doubt Blogger has a good reason for this quirk.

Concentrated solar power revived?

Concentrated solar power (CSP) looked like a really useful addition to the renewable panoply 5 years ago. It worked by using mirrors to concentrate sunlight on a central tower. The intense concentration of sunshine heated salts to ±600 C, melting them. The molten salts could be used immediately to drive steam turbines to generate electricity, or they could be stored to be used later for the same purpose. This allowed CSP to deliver 24/7 electricity, just like baseload. Only cheaper and cleaner.

However .... the most famous CSP plant, at Crescent Dunes in Nevada, failed, primarily because the tank where the molten salts were stored kept on cracking. It looked as if CSP would never be a reality, which was a great pity, because CSP is a fantastic complement to other forms of renewables.  Solar plus 4 hours of storage is cheaper than CSP, solar plus 10 or 12 hours of storage isn't.  And CSP is cheaper than new coal and much cheaper than new nuclear, while able to deliver baseload power.

But (perhaps) CSP is going to be resuscitated. An Australian company, Vast Solar, has tweaked the basic concept of CSP.  They have a 1MW pilot plant up and running, and they're planning to open a 30MW plant within a couple of years, with plans to expand that to 150 MW if it's successful.

When SolarReserve proposed a 150 MW tower Concentrated Solar Power (CSP) power plant for Port Augusta [Australia], the firm was fresh off completing Crescent Dunes, the world’s first attempt at utility scale tower CSP with storage. The startup was unable to get funding to build the Port Augusta project, but it was fully developed: SolarReserve had secured state government approval to build 150 MW of CSP with 1100 MWh of thermal energy storage and 70 MW of PV.

But now; like SolarReserve’s other fully developed projects; Likana in Chile, and Redstone in South Africa, the Aurora project is under new ownership. Several years ago, 1414 Degrees purchased the project from SolarReserve and added a 140 MWh battery project. More recently, Australian CSP developer Vast Solar has purchased 50% of the project.

“Vast Solar’s long term plan is to build up to 150 MW of modular multi-tower CSP at the Port Augusta site, beginning with a 30 MW plant we expect to have online in 2025. What we intend to do afterwards is build a larger plant on the southern end of the site,” said CEO Craig Wood. That larger project would share site infrastructure, including the O&M team, the substation, some utility services and access roading.

The firm takes a novel (and award-winning) approach to tower technology that they believe can greatly increase the ultimate capacity of tower CSP. Instead of having a single tower with its solar heat fed by one solar field of heliostats, then running a steam turbine from heat stored in a co-located power block, Vast Solar will deploy multiple solar fields and towers that link together to make up a modular power plant.

In this technology, the solar field piping transfers heat to a shared grid-connected power block housing thermal storage and a steam turbine and generator. Though various approaches for multi-tower CSP have been researched, this will be the first commercial plant.

Wood spelled out the long term rationale; that a multi-tower approach enables the controllability and scalability of trough systems with the high temperatures and performance of central tower CSP. And allows for much larger CSP plants in the long run.

“Linking multiple solar arrays and tower receivers back to one central power block means you are able to build much larger plants,” he explained. “A CSP plant with a single central tower is ultimately limited to 100 to 150 MW.”

This is because as the size of the solar field increases, the mirrors at the outer edge which are typically a mile away from the receiver on the tower, deliver lower solar flux.

“So central tower CSP is limited in terms of the number of megawatt-hours of storage that it can have which ultimately means it is limited in terms of the cost down opportunity,” added Wood, who has both an engineering and finance background.
Nuclear inspires liquid sodium for heat transfer

Because Vast Solar intends its projects to be built in multiple units all connecting to one power block, it needs an effective heat transfer fluid that can be pumped from each tower to where it is stored and used in the power block.

The search for a fluid with excellent thermal conductivity – important in its heat transfer role but also in case something goes wrong and the fluid needs to be re-melted – led to Vast Solar pioneering an innovative heat transfer fluid for CSP, albeit one with decades of experience in the nuclear industry: liquid sodium.

“We went looking for something that would allow us to have that modular configuration in a very cost-effective way that also has high thermal conductivity,” Wood explained.

“Sodium boils at 883 C and solidifies at 97 C; so it has a wide operating range. In our system, with receiver outlet temperatures of up to 580 C, the sodium is just perfect in terms of the operating temperature range. We need a temperature range between 580 C in the receivers, and 300 C at the lowest, so this is right in the middle of what sodium can do while staying liquid.”

Another key benefit of using sodium as the heat transfer fluid from the receivers to the power block is that it, if something goes wrong and it freezes, it can readily be reheated to become liquid using heat tracing elements on the pipe.

“Once the sodium arrives back at the power block, we transfer that heat into thermal energy storage in a standard molten salt system and, when we need to, we use the heat from the salt to create steam to spin a turbine,” he said. So the heat is carried in liquid sodium, stored in molten salts, and finally used in the form of steam in a Rankine cycle turbine.

