Too cheap to meter

by John Quiggin on October 19, 2020

That’s the headline for my latest piece in Inside Story, looking at the implications of zero interest rates for renewable energy sources like solar and wind. Key para

Once a solar module has been installed, a zero rate of interest means that the electricity it generates is virtually free. Spread over the lifetime of the module, the cost is around 2c/kWh (assuming $1/watt cost, 2000 operating hours per year and a twenty-five-year lifetime). That cost would be indexed to the rate of inflation, but would probably never exceed 3c/kWh.

The prospect of electricity this cheap might seem counterintuitive to anyone whose model of investment analysis is based on concepts like “present value” and payback periods. But in the world of zero real interest rates that now appears to be upon us, such concepts are no longer relevant. Governments can, and should, invest in projects whenever the total benefits exceed the costs, regardless of how those benefits are spread over time.

{ 35 comments }

1

Tim Worstall 10.19.20 at 10:21 am

I think you’ve a typo in there:

“On average, the cost of capital has almost halved, implying a near doubling of the time a project needs to pay a full return to investors.”

Halving rather than doubling.

A change in the cost of capital also applies to any high upfront and low operating cost method of energy generation.

” the promise made decades ago by the promoters of nuclear power: that they will deliver electricity “too cheap to meter.” (Even with access to cheap capital, nuclear power never delivered on that promise.)”

True, but now capital is even cheaper the numbers still change. And, oddly, so do the economics of fossil fuel extraction. Of at least some methods, it’s the establishment of the infrastructure to exploit that costs much of the money, not the operating costs. Lowering the cost of capital reduces the costs of all capital uses, no?

This might be going just a little far:

“But in the world of zero real interest rates that now appears to be upon us, such concepts are no longer relevant. Governments can, and should, invest in projects whenever the total benefits exceed the costs, regardless of how those benefits are spread over time.”

As Stern chews through even at a zero financial interest rate there’s still a societal or social one.

2

Steve 10.19.20 at 12:33 pm

Interesting article John. Given the current concern over Australia’s apparent vulnerability to oil shortages due to interruption to supply, do you have any comment on potential interruption to supply of PV panels? Currently I gather most are sourced from China, with Australian production unable to compete and closing down some years ago. And China is playing hardball with Australian trade
at the moment.

3

Dave Heasman 10.19.20 at 11:12 pm

” the promise made decades ago by the promoters of nuclear power: that they will deliver electricity “too cheap to meter.” ”

I thought that claim was made in regard to the UK Zeta project – MHD – magnetohydrodynamics, getting energy from seawater. Or moonbeams or cucumbers, I dunno.
My old Prof was a junior on the project.

4

Tm 10.20.20 at 7:43 am

How is solar power capacity developing in Australia? When will you reach 100% renewable?

5

Lee A. Arnold 10.20.20 at 10:07 am

We need a good explanation for why the interest rate is zero. (It must not be an alternate description of the fact that the interest rate is zero, of which there are plenty.)

6

Hidari 10.20.20 at 11:13 am

This is obviously good news, and I hate to be that guy but the time when Australia (or any country) ‘runs on’ 100% renewables remains many decades away, unless you are talking about a time when all transportation, of all sorts, is either ‘ecological’ (i.e. bikes) or else 100% electric.

In the absence of any existing passenger flight ‘mechanism’ that is purely electric, there will be no countries, anywhere on Earth, that run purely on renewables until the second half of the 20th century. People often ‘cheat’ by talking about (e.g.) Iceland as being run on ‘100% renewables’. It is not. grid electricity in Iceland is run on 100% renewables. Not all power (their petrol is all imported of course, delivered on carbon dioxide producing boats).

And what is life like in Iceland?

Electricity in Iceland is indeed very cheap, although you are still charged for it, make no mistake. And what do they do with all that cheap power?

‘They have been successful in attracting aluminum smelters with cheap electricity. It’s so cheap that it makes it economical to ship bauxite from Australia and the Caribbean for energy-intensive smelting. ‘

In other words, to use petrol driven ships to transport bauxite, ripped out of the ground by petrol-using diggers, and driven to the coast by petrol driven trucks, and then use that to make aluminium. And how ‘green’ are these aluminium smelters? Hard to find out. Strangely, no one seems to want to know.

