Energy diversity will bring seismic shift to mix as renewables expand

diversifying energy, the venture magazineCoal has always been king when it comes to Australia’s energy sector. The first shipment left Newcastle in 1799, just more than a decade after the First Fleet’s arrival. Coal still supplies nearly 90 per cent of electricity generation in New South Wales and 61 per cent nationwide. Under the Paris Accord of 2015, the country has pledged a 26 to 28 per cent reduction in CO2 emissions by 2030. In order to do this, renewables such as solar, wind, and hydro power need to play a larger part of the mix for energy diversity. The transition is a complex one, that in some ways cuts to the heart of the national identity.

Reliance on Fossil Fuels

diversifying energy, the venture magazineAustralia is the world’s No. 1 exporter of both liquified natural gas and coal, generating more than $100 billion in annual revenue. Domestically, 94 per cent of energy demands were met by fossil fuels in the form of coal, gas, and oil in 2018. Traditional sources of energy clearly are a key part of everyday life. Still, most of the country’s coal and gas are exported, and as production infrastructure ages, prices are increasing. According to AMP Capital, increasing utility prices means that Australians of median income spent 4.8 per cent of disposable income on power and gas last year, up from 4.4 per cent two years prior. Lower income households spent 10.6 per cent on those utilities, up from 9.6 per cent in 2016. Whilst it is true that this is partly due to government subsidies for renewables, those subsidies make up a small per centage of consumer costs. Most of the increase comes from competition from international export markets. In the long run, energy diversity with a mix of renewables and fossil fuels will bring utility bills down.

Having more money in your pocket is motivation enough, but there are environmental concerns as well. The average Australian uses 5.7 million tonnes of oil and is responsible for 16 million tonnes of CO2 emissions each year, one of the highest averages in the world. From the standpoint of sheer availability, this is unsustainable over the long term.

“We are currently experiencing a once-in-a-generation transformation in the mix of power supplying Australian homes and businesses,” Fiona Orton, future grid manager at TransGrid told Utility Magazine. “Today, almost 90 per cent of electricity generated in NSW comes from coal, but over the next 20 years, the majority of these power stations will reach the end of their technical lives and are likely to retire.”

The Genius of ‘And’ 

Transitioning to an energy diversity, mixing in more renewables, will not happen overnight, but there are ways to speed things up by repurposing existing coal power stations to renewable energy plants. In Germany, where coal plants are set to close by 2038, some are choosing to convert to battery storage hubs for renewables. As seen with Tesla’s big battery in South Australia, such storage makes renewable energy more consistent and reliable by saving surplus power from particularly windy or sunny days and keeping things running when skies are calm or cloudy.

diversifying energy, the venture magazineJason Sharam, owner of Linked Group Services in the mining town of Mackay, QLD, manufactures products for coal mining companies. Those products, however, use solar power. “I guess people are coming to the realisation that the beauty is in the genius of ‘and,’ so mining and renewables, as opposed to the tyranny of ‘or.’ It’s not one or the other; it’s both together,” Sharam told the ABC. He knows coal production won’t last forever and thinks coal-heavy areas would be wise to make themselves renewable experts as well. “It could be 20 years, could be 50 years, may even be 100 years before we stop using coal to generate energy. But it’s going to stop,” he said.

A decade ago, coal-fired power plants near Port Augusta supplied a third of SA’s electricity. Now, it’s home to the 220 megawatt Bungala Solar Power Project, which will cover more than 800 hectares when completed. It’s the largest solar project in the Southern Hemisphere. Projects such as these have much-needed brought energy diversity to a state that saw devastating blackouts in 2016. Renewables now make up more than 50 per cent of the energy mix in SA. That pattern will continue nationwide as cities and towns built on coal shift to renewables.

Rapid Pace of Change 

Despite the traditional reliance on fossil fuels, renewables are growing at such a rate that Australia is expected to meet its Paris Accord pledge as early as 2025, five years ahead of schedule. Government subsidies have helped keep renewable projects afloat, but as they become scalable, energy diversity makes more and more financial sense. “The amount of solar capacity we’re on track to have operational by 2021 will mean competitive conditions in the wholesale market between around 10am to 3pm will be akin to what we tend to experience late at night between 2am and 5am,” Green Energy Markets (GEM) director Tristan Edis told the ABC.

diversifying energy, the venture magazineSnowy Hydro’s Snowy 2.0 pumped hydro project is expected to add 2,000 MW of energy generation and 175 hours of storage to the National Electricity Market. “We did a deal just before Christmas when we announced 888 megawatts of renewables and the average price for buying that was $40 (per MWh) and the peak price in the market gets somewhere around $100 — so you’re roughly buying for $40, roughly selling at a $100. So a $60 spread which drives the economics,” Snowy CEO Paul Broad said at a February press conference.

Origin Energy has reported its contract prices for wind and solar energy have decreased from $120-$150 per MWh in 2012 to $45-$65 in 2018. Market modeller RepuTex shows states are meeting their target goals of an energy mix with 50 per cent renewables by 2030, which with continued state sponsorship will bring wholesale electricity prices down from $85 per MWh to $70 by 2022. The CSIRO’s Australian National Outlook 2019 forecast for 2060 released in June shows a 38 per cent decrease in household spending on electricity even with minimal productivity and up to 64 per cent decrease with a concentrated focus on energy diversity. That might be a rosy outlook, but as renewables keep growing, the energy mix will look much different in the near future than it does today.