As did SolarReserve before them, Vast Solar has found that locals in this former coal plant town are very motivated, understanding that due to being a form of solar that has a thermal power block, CSP brings many of the same power station jobs back – but without the coal.

“Port Augusta is an interesting community with an industrial history, having previously been home to the two major coal fired power generators in South Australia,” Wood noted.

“So the locals understand the benefits of long-term well-paying jobs in a thermal power station like CSP. When the last of the coal-fired plants was announced for closure, the community organized a group called Repower Port Augusta to actively try to secure CSP for the town. People have figured out that PV and wind – while cheap – tend not to provide many jobs.”

Official support helps too, with the grid authorities actively trying to smooth the grid connection process. “The authorities have said to us that they’re pretty excited by the prospect of the steam turbine being installed in that location,” said Wood.

“As a thermal form of solar, CSP delivers its solar energy via a turbine. In the South Australian grid there is already a lot of intermittent renewable installed and, with more slated for installation, providing the ancillary services that turbines delivers is really attractive in that location.”

With energy delivery focused on morning and evening peaks, the CSP plant would have the high earning potential of batteries in Australia’s market-based grid, where prices can briefly shoot to a high price cap of $15,500 AUD.

“Regularly you’re seeing prices of upwards of $200 to $300 a megawatt-hour,” said Wood.

“There are definitely seasonal factors but also, particularly in South Australia, you’ve got a high volume of wind and a high degree of interconnection with the eastern states. If you get a coalition of circumstances such as not much wind and then an interconnector being constrained or down for maintenance, you do find extended periods of high prices.”

And here's an article about fixing the problem with the storage tanks:

A consortium has moved to patent a new tank design for the high temperature molten salt tanks used in thermal energy storage systems, like concentrating solar thermal power (CSP) projects.

Concentrated solar power systems use mirrors and receiving towers to gather and store the sun’s energy. The technology has had a disrupted history, from being hailed a great solution, to being wedged out by cheap solar PV combined with the finicky hindrances which detracted from CSP’s great advantage of dispatchability.

One of those finicky hindrances includes the molten storage systems’ hot tank, which had tended to leak because of thermal cycling and fatigue, resulting in substantial production losses for CSP projects.

Now, a consortium including Sydney-based Vast Solar, as well as CyD, Solar Dynamics, and Alia Energy Consulting and Critical Engineering, say they have jointly developed a tank design which addresses the issue, drawing on input from the Advanced Materials Team at the Australian Solar Thermal Research Institute (ASTRI), led by the Queensland University of Technology and Flinders University.

Dubbed the Flexitank, the consortium said it developed the new design by carefully analysing, understanding and learning from previous failures. The design increases the flexibility of the floor of the tank and mitigates the risk of failure associated with thermal cycles by absorbing the repeated expansion and contraction typically encountered in such tanks, the consortium outlined.

“Once we understood the tank failure modes and started testing the physical properties of the incumbent materials, we realised that flexibility is the key to overcoming thermal cycling and fatigue,” Vast Solar CEO, Craig Wood, said. “The economics of thermal storage are compelling, and we are delighted that our work will now deliver much needed reliability.”

“We are confident that the new design will substantially improve the operation performance of CSP systems moving forward,” Dominic Zaal, ASTRI Director, added. 

[Source of articles: Vast Solar's website] 

We'll see, won't we?  I was enthusiastic about CSP 5 years ago, and it all came to nothing.  These advances might yet bring it back from the dead, and it would be excellent for green electricity generation if Vast Solar succeeded.

The sand battery

From the Australian Broadcasting Corporation (ABC)

The idea of storing heat in sand to warm homes through winter may, on the face of it, seem too simple to work.

Drop a load of cheap builder's sand in an insulated silo, heat the sand with renewable electricity, and then tap the stored thermal energy for months on end.

In an age of green hydrogen, lithium-ion batteries and other high-tech energy solutions, it can't work, right?

Finland begs to differ. This month saw the Nordic nation launch the world's first commercial "sand battery".

 

Heat-storing sand batteries like this one in Finland could become a familiar sight at Australian factories looking to cut their gas bills.(Supplied: Polar Night Energy)

 

About 230 kilometres north-west of Helsinki, in the town of Kankaanpää, homes, offices and the public swimming pool are being heated by thermal energy stored in a 7-metre steel container filled with 100 tonnes of sand.

So how does it work, what else can it be used for, and should we build them in Australia?

The Kankaanpää sand battery is connected directly to the grid and runs when electricity is cheapest.

Hot air blown through pipes heats the sand in the steel container by resistive heating (this is how electric heaters work).

The sand is able to store heat at around 500–600 degrees Celsius for months, so solar power generated in the summer can be used to heat homes in the winter.

It can store up to 8 megawatt-hours of energy, which is the capacity of a large, grid-scale lithium battery.