(https://www.theglobeandmail.com/globe-drive/culture/technology/why-steaming-hot-iceland-has-very-cheap-power/article593551/#:~:text=Electricity%20prices%20are%20low%20in,benefit%20of%20nearly%20free%20heat.)

7

Hidari 10.20.20 at 11:37 am

‘Aluminium smelting is the process of extracting aluminium from its oxide, alumina, generally by the Hall-Héroult process. Alumina is extracted from the ore bauxite by means of the Bayer process at an alumina refinery.

This is an electrolytic process, so an aluminium smelter uses huge amounts of electricity; smelters tend to be located close to large power stations, often hydro-electric ones, in order to reduce the overall carbon footprint. This is an important consideration, because large amount of carbon is also used in this process, resulting in significant amounts of greenhouse gas emissions.’

https://en.wikipedia.org/wiki/Aluminium_smelting

71% of Iceland’s electricity goes towards aluminium smelting.

It’s easy to find out how much Carbon Dioxide Iceland ‘consumes’ so to speak: not nearly so easy to find out how much it produces.

8

notGoodenough 10.20.20 at 11:39 am

Once again, JQ delivers an interesting analysis of renewable energy. I would say it also represents a fascinating decoupling between the energy/resource and financial return on investment.

It will be interesting to see if this can lead to improvements at the recycling side too (although financial incentives may lean the other way, perhaps a built in recycling cost at sale or a mandatory regulation might help tip the scale back – thoughts on this would be welcome).

9

notGoodenough 10.20.20 at 11:52 am

Once again, JQ delivers an interesting analysis of renewable energy. I would say it also represents a fascinating decoupling between the energy/resource and financial return on investment. It will be interesting to see if this can lead to improvements at the recycling side too (although financial incentives may lean the other way, perhaps a bult in recycling cost at sale or a mandatory regulation might help tip the scale back – thoughts on this would be welcome).

Tm, not to threadjack, but I just wanted to offer a quick response (just in case you don´t have already to hand). This is all a bit handwavy (and I am not an expert in the macro, only in storage!) so take this with copious quantities of salt:

How is solar power capacity developing in Australia?

Renewables in Australia, including solar, are generally developing pretty rapidly – if I recall correctly, somewhere around 24% of Australia’s total generation (as of 2019, and up 2.7% from 2018)[1]. In terms of % of total generation, it seems it is Wind (8.5%), Hydro (6.2%), Solar (7.6%, but I think this includes both PV and solar thermal). Of course, we have to be a bit cautious – generation =/= consumption, and off-grid vs. on-grid is a key point (though total renewable grid electrification would facilitate off-grid renewables).

Interestingly, there are a few bits that stand out to me in terms of Australia:

1) Hydro is no longer the biggest renewable sector (as it has been with other countries at the 100%-ish mark).

2) Sydney looks to be proving an interesting test-case. Supposedly it will be 100% renewables, via a deal with Flow Power, and IIRC mostly (ca. ¾ production) off of wind (Saphire, Inverell) with the remainder (ca. ¼) solar (Bomen, Wagga Wagga; Shoalhaven, Nowra).

When will you reach 100% renewable?

Prognostication is difficult, and of course the political and social climates could change things dramatically. Currently (assuming development continues at its current pace, which is a big assumption) Australia is set to hit 50% by 2030 and 100% by 2050, with some suggesting an investment of ca. 22 billion per year (not small potatoes!) to meet these targets (without which the other main way of meeting these would be through slight-of-hand via carryover credits) [2].

However, one of the big handicaps seems to be the lack of planning and assurances – though some states have plans for total decarbonisation, a central strategy and firm commitment is still (as far as I can tell) lacking. On the other hand, recent events like the tragedy of the terrible fires may well provide a bit of public pressure and impetus to push this stuff more rapidly.

As far as I am aware, the generation is relatively well understood (though there needs to be more forethought in terms of recycling), and it is the storage which will be the trickier issue to solve (though not necessarily insurmountable, as I noted on a previous thread [3]).

While the tech still needs to keep advancing, I think one of the main limiting factors is the lack of investment needed for actual wide-spread adoption (though that does come back to an extent, as infrastructure spending often does, the combination of powerful fossil fuel lobbying and ideological presuppositions of many are pretty big handicaps to overcome). Perhaps the zero interest rates may help!

