Conclusions
Generators competing to supply the NEM draw energy from many sources. But as a result of the carbon tax the proportions of each fuel are likely to change artificially. Some fossil fuels are presently exempt from the carbon tax (petroleum) or receiving compensation (brown coal). Thus we can expect these to become more dominant in the energy mix than they might have been had the tax not been implemented.
The sad fact is that while imposing economic distortion, not the least by raising electricity prices and then compensating some consumers to minimise the impact on demand, the carbon tax is unlikely to have a significant impact on overall carbon released to the atmosphere.
The present tax serves mainly to distort energy markets; reducing economic efficiency; and hence lowering economic productivity.
As long as we continue to support green energy through the mandatory renewable energy target (MRET) certificates, subsidising relatively expensive wind and solar installations we can expect the price of electricity to continue to rise. At the same time there are real concerns about the level of investment in base load generation required to keep the lights on in future.
These factors begin to make carbon reduction using the nuclear option to progressively replace coal for base-load energy look very attractive in the medium term; but this can't happen in time to assist with meeting the MRET.
This was discussed in some detail above, under the heading 'Meeting the target'.
There is a strong case for replacing both the carbon tax and the mandatory renewable energy targets as soon as possible, well before 2020, and replacing them with a broad based non-discriminatory carbon cap-and-trade scheme designed to meet Australia's Kyoto carbon reduction commitments by reducing carbon intensity across the economy.
By that I mean one in which no industry sector or consumer is exempt or privileged:
- if someone or some business releases a tonne of carbon dioxide, carbon monoxide, or methane - they must buy a credit (no exceptions);
- if they can prove that they have absorbed or sequestered one – they create a credit to sell;
- in order to achieve this any viable, competitive technology is acceptable;
- and if pensioners, or others, are unfairly disadvantaged due to price rises, increase the pension or lower their taxes.
In other respects the scheme would be similar to that proposed by Federal Treasury and Professor Garnaut’s committee in 2010.
Response to comments (see below)
As I have said the falling price of PV solar has effectively put an end to some 100 years of attempts to make thermal solar economic. So let's assume that economies of scale and improved technology will continue to prevail à la Moore's Law, consolidating these gains, and ignore financial cost entirely for a moment.
Let's just look at the limiting technical conditions.
Solar suffers even more than wind from a poor capacity factor. The link referred to: Photovoltaics shows the solar incidence for Paris average 3.34 hrs per day (in spring and autumn). But the difference between summer and winter is over 740%. The difference hour to hour can be even greater; and of course midday to midnight close to infinite.
The problem is that to meet even a tiny fraction of the peak daytime demand in winter you need seven times the number of panels that you do in summer. This means that during minimum daytime demand in summer you will have way more generation than the electricity market can absorb. Germany has already hit this condition several times this year.
Because the spot price of electricity can go negative Germany has had to pay for other countries to take the excess energy away.
If say the present capacity was doubled dumping power would no longer be a viable option. Then for part of the day in summer Germany would need to turn off a proportion of the panels. As I have already said this is presently hard to do and would require additional infrastructure.
As more panels are added to meet periods of high demand, more and more need to be turned off during peak sun and low demand, for longer and longer periods. This reduces the net contribution that a marginal additional panel can make.
These panels consume energy to manufacture, install, maintain and recycle. They also release CO2 in these processes. A British study puts PV solar at about 10 times the CO2 released per kWh of Nuclear (Click Here).
Marginal panels will ultimately fail to recover this 'energy cost of ownership'; so that additional panels never collect the energy expended in deploying them. Well before reaching that point they become more polluting than even fossil fuels.
The same happens with excessive investment in Wind. But Solar is worse than wind because wind has a much better capacity factor. It still blows on rainy days and at night.
So at what point does this decline in effectiveness begin to happen?
As Germany has just demonstrated it begins as the average contribution approaches 6% for solar and as Denmark and South Australia demonstrate, at just over 20% for wind.
Now let's consider cost:
At the point at which production first exceeds demand adding additional panels (or turbines) continues to contribute additional usefull energy at other times but the cost of electricity generated begins to rise rapidly, as panels (ot turbines) are increasingly prevented from delivering all the energy they collect when at their most efficient, on sunny or windy days, if demand is low.
When this happens the other generators, that pay a price for fuel, drop out of the market as the the energy price collapses to zero or less.
But in Australia the renewable energy credits are still paid by the consumer and where feed-in tariffs apply, generators are still paid generously (rather than being fined), increasing the cost to the consumer. Thus unwanted energy is generated at an uneconomic cost to the consumer.
Some of these market distortions may disappear, if as you have said, the price of PV solar falls to the point that it is competitive without any direct or implicit subsidy. But it will still make only a small contribution due to an inherently low capacity factor.
As I have said elsewhere, large scale inexpensive and efficient energy storage and recovery would be a game changer. But present generation batteries have a short re-cycle life (of at best a decade); are still far too expensive; and lose too much energy. Almost everything else is even worse (more costly and/or less efficient). Perhaps super-capacitors can be made to work an integral part of a thin film solar panel.
But when considering the grid and energy demand we are talking in TWh. Not even large scale pump-storage can store enough energy to make up winter demand from summer solar excess.
Sure solar has a place; but probably not more than around 10% of total electricity demand.
For further discussion have a look at Renewable Electricity