The project was the work of Finnish startup Polar Night Energy and a local Finnish utility Vatajankoski.

Polar Night Energy's chief executive officer Markku Ylönen said the entire battery could be built in "any steel workshop".

"It's really a typical silo with nothing that special," he said.

To discharge the stored thermal energy, air is circulated through pipes in the sand where it's heated, then directed, to wherever it's needed.

Right now, that's mostly heating homes, but it could also be used for high-temperature industrial processes, Mr Ylönen said.

Very little energy is lost in this process, so long as the heat is not being transported very far, he said.

In theory, the stored heat could be used to drive a steam turbine to generate electricity, but this is far less efficient.

"The efficiency will be something like 20–25 per cent," Mr Ylönen said.

"Technologically speaking, there are no obstacles, but the economic case is harder to find than with heat-only projects."

Australia doesn't have the same domestic heating requirements as Finland, but there's plenty of potential for using stored thermal for industrial processes, said Andrew Blakers, director of the ANU Centre for Sustainable Energy Systems.

"There's an enormous storage market for these things and that is to replace gas in factories," Professor Blakers said.

About 16 per cent of Australia's emissions are due to burning of gas in industry for processes needing high temperatures (anything above 100C).

Heat pumps (the same technology used by reverse cycle air-conditioners), which can be powered by renewables, max out at about 100C, meaning they can't replace gas for these industrial uses.

But thermal storage can deliver temperatures of more than 1,000C, depending on the storage medium.

"You choose the storage medium to suit the temperature of the process," Professor Blakers said.

Sand is just one option. Others include crushed rock and molten salt.

The idea of thermal energy storage, including the sand battery concept, has been around for years.

So why are we only building these heat batteries now?

Firstly, for many years it's been cheaper to burn gas to generate high temperatures.

Secondly, due to heat loss, thermal energy can't be transported as easily as pressurised gas, which can make it trickier to use.

But recently the economics have changed.

Russia's invasion of Ukraine has disrupted the supply of gas to Europe and other markets.

In the first quarter of 2022, European gas spot prices were five times higher than in the first quarter of 2021.

These high prices led to Australian gas producers exporting their gas, rather than selling it domestically, driving up prices in Australia.

Thermal storage has become cheaper than burning gas for high-temperature industrial processes, Professor Blakers said.

"In the past three years, the price of solar and wind has fallen so far, and [in the past few months], the price of gas has gone through the roof.

But factories looking to switch to thermal storage won't be able to simply pipe in heat, like they do with gas.

Instead, they'll have to build their own thermal storage silos and heat them with cheap daytime solar electricity, from their own rooftop systems or the grid.

"A few thousand cubic metres of storage would be enough to keep a factory running," Professor Blakers said.

Or factories could wait for gas prices to fall.

"I think they'd be nuts if they waited," Professor Blakers said.

"Nobody can predict where the gas price will go, but the one thing you know is daytime solar electricity is going to stay at a low price."

The Australian start-up 1414 Degrees has developed and patented a thermal storage system similar to the Finnish battery, but using molten silicon to store heat instead of sand.

It recently teamed up with another company, Vast Solar, to plan a solar thermal project in South Australia.

The proposed Vast Solar solar thermal project in South Australia.(Supplied: Vast Solar)

 

Swedish public utility Vattenfall is also building a 200MW-rated thermal energy storage in Berlin.

The heat storage tank can hold 56 million litres of water, which will be heated to 98C to warm homes.

Polar Night Energy has had plenty of interest in building more sand batteries, with the war in Ukraine putting the focus on alternative energy sources and storage methods, Markku Ylönen said.

Recently Moscow suspended the supply of gas and electricity to Finland due to its request to join NATO.

The next battery will be 100 times bigger, or about 20 metres in diameter and 10 metres high, with 1GWh of energy, Mr Ylönen said.

"With the economies of scale, if we go 100 times bigger, the price won't be 100 times larger. It will be 20–30 times larger.

"It will be in Finland, but we are already negotiating several sites internationally."

Once the first of these larger designs is built and tested, others could be built rapidly, he said.

"I would [eventually] like to say that we are building 10 next year."

South Australia sets new wind record

 From RenewEconomy

Iberdrola's Lake Bonney wind farm.

South Australia has set a new wind output record, as new capacity comes on line and as previous limits on wind output are relaxed after the installation of four synchronous condensers that provide grid security.

According to NEMLog, the new wind output record of 2,062MW in South Australia was set at just after midnight on Friday morning, beating the previous record of 2,051MW set just six days earlier.

At the time, wind was providing 120 per cent of the state’s local electricity demand, although the few gas generators that were operating at the time succeeded in keeping the wholesale electricity price at around $220/MWh.

The price later went negative around 2am after the last of the reciprocating gas engines were switched off, and went negative again during the daytime when the combined impact of wind and solar pushed more gas out of the system.