Anyway, as I say exercise a lot of caution with this post (I am offering my current understanding, but as I am not an expert I offer this with substantially lower than usual confidence), but there are my 0.02$ for what it is worth…

[1] https://assets.cleanenergycouncil.org.au/documents/resources/reports/clean-energy-australia/clean-energy-australia-report-2020.pdf

[2] https://www.uts.edu.au/sites/default/files/article/downloads/ISF_100%25_Australian_Renewable_Energy_Report.pdf

[3] https://crookedtimber.org/2020/08/25/every-day-coal-is-killing-us/

10

Zamfir 10.20.20 at 1:16 pm

I feel like there’s a step missing here?

You’re painting a scenario where:
– private investors are willing to loan to the government at basically zero interest, after inflation. They just want to safely shift their income in time, and are not looking for positive returns
– solar projects have lifetime benefits that exceed their cost
– but those private investors are not financing solar projects themselves, or at least not on the scale that you want. Otherwise the government would feel no need to do it in their place.

This trifecta can make sense. It implies on the one hand that solar projects have risks that investors don’t want to take on, and on the other hand that the government sees social benefits beyond the monetary returns on the projects. So the government takes on the project risk, as an effective subsidy to generate the social benefits of solar power.

But in that light, it would be misleading to focus on the near-zero interest rate on bonds. It’s the risk that is the more important factor, that should be the core of the analysis.

11

Gorgonzola Petrovna 10.20.20 at 8:59 pm

When electricity is generated, its cost is zero. But what about when it’s not generated?

I heard somewhere recently (don’t know it’s true) that in order to satisfy the demand regardless of weather conditions, solar power stations have to employ some very advanced gas turbines. Turbines have to be advanced to be able to ramp it up from zero to max output in a matter of seconds, when clouds cover the sun. And for the same reason the operation of these turbines can’t be, naturally, too fuel-efficient. Like if you go pedal to the metal from 0 to 60 in 5 seconds, then hit the brakes and stop, and keep repeating it. Imagine the gas mileage.

Is any of this true? And if so, is it included into the cost calculation?

12

Omega Centauri 10.20.20 at 10:31 pm

There are several groundmount projects around the world that have come in with even lower prices for the generated electricity. As long as the risk accrues to the project developers, that figures into the interest rates that banks are willing to lend at. Unfortunately the current risk premium is significant. I think the principal risk is whether the offtaker will continue to pay the agreed upon price decades from now. There was significant pressure during the PG&E bankruptcy to abrogate contracts for the future purchase of solar electricity which had prices several times the rate a new solar-farm would be willing to charge. This is always a significant risk for legacy projects competing against any rapidly advancing technology. Would the purchaser be better off waiting until the price/cost drops even further and therefore delay commitment.

Obviously government could step in and assume these risks, since the social benefit accrues to the citizens.

Actually we need solar to be really cheap, as the most affordable way to cover the issue of variable production is to significantly overbuild the resource, so that even during periods of unfavorable weather, there is still enough to go around. Overbuilding can significantly reduce the amount of storage needed, but assuring the project developers of a significant return on capital invested has to be tackled, otherwise the rate of buildout will be too timid.

13

notGoodenough 10.20.20 at 11:09 pm

Hidari @ 6

I am off to sleep soon, so I don’t have time to fully address your points with the depth it warrents (my apologies). However, just to hit a few rather quickly:

1) Electrification of transportation (cars, lorries, etc.) is more-or-less a technologically resolved issue. Yes, there is still substantial room for improvement (not least in recycling and sourcing raw materials), but with a 100% renewables grid it is certainly feasible to have a zero emission (or near zero emission) road and rail transportation.

2) I am not sure why you keep demanding electrification of air transport, when what we care about is “green” air transport. AFAICT the best technology for this is hydrogen power as 1) the gravimetric densities make sense and 2) there is technology transfer from the gas turbine systems. I have already talked several times about the value of hydrogen for air, and while I won’t claim to be an expert I was gratified to recently see Airbus appear to be taking this route for much the same reasons I propose it as an aviation solution. While advances in this area should be sped up (and there are substantial challanges to adress), it seems to be less a technological issue and more a “we-are-looking-for-risk-free-profit” issue (so investment and incentives in this area would help a lot). In short, this seems to be more a fiscal/political issue than a technological problem.

