South Australia has run aground on the long foreseen wind energy reef - is this a lee shore?

Those of you who have followed my energy commentaries published here over the past six years will know that this situation was the entirely predictable outcome of South Australia pressing on with an unrealistic renewable energy target dependent on wind generated electricity, subsidised by market distorting Large-scale Generation Certificates (LGCs) (previously called RECs in some places on this website - the name was changed after their publication).  

This is a mechanism that is now well beyond its 'use by date'.

That the practical limit to market share is equivalent to the fluctuating energy resource's capacity factor (the percentage of time that the power-station is able to operate at its nominal peak capacity) is not rocket-science.  A fluctuating energy source, like wind, that can fall to as little as nothing in adverse climate conditions and is, on average, available for only about a third of the time, can supply only about a third of the total system energy without becoming redundant.  Thus the system must have the remaining two thirds provided by other energy sources.  In this case, in the absence of the obvious alternative outlined below, this will be provided by fossil-fuelled generation.  And, obviously, if load-sharing and black-outs are not to occur, these other sources must be capable of supplying the entire peak-demand, should no wind be available at that time.  Not rocket science - obvious to 'Blind Freddy' - read more here.

Ways of meeting such mismatches, between wind availability and demand, include interlinks to other parts of the grid and/or rapid response generators like gas turbines.  But interlinks can be problematic as it can't be assumed that other parts of the grid will always be able to respond. Similar climate and demand conditions may be widespread.  So without base-load generators providing the bulk of the remaining two thirds of system energy; and without rapid response peak-load generation; expect trouble.  In addition some redundancy is required. Parts of the system will always be down for maintenance or due to mechanical failure.  There is the old trade-off.  Equipment failure is an inevitable outcome of insufficient scheduled off-line preventative maintenance and/or replacement.

Thus we talk of 'base load' capacity to handle regular demand; peak load capacity to handle peaks in demand and sufficient redundant reserve capacity to cover equipment outages.

The trouble with a fluctuating resource like wind or solar is that it's only there when it's there and that's not necessarily when its wanted, like during periods of high demand.  In this case doubling-up to provide system redundancy is not a solution.  If there is insufficient wind or too much to run the turbines having more turbines will not help. Unlike fuel based power generation, the cost of wind and solar electricity is entirely due to the cost of the equipment.  If there's no wind or sun, redundancy achieves nothing but higher costs.  Doubling-up doubles the real cost of wind or solar energy, even during ideal conditions. Such overinvestment is bad in other ways. When there's too much wind or sun generated electricity but insufficient demand energy prices are driven negative. Then all power stations supplying the energy market become unprofitable.  As some base-load generators can't easily be shut down they become seriously unprofitable; and if there are too many wind turbines this happens even during light wind conditions.  If this goes on for too long, due to excessive investment in wind, under the impact of Large-scale Generation Certificates, the owners of other generators may decide to cut their losses and close, as has happened in South Australia and Victoria.  For a more detailed discussion of the impact of Large-scale Generation Certificates (or RECs) on profitability go: here.

Large-scale Generation Certificates are designed to encourage the market to meet the National Mandatory Renewable Energy Target (MRET).

In a free market, without LGCs, everything would sort itself out over time because wind and solar would only be profitable for those periods when the price of energy about doubled that of base-load coal and gas, curtailing over-investment in these energy sources.  Each wind farm would then compete with the others, and with other suppliers, for the limited peak load market opportunity.  In this situation wind would probably become unprofitable and no one would invest in it so some sort of regulation is probably required, on top of the LGC/REC mechanism.

What is this REC thing that's currently wrecking South Australia? 

To make wind and solar competitive we have a pseudo-market mechanism - the Large-scale Generation Certificates.  These subsidise wind and solar and new hydro-electricity. RECs were initially envisaged as a temporary mechanism to get renewables off-the-ground, to be replaced in due course by a more general carbon cap-and-trade mechanism using tradeable carbon certificates. 