The constraints on wind and solar output in the state have been relaxed significantly since the installation of the four syncons, which provide “system strength” and allow the market operator to retain only a minimum amount of gas generation when there is plenty of wind and solar.

Syncons are spinning machines that do not burn fuel, but many in the industry believe that battery storage with “advanced” or “grid forming” inverters will be able provide a similar service.

Several big batteries have installed such inverters, including Hornsdale Power Reserve in South Australia, but trials to date have been limited.

South Australia’s wind output has been highly variable over the past week, falling to a minimum share of 3 per cent on Tuesday, but the state’s share of wind and solar remains at a world leading 67.4 per cent over the past week, and 65 per cent over the last 12 months.

The Port Augusta Renewable Energy Park, which had been shut down for several weeks after as yet unexplained “oscillations” caused lights to flicker, has also resumed output and is producing at up to its current hold point level of 140MW as it works its way through the commissioning process.

PAREP will ultimately have 210MW of wind capacity and 107MW of solar capacity, making it the biggest wind and solar hybrid facility in the country once complete.

Renewables output routinely exceeds demand in South Australia

From the AEMO

Our latest #energyinsights shows that renewable generation in South Australia exceeded total demand for the state just about every second day (180 days) last year, peaking at 135% of total demand in November. 

The AEMO is the regulator of the NEM (national electricity market), Oz's electricity grid.  In South Australia, even the sadly misnamed Liberal Party, which at the federal level is hostile to renewables, is enthusiastic about the benefits renewables have brought and will bring to the state. (It has the lowest wholesale electricity prices in Australia, after having the highest 10 years ago.)  SA has excellent wind and solar resources, and with a new HVDC connector to NSW will become a major energy exporter over the next few years.

What we can learn from South Australia's renewables revolution

 From WEForum

It’s one-and-a-half times bigger than the US state of Texas, almost as big as Egypt and has a population of 1.7 million people. The state of South Australia is also a global leader in the use of renewable energy.

The use of renewable energy will play a crucial part in helping the world hit the targets set at the Paris Climate Agreement to tackle climate change, including halting the increase in the global average temperature to well below 2C above pre-industrial levels and working to limit the temperature increase to 1.5C above pre-industrial levels.

The progress made by South Australia could help the rest of the world find a faster route to a successful energy transition, according to a report from the Institute for Energy Economics and Financial Analysis (IEEFA).

Called A Grid Dominated by Wind and Solar Is Possible, South Australia: A Window Into the Future, here are seven takeaways from the report.

1. Most - and sometimes all - annual demand can be met by wind and solar.

The South Australia state government set a 2020 target of getting 26% of the state’s energy from renewables. It smashed that goal, with renewables delivering 60% of its energy needs. In October of that year, 100% of the state’s energy came from solar sources – just for one hour, but it marks an impressive turnaround for a region that was 100% reliant on fossil fuel as recently as 2006.

Key to its success has been a commitment to a mix of renewable sources, the IEEFA says. “South Australia therefore provides valuable lessons for the rest of the world, showing what is possible with variable renewable energy (VRE) and distributed energy resources (DER) integration.”

2. Renewables adoption can be driven by government policy and market features.

South Australia is known for its sunshine and reliably strong winds. But having a lot of sun doesn’t automatically mean a lot of solar power. For that, there needs to be the right legislative processes in place. The Australian federal government introduced its Renewable Energy Target (RET) in 2001, along with a Renewable Energy Certification scheme aimed at encouraging new installations. “Many early projects incentivized by [RET] were installed in South Australia as the market was attractive to investors and developers,” the IEEFA report says.

3. Ambitious plans can spark economic growth.

The South Australian government has set its sights on producing 500% of its energy from renewables by 2050 and becoming a net exporter of greener power.

The neighbouring states of New South Wales and Victoria are among its intended targets, IEEFA says, with additional plans to export “green hydrogen, green steel and other low emissions products internationally”.

Such a goal lead to new investments grid transmission capacity, renewable energy infrastructure and green manufacturing capability, spurring change.

4. Renewables can help deliver sub-zero wholesale electricity prices.

Wholesale electricity prices for South Australia were the lowest in the Australian National Electricity Market in the final quarter of 2020. So low that the price of electricity fell to minus-$9 per megawatt hour (MWh) between 10am and 3.30pm during the first quarter of 2021. Not only has this enabled renewable companies to undercut traditional coal and gas generating businesses, it has “rapidly driven down wholesale electricity spot prices in line with the merit order effect (due to lower-cost electricity being available in the wholesale market), especially in the middle of the day when prices are often negative,” the report says.

5. Renewables grids can deliver system reliability and security.

“Overall South Australia has met its reliability standard for the past 15 years,” IEEFA says. The only exception was in 2008-09 when “extreme temperatures in Victoria and South Australia reduced the availability of the interconnector between the two states”.