3) Aluminium production from bauxite is (as far as I can tell) polluting for two main reasons – a) the use of fossil fuels to power it and b) the current electrolysis process uses a carbon counter electrode, which oxidises during the process. The bulk of CO2 emissions comes from “b) fossil fuel electricity”, accounting for ca. 70% of the CO2 emissions for this process [1]. Indeed, estimates put the reduction (going from fossil fuel to hydroelectric, like that in Iceland) of tCO2 / t Al from 11.5 to ca. 2-4. That is, I hope you would agree, a reduction worth having. It is possible to extend this still further by using carbon-free, inert anodes (which would also help eliminate other harmful gasses produced), and while this raises the overall energy required if we have zero-emission energy production it won’t raise emissions overall.

And while I always urge caution regarding industrial claims, it appear Rio Tinto are pushing to introduce this technology by 2024 (Project Elysis, started 2018).

Summary

In short, again, it is true that renewable energies in and of themselves won’t solve all the issues – but it will go a long way. When combined with other technological developments, there seems to be little reason not to dramatically cut emissions in the short to medium term, and target zero emissions in the longer term (from a technological POV).

Heavy investment in green technologies will help drive this, and if we can combine this with the powerful social and political reformations I believe are important for an equitable society, then the future is not so bleak.

Now how likely this is to happen from a social and political POV is another matter – but that is a thread for another day, as I suspect this is already veering a bit off topic (apologies to John Quiggin for the detour).

I hope you find this an interesting starting point for your consideration.

[1] http://dx.doi.org/10.3390/su10082881

14

notGoodenough 10.20.20 at 11:12 pm

Note: sorry again, quick typo because I am sleepy.

It should read The bulk of CO2 emissions comes from “a) fossil fuel electricity[…]”

15

Kiwanda 10.21.20 at 2:18 am

Re de-carbonization, beyond all-renewable generation of electricity, the current idea is to “electrify everything”, so, as reviewed in the context of the alternative of “green hydrogen”: battery-electric cars, trucks, and short-haul aviation; electric heat pumps for heating water and buildings, and the heat needed for most industrial processes; maybe electrolytic methods for steel production instead of coke. In addition, “green hydrogen” produced by electrolysis could support long-haul aviation, shipping, chemical feedstock needs, seasonal energy storage, “bursty” industrial heat, steel production. Cement and aluminum production currently involve chemical reactions that involve CO2 as a product; apparently there’s alternatives for cement being researched. All of these are economically feasible, or even economically attractive, but require massive changes.

16

John Quiggin 10.21.20 at 3:41 am

A response to Zamfir @10. Private investors require a return (the “equity premium”) which exceeds the bond rate. No one knows why: this is “the equity premium puzzle”. Based on C20, when real bond rates were low but mostly positive, there was a corresponding “risk-free rate puzzle”, which is even sharper now.

On most (not all) explanations of these puzzles, the policy implication is that, if government enterprises in a given sector can deliver the same outcomes as private enterprises, then public ownership should be preferred. This gives you a mixed economy since private ownership is more efficient in a lot of cases. The sharpest case is where government businesses lose money while private enterprises are profitable.

When governments can borrow at zero, this sharp case is the only relevant one. If governments can borrow at zero, and invest profitably in the face of private sector competition, they should do so.

17

Hidari 10.21.20 at 7:55 am

‘This gives you a mixed economy since private ownership is more efficient in a lot of cases’

What does the word ‘efficient’ mean in this sentence? How is efficiency measured (quantitatively)? By whom? For what purposes?

‘The sharpest case is where government businesses lose money while private enterprises are profitable.’

You have totally lost me (my fault, I’m sure). What does the phrase ‘sharpest case’ mean?

18

notGoodenough 10.21.20 at 9:03 am

Gorgonzola Petrovna @ 11

Satisfying demand regardless of weather is an issue of “intermittency and variability”. I´ve already touched on this a bit [1], and I am wary of going too deep given that it is kind of derailing the thread. The in a nutshell is that there is a plethora of energy storage technologies out there, and that what we need to look at is selecting that/those most suitable for the planned application(s).

For example, different renewables have different degrees of intermittency and predictability, so the energy storage solutions may vary (or vary in ratios of use, etc., or require you to consider nuclear as a mitigation or base load technology). Moreover, depending on the size of your area and how well it is integrated with a global network, it may be possible to use regional variations in weather, etc. to mitigate too. There is also the issue of what sort of distribution network you have in mind – e.g. demand / generation profiles can vary a bit depending on micro vs. macro grid.

There are a range of options out there (e.g. pumped hydro, flywheels, etc.), but in general batteries are one of the more popular and common solutions. I think there is some interesting developments in the pumped battery (redox flow) world that will make some big advances here (employing Li-batteries for this sort of application is, to my mind, not a sensible use of the technology).

So, while gas turbines are one potential solution to the issues of using renewables, it seems that there are other technologies which are less problematic. And, while I think I would need to talk more to an engineer regarding load/demand to comment in more detail, as far as I am aware there is nothing a gas turbine offers (in terms of energy storage and supply) that cannot be attained via other methods (even if those other methods may have drawbacks, e.g. being more expensive to implement or whatever).

In short, to the best of my knowledge gas turbines are not necessarily required to deal with intermittency and variability, so I don´t know that this is necessarily a fundamental issue.

[1] https://crookedtimber.org/2020/08/25/every-day-coal-is-killing-us/#comment-804535

19

John Quiggin 10.21.20 at 9:21 am

@Hidari I’ve been writing in a hurry as usual. For “more efficient” just read “making better use of resources and therefore more profitable”. There are separate arguments for public ownership or regulation in cases where maximizing profits produces negative externalities, relies on monopoly and so on.

For “sharpest case”, I just meant that it’s pretty obvious that if a private enterprise makes money and a public investment in the same industry loses money, then (abstracting from the problems mentioned above) the public shouldn’t be investing.

20

Zamfir 10.21.20 at 11:28 am

@John, is the ERP really a necessary concept to introduce here? It’s in itself a nightly slippery and contentious topic. And then on top of that slippery surfsce, we would get the second complication whether its lessons would apply to the specific case of building a lot of solar projects. It might be wiser to skip directly to the specific risks of solar projects.

As I see it, the big uncertainty there is simply prices. Uncertainty in capex and opex cost are very manageable, more than for other energy projects. But prices are a crazy gamble, especially in the long run. The spot price of electricity during sunny hours might indeed become too cheap to meter – which means bankruptcy for projects that cost 2ct/kWh to build. Interest rates are not the determinant , the principal itself is at risk there.

Form the article, I am not exactly sure what you are proposing. A common practice is that government auctions off a guaranteed kWh price for a long period, so it takes on the price risk instead of private parties. The alternative might be that the government borrows money and builds the projects itself (perhaps by tendering fixed-cost contracts for that construction from private parties).

I don’t think that makes much of a difference. In either case the government commits to future payments (either payment for delivered fixed-price kWhs, or bond repayments),the government receives kWhs, and it might not be able to sell those kWhs at rates that cover the committed payments.

I personally support this, as a means to transition away from fossil fuels. But strictly as a monetary business decision, I am not sure it adds up at all. We should only do this, if we accept that the government might well lose money on the program.

21

Richard M 10.21.20 at 12:57 pm

@Hidari

There is supposedly technology under development which should eliminate the direct CO2 production from aluminium smelting:

https://www.theguardian.com/environment/2018/may/10/new-technology-slash-aluminium-production-carbon-emissions

Of course, that would do do little if the electricity used is from burning coal, the people working in the plant drive to work each day in a petrol-powered car, and so on. On the other hand, cheap low-carbon aluminium would change the emissions budget calculations involved in things like electric cars and wind power.

It seems plausible there is a good equilibrium where we do everything, and a bad one where we do nothing, and not much meaningful in between. Which is what makes progress hard in a political system designed to produce compromises.

22

lurker in the dark (and cold, and wet) 10.21.20 at 2:20 pm

‘Satisfying demand regardless of weather is an issue of “intermittency and variability”.’ notGoodenough, 18
Solar is predictable in a negative way: there is zero solar production at night. Whether this is a problem or not depends. If all you need is to get over a single night, no biggie. OTOH if your predictable peak energy use is during winter, a couple of months into a gloom with nothing an Australian would recognize as sunlight, solar is not for you.