Continuing to maintain supplies will mean having an infrastructure that can accommodate a larger number of generators and the distributed nature of energy resources, the report says. It cites 253 occasions when the Australian Energy Market Operator had to intervene in the market during 2019-20 (compared to 153 times in 2018-19) to direct “synchronous generators to maintain the system in a secure operating state”.

6. Batteries can support system reliability and energy security.

South Australia has four grid-scale batteries on-stream and two more being built. This includes the world’s largest battery energy storage system, according to IEEFA – the Hornsdale Power Reserve, which was installed in 2017 by Tesla and Neoen.

The report describes the Hornsdale battery as “a technical success, helping to keep the lights on when faults have occurred in the grid”. IEEFA also points out that the site has recouped its capital cost in just over two years of operation.

7. Distribution networks can adapt to support rooftop solar.

An estimated 40.3% of households in South Australia have rooftop solar panels. To ensure their safe and effective incorporation into the grid, the ebb and flow of electricity across the distributed network must be carefully managed.

Last year, South Australia introduced a regulation to enable operators to remotely disconnect rooftop solar inverters. This is not an approach favoured by IEEFA, the report points out. Instead, the organization recommends the use of dynamic operating envelopes or DOEs. “DOEs allow distributed energy resources to import and export within the constraints of distribution networks on a five-minute basis, set 24 hours in advance,” IEEFA says.

First gigawatt-scale grid nears 100% wind and solar

 From RenewEconomy

In the transition to a world free of fossil fuels, all eyes should be on developments in South Australia, because it is here that skeptics about wind and solar are being defied, and where the local grid is just one step away from being able to operate with no fossil fuels in the system at all.

Last weekend, as reported by RenewEconomy, South Australia set multiple new records for the share of wind and solar for any gigawatt scale grid in the world.

Wind and solar reached a peak “instant” output of 135 per cent of local demand, and over a 48 hour period grabbed a share of 108 per cent of local demand, and a 100 per cent share over a 93 hour period. The excess supply was mostly exported to Victoria, although small amounts were also stored in batteries.

The new records were facilitated by a new operating protocol that means the Australian Energy Market Operator requires only two gas units to be operating at the time – a total of just 80MW. It means that gas delivered less than five per cent of total generation when there was enough wind and solar to meet demand.

It has been expected that once the new transmission line linking South Australia to NSW – Project EnergyConnect – is built and operating at full capacity in 2025, then South Australia will be able to operate with only wind and solar generation, and no fossil fuels at all at certain times.

But it is now clear, according to a recent AEMO document, that this could happen even earlier than that thanks to new technologies and new ways of thinking about the grid.

“Project EnergyConnect (PEC), a new synchronous connection between South Australia and New South Wales, is expected to remove the need for a minimum level of synchronous generation online in normal system operation, subject to network support and control requirements being met,” the document says.

“AEMO continues to study the capability of the South Australia power system to function with fewer than two synchronous generating units online, prior to PEC operation.”

This is groundbreaking stuff. South Australia already leads the world in the share of wind and solar in its grid – an average of more than 62 per cent over the last 12 months – and the penetration of rooftop solar in particular, which has delivered up to 92 per cent of local demand at times.

Other grid reach 100 per cent renewables, but they do this with more traditional “renewable” technologies such as hydro and geothermal. South Australia has neither geothermal nor hydro, and it closed the last of its coal generators in 2016.

No other grid is this far down the track with just “variable renewable energy”. Critics say that wind and solar can never power a modern economy. But here they are, doing just that.

The state government has set a target of “net 100 per cent renewables” by 2030, and will likely get there much earlier, thanks to the new link to NSW which will encourage more wind and solar to be built.

But the key figure there is “net”. It’s one thing to build enough wind and solar to deliver the equivalent of annual demand over a year, another to be able to operate the system with no fossil fuels at all. It occurs on smaller, mostly off-grid systems, but not at a gigawatt scale grid like South Australia’s.

That’s where AEMO is headed. It warns that it is yet to decide exactly how that will operate, because it has not been done before.  

“The operating envelope for the South Australia power system with no synchronous generating units is yet to be determined,” it says,

“Neither AEMO nor any other grid operator has proven whether a gigawatt-scale power system with the configuration of South Australia can be operated with no synchronous generating units.”

It is likely, however, that much will depend on the deployment of grid scale batteries that have what are known as “grid forming inverters”.

It’s complicated technology, but the main difference is that rather than following the signals from the rest of the grid, these inverters have the capability of creating their own lead, and act as “virtual synchronous machines” that replicate the system strength and other grid services delivered by spinning machines.

In South Australia, there are already two big batteries that can operate in this mode – Dalrymple North and the expanded Hornsdale Power Reserve. But their total capacity for these services is relatively small, and may not be enough for AEMO to allow the last gas units to be switched off.

That, however, could change when the new AGL battery at Torrens Island, which at 250MW and 250MWh will be bigger than the combined capacity and storage of Hornsdale and Dalrymple, begins operation by early 2023.

At the moment, the only reason AEMO requires two synchronous gas units operating as a minimum is because one is needed as a backup in case the other fails.

“To cover the credible loss of a unit, a second unit must be online. It is either zero or two,” AEMO says. “One unit may provide the requirements, however AEMO must cover the credible loss of that service and hence a second unit is required.”

AEMO is also making sure that a couple of others issues that have emerged, mostly as a result of the rapid growth in rooftop solar PV, are also dealt with.

These are reactive control, RoCoF (the rate of change of frequency), and ramping support. This is mostly to do with the rapid change in output from rooftop solar, either as the sun goes down or because of cloud cover.

“Will AEMO be looking into operating South Australia with fewer than two synchronous generating units?” AEMO asks itself in the document. “Yes,” it says.

More information is expected to be released in a new document in early December. What is quite clear is that South Australia is at the edge of the innovation envelope and doing things that many thought was not possible. And shining the light towards a totally renewable future.

Source: 7 renewable energy lessons from South Australia

South Australia's stunning renewable transition

 From RenewEconomy

South Australia’s world leading green energy transition to a grid dominated by wind and solar has delivered the lowest wholesale prices in the country, slashed emissions, and presents no concerns on the issue of reliability, according to the latest annual assessment by the market operator.

Wind and solar, the report confirms, has delivered a world leading share of 62 per cent of local generation in the past 12 months, wholesale sales were the lowest on the mainland at an average of $48/MWh, and grid emissions fell to a record low.

The achievements have been celebrated by the Liberal state government who, against many expectations, has thrown its support behind the switch to renewables, aiming for “net 100 per cent” renewables by 2030 and 500 per cent renewables by 2050 as it looks to low cost wind and solar to drive green hydrogen and a green industrial revolution.

State energy minister Dan van Holst Pellekaan noted the recent landmarks that include the local distribution network becoming a “net exporter” of rooftop solar for the first time in September, and repeated the event four times in October, including for four hours on one Sunday.

“This capped an extraordinary month as South Australia securely ran at over 72 per cent renewable energy in October, managing 100% renewables at times on nearly every single day,” he said.

One of the most remarkable changes in South Australia’s electricity grid is the growing role of rooftop solar, which delivered up to 88 per cent of total demand at times in October, and could reach 100 per cent of local demand either this spring or next.

Van Holst Pellekaan noted that AEMO’s new report – the South Australia Electricity Report – forecasts that within a decade South Australia will be producing well over 150% of the state’s demand from rooftop solar at certain times of the year. 

“South Australia is now regularly breaking world records on renewables – operating securely and with the average residential market [electric bill] offer down $303 since we came to government.”

There’s much to celebrate in the AEMO report, particularly as it defies the continuing sniping of anti-renewable ideologues and pro-coal and pro-nuclear lobbies who insist that a modern economy cannot be supported by wind and solar, even if backed up by storage.

The AEMO report makes it clear that it can. It expects rooftop solar to supply up to half of all electricity demand within 10 years – depending on the outlook – and says that with the right protocols and mechanisms, and enough storage, this can be managed.

The emissions intensity of the South Australia grid reduced by another 9.8 per cent to 0.26 tonnes per MWh in 2020-21, the lowest levels to date.

“This change reflects increased penetration of rooftop PV and large-scale solar,” it noted. (No new wind has been added in the last two years).

The wider NEM has also been seeing reductions in emissions intensity since the peak in 2014-15, and reached its lowest levels to date in the past year, but was still almost three times as polluting as South Australia, with 0.70 t/MWh).

Rooftop solar delivered 15 per cent of total state generation and this will at least double over the next ten years, and new mechanisms, including the ability to “shut down” rooftop solar if needed, and a new mechanism known as “dynamic arming”, which allows the operators to best identify where this should occur.

The report also predicts the state will be host 20 per cent of all home batteries on the country’s main grid over the next five years, and is factoring in new green hydrogen projects, and a big uptake of electric vehicles, which could account for one third of all grid demand.

It says “electrification” and electric vehicles could create 5.5TWh of demand by 2030. By 2050, that number could jump to 19.7TWh, about 155 per cent of today’s underlying consumption. Around 13.TWh would come from household and business demand switched from other fuels, and 6.6TWh from EVs.

Currently, the number of EVs in South Australia is estimated at 1,386 (all road vehicles), with just 3.29GWh of consumption.

The pipeline of large scale wind, solar and battery storage projects is even more spectacular, with some 2.7GW of battery storage proposals, (including virtual power plants) and 7.5GW of large scale wind and solar proposals.

PVNSG  is small-scale solar (under 400kW)
Total solar has risen from 8.3% to 20.4% in 4 years

In the chart below, note how low the wholesale electricity price from 10.30 to 2.30 is, and how high it is from 5.30 to 8.30.  This allows battery storage to pay for itself.

The visionless and fossil fuel spruikers have kept on insisting that it is impossible to run a grid with 100% wind and solar.   South Australia will prove them emphatically wrong.   