23

steven t johnson 10.21.20 at 3:31 pm

The public should not invest in enterprises that lose money while private enterprises do?John Quiggin supports closing down the US Postal Service. And supports private weapons manufacturing too. Good to know, if JQ actually meant to say this.

24

Gorgonzola Petrovna 10.21.20 at 5:48 pm

@18 “but in general batteries are one of the more popular and common solutions”

On an industrial scale? Somehow I doubt that battery storage is, at this time, the common solution. Are you sure?

25

John Quiggin 10.22.20 at 5:22 am

Zamfir @20 A comments thread is not the best place for this kind of discussion, but a central part of the equity premium debate is that there should not be a large premium for (pure) risk. Sure, the government might lose money, but as long its investments make money on average this isn’t a problem. Arrow and Lind did the classic paper on this in the 1970s, but the subsequent literature is full of confusions, partly because the anomalous equity premium wasn’t recognised until the 1980s, and was treated (given Mehra and Prescott’s title) as a puzzle, rather than as a phenomoenon with serious policy implications.

@23 The Post Office loses money (in the US) because it is obliged to deliver letters at a price less than cost. In Australia, this obligation is offset by a specific payment and Australia Post (our Newspeaky name for the Post Office) makes money.

As regards weapons, I don’t think the people killed and maimed by those weapons would care much whether they were produced by a government enterprise or a private firm. Please take a little time to think before posting cheap shots (sic) like this.

26

Zamfir 10.22.20 at 8:19 am

@JQ, I am not complete clear yet, what you mean when you talk about “making money”, from the perspective of the government building solar projects? Does it include off-the-books benefits, like reduced carbon emissions or the consumer value to the country of low electricity prices? Or is it a strict cash issue: the government sells electricity to private parties and expects to take in more money (over time) than it spent? And if it’s the latter, is there much government control over prices involved?

If it’s the most restrictive sense (only cash, little direct price setting), how can we be confident that the expected return is positive? Even at current levels of wind and sun, our local spot prices already show strong correlation with their production. That’s just the market face of the intermittency problem.

Right now, here in the Netherlands, you would not get much more than 2 or 3 ct/kWh, on average, for solar power on the spot market. That number can still go down a lot, depending how the interplay between PV and storage plays out. Over the next 20 years, the average market price for solar power may well be closer to 0 than to 2 ct/kWh.

I call that a risk, in the engineering sense of “something that may go wrong with the plan”. More than in the finance sense of zero-mean variance around an expected value . This risk may well drag down the expected value below zero, I don’t know.

27

Tim Worstall 10.22.20 at 11:00 am

Not wholly and exactly so:

“‘They have been successful in attracting aluminum smelters with cheap electricity. It’s so cheap that it makes it economical to ship bauxite from Australia and the Caribbean for energy-intensive smelting. ‘”

You process the bauxite close to the mine site. It’s low value stuff. $50 a tonne as a reasonable rule of thumb. Transport costs are thus a thing to worry about. Bauxite is processed into alumina (aluminium oxide) via the Bayer Process – effectively, boiling the bauxite in lye or sodium hydrixide. Jamaica has four such plants, Iceland none.

Processing the alumina into aluminium takes that electricity. A slightly old rule of thumb being $900 of electricity per tonne of aluminium produced. The alumina might be between $200 and $600 a tonne. Which is why it is transported to where the electricity is cheap.

As an historical matter the location of an aluminium smelter usually was decided by “Where can we get cheap electricity?”. One on Anglesey because of a local nuclear plant. Varied in Siberia because big river where a dam could be built – much the same in Quebec and Pacific NW of US. The Al plant having a long contract to take the power being the financial underlay of the decision to build the pwer plant/dam.

Iceland’s just the latest iteration of the process.

28

notGoodenough 10.22.20 at 12:30 pm

lurker in the dark (and cold, and wet) @ 22

“OTOH if your predictable peak energy use is during winter, a couple of months into a gloom with nothing an Australian would recognize as sunlight, solar is not for you.”

I am surprised that you appear to think that people working in the energy field have never considered that it gets darker in winter. I am also baffled that anyone would think that implementation of renewables would be only one technology – I have yet to see anyone working in the field say we should only have solar (or only wind, etc.). Indeed, I have previously specifically noted (e.g. in a reference in a previous comment on this thread) that we need a “diverse basket of generation”.

I would also note that the specific comment you are replying to was with respect to the short-term intermittency described in 11, not the long term variability you are describing. Longer term storage issues will require different considerations – even pumped hydro etc. may not be sufficient, depending on what your timescale and supply/demand looks like.

My general and generic response to your comment would be that a diverse basket of generation (so, you know, not only solar panels, because that would be rather foolish), coupled with diverse storage and distribution, a good understanding of your supply and demand variability, and considerable thought about implementation, would likely make renewables a generally feasible thing to implement (potentially alongside other technologies) in order to achieve dramatic reductions in greenhouse gasses (and, potentially, even reach the zero emission target we desperately need).

If you want a more detailed response giving a sensible outline of the required technologies for the widespread use of renewables in specific cases you have in mind, we can discuss a more tailored response. My consultancy rates are in keeping with those typical in my industry, so if you happen to represent a major organisation or governmental body, I believe you will find them reasonable (though I would recommend hiring a broad team of experts to meet the broad range of fields you will wish to address).

29

notGoodenough 10.22.20 at 12:32 pm

Gorgonzola Petrovna @ 24

“On an industrial scale? Somehow I doubt that battery storage is, at this time, the common solution. Are you sure?”

Gorgonzola Petrovna, it would probably help the discourse if you more carefully read what I have written. I did not say “battery storage is the most common industrial scale solution”, because that is a statement so broad as to have no real meaning (it doesn´t define for which specific purpose – e.g. arbitrage, load smoothing, etc. – or what is “industrial scale”). Instead, what I wrote was [with respect to the short term intermittency issue you describe] “batteries are one of the more popular and common solutions”.

To make the point more broadly, I have already noted that the solutions selected (and remember we are talking a “basket”, not a one-size-fits-all here) will depend on what the needs are, what already exists, and likely a wide variety of social and political influences which have nothing to do with the technology in question. Another very important consideration for the future is how you envision your networks being developed – are you targeting micro or macro grids? Different countries may well come to different conclusions (and what works well in Ireland may well be different to what works well in India). Etc. Etc. Etc.

Systems are also employed for a variety of reasons, which can include arbitrage, load smoothing, back up system storage, micro-macro grid transfer, etc. So, when considering the variability and intermittency issue, one also needs to consider the bigger picture – and what is the intended use (and what timescales you are planning, and what other sources you have available).

The situation you described in 11 was, essentially, an issue of shorter-term intermittency. Longer term storage issues require consideration of other timescales (and so the possible use of pumped hydro storage, exploiting global distribution, etc.) which will likely require consideration of other technologies. But, because this is blog comments rather than a series of voluminous books addressing every possible topic, I confine myself to the specific point raised to avoid irritating our generally forgiving blog-host.

To address your skepticism about the usage of batteries, within the deployment of renewables batteries are indeed one of the most popular energy storage solutions (for certain specific applications). For example, solar and wind farms typically employ lead-acid, li-ion, vanadium, and NaS technologies [1], with the following considerations:

Lead acid offers moderate specific energy, high reliability, mature technology, and is less costly, and is regularly employed in substations the world over;

Li-ion offers higher energy density and energy conversion, but is costly (and relies on Li, which is identified by the EU as an “at risk” resource). However, examples do exist (cf. Hornsdale, a 150MW/194MWh grid-connected energy storage system co-located with the Hornsdale Wind Farm used for energy arbitrage and as a continuous spinning reserve; the Vermont GMP 4MW facility used to backup power, for microgrid capabilities, and demand charge reductions);

Vanadium redox flow offers a high response time, good cyclability, and can flexibly alter the depth of discharge on the fly (cf. the Hokkaido 6-MV vanadium redox flow battery configured to the 30-MW wind farm for peak frequency regulation);

Sodium sulfur is a relatively mature technology, and offers a long, continuous discharge and high cycle time which helps shift energy in time and traces wind power schedule output (cf. Japan´s 34-MW sodium-sulphur battery coupled with a 51 MW wind farm, which has a 42 MW stabilisation operational voltage).

While redox flow batteries are less common, I believe the advances being made will prove very interesting – particularly in comparison to the longer-term storage systems (like pumped hydro). This is, however, speculative on my part, so feel free to treat as very tentative.