South Australia solar hits 106% of demand

 From IEEFA

The combination of rooftop and large scale solar met all of South Australia’s demand, and more, during multiple trading intervals on Saturday, highlighting once again the rapid progress of renewables in Australia’s main grid [Note: this does not include wind generation.  South Australia is as windy as it is sunny, and could easily provide power for much of Eastern Australia]

South Australia is already a world-leader with an average of more than 62 per cent wind and solar in the past year, and it regularly reaches 100 per cent renewables, usually with the help of its 2GW of installed wind farm capacity.

Last October, for the first time anywhere in the world for a gigawatt-scale grid, solar output accounted for more than 100 per cent of state demand, with the surplus, including some gas and wind generation, exported to Victoria.

On Saturday, solar reached that landmark again, reaching what is likely to be a record peak of 106.1 per cent of state demand at 11.10am, and meeting at least 100 per cent of state demand for nearly an hour.

5 years ago, coal lovers were screeching about how renewables had made South Australia's electricity supply vulnerable to outages.  When a storm blew down part of the grid, they blamed wind farms, as if electrons generated by renewables are somehow heavier than those from fossil fuels.  Today, SA is an energy exporter to the rest of the east coast, and a new HVDC line connecting SA to NSW will increase this in future.

Bungala solar farm, South Australia

Coal power stations turn from asset to liability

 From Energy Synapse

Having cheap coal-fired generation in your electricity portfolio used to be one of the biggest competitive advantages for vertically integrated energy companies or “gentailers”. However, the role and value of baseload coal is quickly disappearing in Australia’s National Electricity Market (NEM), as the uptake of renewable energy grows. Companies with a heavy exposure to coal, such as AGL, will need to transition their business models if they want to survive.

Variable renewable energy (VRE) squeezing out fossil fuel generation has been the story of the last decade in the NEM (see chart below). Two big milestones have been reached in recent years:

1. 2017-18 was the first financial year where variable renewables generated more electricity than gas-fired generators. Furthermore, gas generation finished the 2020-21 financial year at the lowest level it has ever been.
2. 2019-20 was the first financial year where variable renewables generated more electricity than brown coal.

Note that in the chart above, VRE includes the electricity generated from wind power, large-scale solar, and rooftop solar.

Brown coal-fired generators need high capacity factors to remain economically viable and face increasing maintenance costs as they age. We have already seen a number of brown coal casualties, which have exited the market such as South Australia’s Playford B in 2012 and Northern in 2016, as well as Victoria’s Hazelwood power station in 2017.

So how exactly do renewables squeeze out fossil fuels? In the wholesale energy market, power stations submit bids stating how much electricity they are willing to supply and at what price. The market operator then dispatches the cheapest generators to meet the demand in the market.  In contrast to fossil fuels, wind and solar do not have a fuel cost. Their marginal cost is essentially zero. As a result, they frequently bid $0/MWh for their electricity. This means that more expensive generation is pushed to the back of the dispatch queue. This is also the same mechanism by which renewables put downward pressure on wholesale prices. It is known as the “merit order effect”. Furthermore, as renewables put downward pressure on prices, this eats into the profits of inflexible generation such as coal, which runs through the low price periods.

Brown coal-fired generators need high capacity factors to remain economically viable and face increasing maintenance costs as they age. We have already seen a number of brown coal casualties, which have exited the market such as South Australia’s Playford B in 2012 and Northern in 2016, as well as Victoria’s Hazelwood power station in 2017.

So how exactly do renewables squeeze out fossil fuels? In the wholesale energy market, power stations submit bids stating how much electricity they are willing to supply and at what price. The market operator then dispatches the cheapest generators to meet the demand in the market. In contrast to fossil fuels, wind and solar do not have a fuel cost. Their marginal cost is essentially zero. As a result, they frequently bid $0/MWh for their electricity. This means that more expensive generation is pushed to the back of the dispatch queue. This is also the same mechanism by which renewables put downward pressure on wholesale prices. It is known as the “merit order effect”. Furthermore, as renewables put downward pressure on prices, this eats into the profits of inflexible generation such as coal, which runs through the low price periods.

Note that Australia had a carbon price from July 2012 to June 2014. This increased wholesale prices and hence wholesale values, but fossil fuel generators also had to payout the carbon price, which is not depicted here. Thus, although the current wholesale values are significantly lower than the super profit era, the situation is not dire compared with historical averages. This is an important point. We are not suggesting that all coal-fired power stations need to close tomorrow. But rather that a 10 year closure plan is needed.

So what might the future for coal look like? South Australia can give us some good hints.

15 years ago, South Australia’s grid was dominated by coal and gas (see chart below). Coal fired power stations have high fixed costs, but low marginal costs. They are also slow to start and have relatively low ramping ability. This results in coal operating in a constant or “baseload” pattern.