There are, of course, other technologies in the world and, depending on your planned application, some of these may well be more suitable than batteries (for example, I think hydrogen makes more sense for use within planes). There is, however, as far as I can see nothing intrinsic to GTs which makes their replacement impossible (from a technological perspective). If you are aware of any reason which would render it impossible for greener technologies (including, but not limited to, batteries) to replace, I would certainly be interested in seeing your data.

So, you are welcome to remain skeptical that batteries can be employed at the “industrial scale” (whatever you mean by that), but in order for us to have any further sensible discussion you would 1) have to give a clear response as to what you mean, 2) explain how this is relevant to my comment, and 3) actually read what I write.

[1] Grid-scale Energy Storage Systems and Applications,
DOI 10.1016/C2017-0-00957-6

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Kiwanda 10.22.20 at 10:41 pm

lurker in the dark (and cold, and wet):

OTOH if your predictable peak energy use is during winter, a couple of months into a gloom with nothing an Australian would recognize as sunlight, solar is not for you

Yeah, wind and solar are variable, and the energy they supply cannot always meet demand. But demand is variable, and “baseload” suppliers of electricity are currently supplemented with dispatchable suppliers, such as gas peaker plants. For the relatively small additional supply that gas peakers give, batteries are close to out-competing them. For larger supply needs, like meeting the early evening gap between supply and demand due to people coming home from work and the sun going down, (the “duck curve”), pumped-storage hydroelectric seems to be currently the most economical dispatchable low-carbon source, but prospects for expanding it seem limited. Since batteries for this purpose don’t need to move around, the way lithium ion batteries in cars do, they can be a lot heavier, and so cheaper, e.g., “flow” batteries. For even larger supply needs occurring seasonally, like “the wind dies for a long time in winter,” it might be possible to run turbines with “green hydrogen”, produced by electrolysis using electricity produced by carbon-free sources.

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John Quiggin 10.23.20 at 2:21 am

@Zamfir

  1. I support pricing carbon emissions, but the argument is independent of that.

  2. As regards “how can we be confident that the return is positive”, this question must be asked of any investment.

  3. As a general proposition, an investment in producing a particular good loses money if it is more costly than competing suppliers or if too much is invested.

  4. I don’t think the specifics of market design you raise are a big problem. Since they vary from place to place, I wouldn;t want to be too firm about that.

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Zamfir 10.23.20 at 6:38 am

@JQ, thanks for the patience.

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Gorgonzola Petrovna 10.23.20 at 8:04 am

@29,
You convinced me that battery storage can handle short-term intermittency, although I still have the impression it’s not commonly used yet. Now, I highly doubt that battery’s lifetime is even remotely comparable to that of a PV module. If the 100-dollar ups under my desk (2-year warranty, not 25 years) is any indication, they get warm, may need cooling. And then, the backup system (for the current, not imaginary future installations) is a completely different story, right? My only question is: is all that included into the cost calculation? Because the post only says “Once a solar module has been installed, a zero rate of interest means that the electricity it generates is virtually free.”

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taciturn biscuit 10.23.20 at 9:09 am

A couple of technologies which are relevant and haven’t come up:

Compressed-air energy storage, which can use underground caverns (old mines or salt domes), combines the low storage costs of grid-scale pumped hydro storage with the easier deployment of battery storage. The compression produces heat, which needs to be added back when expanding the air; the two existing installations (Huntorf in Germany and McIntosh in the USA) use natural gas, but hydrogen also works, or thermal storage.

For air travel, synthetic hydrocarbons (produced by the Fischer–Tropsch process) have the benefits of working with current engines and storage technologies, which are highly efficient and mature. Their main downside is the energy inefficiency of producing them, but given the cost projections of solar and wind energy that’s starting to look a lot more minor.

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Hidari 10.24.20 at 7:07 am

It is vitally important in these discussions to sharply differentiate between technologies which actually exist and which are, right now, being sold on the market (and delivered, and set up, and used, and which generate profit for actually existing companies), and technologies which are only in the prototype phase, or even which only exist ‘on the drawing board’.

I notice that on this thread there is a lot of creative use of language to blur this distinction and to discuss hypothetical technologies as if they actually exist and can be bought in ‘the real world’.

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