In contrast, gas-fired generators have low fixed costs and much higher marginal costs [outside the USA]. They are also quicker to start and have higher ramping capabilities. This results in gas generators operating as “peakers”.

There are of course variations within these categories. For example, black coal generators tend to be significantly more flexible than brown coal generators and hence we see black coal being better able to follow pricing patterns in the market.

Similarly, closed cycle gas turbines (CCGT) tend to be less flexible than other types of gas generators and hence traditionally served what was known as the “intermediate peak”.

However, the main point here is that the traditional paradigm of “baseload” and “peak” comes from the economic characteristics of these generators.

In order for the grid to remain stable, it is vital that the supply of electricity is in balance with the demand for electricity at every point in time. Baseload plus peak is one option for the supply side, but it is not the only option, and certainly not mandatory. It is important to recognise that baseload generation is a business model, not a technical requirement. That business model is what is in danger.

The chart below shows what South Australia looks like today. This data is from the first 15 days in April 2021. The figure on the left shows the electricity demand from consumers and businesses. There is nothing particularly unusual about this pattern. However, once you subtract rooftop solar, large-scale solar, and wind, you are left with the residual demand profile on the right.

As you can see, there is no “baseload” left for coal to serve. This is not a pattern that coal-fired generators are able to follow.

This residual demand is predominately being met by gas generators, and to a lesser extent, batteries. As other states ramp up their levels of wind and solar, we can expect this NEM wide residual demand pattern to be met by a portfolio of highly flexible assets including gas, batteries, hydro, and demand response. It will also be aided by improved interconnections between regions.

Coal, however, does not have a role in this new world. More importantly for investors, coal has little value in this new world. The most valuable energy assets in a highly renewable grid will be the ones that offer the most flexibility.

Furthermore, this is not something that the contracting market will be able to overcome. Industrial energy users have been the traditional offtakers for coal generators. However, these energy users are increasingly moving toward renewable supply to reduce costs and manage their own carbon risks. For example, Tomago Aluminium, the single biggest energy user on the grid, recently announced that they will move to predominately renewable supply when their current contract with AGL ends in the late 2020s.

The pace of renewable energy installations, both utility-scale and behind-the-meter, continue to break records and exceed expectations.  As of July 2021, there were almost 6 GW of committed large-scale clean energy projects in the NEM and a further 2 GW in mid-stage development. Astonishingly, there are over 110 GW of large-scale clean energy projects in early development. Of course, most of these projects will not proceed as they will be found to be unattractive during the feasibility stage. However, the sheer scale of projects under development is a good illustration of the looming threat for coal.

Our internal analysis has shown that coal-fired power stations will struggle to survive beyond 2030 without government support. Savvy energy companies will recognise this risk and the need to have a transition plan to exit coal within the 10 years. On the other hand, those that ignore the risks will find themselves in hot water very quickly.

The Energy Security Board (ESB) has recently provided its final advice to Australia’s energy ministers as part of the post 2025 electricity market design project. The most controversial aspect of this advice relates to the introduction of a capacity mechanism (the Physical Retailer Reliability Obligation (PRRO)).

Many commentator’s first thought was that a capacity mechanism automatically equates to a subsidy to prolong the life of coal. Those heavily invested in coal should be very cautious about counting their chickens before they have hatch as this could very well be a double-edged sword for coal.

1. High uncertainty whether PRRO will actually go ahead

Firstly, the capacity mechanism is little more than a thought bubble at present. The ESB is seeking “in-principle support” from ministers and the go-ahead to develop a detailed design for the mechanism. This would then be put in front of ministers for approval by mid-2023.

“In-principle support” is very far removed from actual implementation. Even if the support is granted, the capacity mechanism could very well fall over during the design stage. It will be subject to substantial stakeholder consultation, and most industry players have already voiced strong opposition to capacity mechanisms.

2. Implementation unlikely before 2025

Even if the eventual design is approved, market participants would need to be given adequate notice before a major reform like the PRRO goes live. This makes practical implementation unlikely before 2025. For energy companies who elect a “wait and see” approach, this will be a long time to lose without a transition strategy in place.

3. PRRO design could actually backfire on coal

The design of the mechanism is still very much a blank slate. This means that there is a real risk that the eventual design could actually disadvantage rather than favour coal. For example, the capacity mechanism could be structured such that higher payments are made to faster responding and more flexible assets. These are traits that the ESB has already flagged that it wants to reward. The mechanism could also be structured to include an emissions intensity threshold, which could disadvantage or even completely exclude coal. The former point has not been explicitly raised by the ESB, but it could be a real possibility, especially if there is an change in federal government in the next or subsequent elections.

The capacity mechanism is simply too uncertain to be relied upon as a saving grace for coal. The transition to clean energy is a threat to traditional energy businesses. But it also presents a once in a lifetime opportunity to reap the rewards from developing a future proof business model that aligns market opportunity with customer and shareholder values. Regardless of the PRRO, the time to plan for coal closures is still now.