You can read simplified descriptions in previous articles on this website here and here and here.

But the carbon cap-and-trade mechanism proposed by the Federal Treasury and subsequently the Garnaut Climate Change Review - the Carbon Pollution Reduction Scheme (CPRS) - was soon so heavily subverted by political lobbying that the certificate soon looked like a pakapoo ticket.  Carbon rich exclusions quickly included gas and petroleum.  But energy resources have a high degree of interchangeability over time. For example the prices of oil and coal are linked due to the potential for substitution.  So certificates targeted on just part of the carbon market would have been seriously economically distorting.  Carbon is carbon - be it in: petroleum; coal; gas; or even garbage; and any economically neutral carbon trading scheme has to encompass it all.

Yet nothing could be as economically horrendous and distorting as the political alternative the lobbyists and their targets ultimately wrought: the dread Carbon Tax. 

This economic travesty targeted only so called 'big polluters' (including the electricity sector that already had the REC scheme that was no longer to be removed); had dozens of exceptions; and a compensation scheme that even included some 'big polluters'.  And why raise a tax, allegedly to change consumption behaviour, and then give it back?  You can read my contemporary comments on it here.

Yet as predicted on several occasions, unless we did something to replace them, the Large-scale Generation Certificates (or RECs) would soon out-live their usefulness because the way they work makes new base-load power unprofitable. So the stock of old base-load power stations would wind-down as Australia's electricity generation infrastructure was eroded, from the foundations up.

Fortunately so far for New South Wales and Queensland, quality wind resources close to population centres have been limited and the abundance of such resources in the southern states concentrated investment there. Thus New South Wales has maintained fossil-fired base load capacity at 82%, complimented by gas (7%) and hydro-electricity (5%).  Even photo-voltaic solar (2% - mainly domestic) has out-grown wind generation. 

Both these states could safely use more wind and solar.  The National Mandatory Renewable Energy Target (MRET) ‘to encourage additional generation of electricity from renewable energy sources and achieve reductions in greenhouse gas emissions’ provided a renewable energy target of 20% by 2020.  As indicated above this is technically possible but it gets a bit dodgy over 20%.  The real world capacity factor of solar is generally below 20% (it's dark half the time and there are clouds and shadows in many locations) and that of wind not much better in all but the best locations.  Average that out and maybe 25% is achievable nation wide.  That leaves 75% fossil fuel if we can get a little more hydro-electricity.  That depends on preventing Bob Brown's mob stopping more dams. 

The entire purpose of the MRET is to "achieve reductions in greenhouse gas emissions' to meet an international commitment to reduce the national carbon footprint.  South Australia, with 13,068 GWh pa (47 PJ - petajoules) in 2014-15 contributed around a twentieth of the nation's total electricity generation of 252,359 GWh (908.5 PJ). 

Nevertheless, wind generation in South Australia has now reached 4,292 GWh (15.5 PJ) - 33% of the State's total electricity generation.  This now exceeds the median capacity factor of the State's wind turbines. Very predictably, approaching this limit has led to base-load closures and consequent blackouts. These have been accompanied by the highest electricity prices in the land; a lot of redundant, carbon intensive hardware, particularly when demand is low or no wind is blowing; and now, a lot of economic pain and individual hardship, with business stock losses, numerous injuries and even premature deaths due to the blackouts.

The State can't realistically blame this on the Commonwealth.  The National Mandatory Renewable Energy Target has been a long standing joint State/Commonwealth initiative, supported by both major political parties.  Politicians in South Australia, Victoria and Tasmania cheered on the proliferation of wind farms with glee, often claiming personal credit, while spruiking their state's 'green' credentials. Some have set higher, unrealistic local targets for renewables, in total disregard for the practical limitations or the consequences.

Now the same politicians are running for cover.  Meanwhile, nobody mentions that all this pain and economic cost that is not limited to South Australia has had negligible impact on its intended purpose - a reduction in Australia's domestic carbon footprint of 5,795.4 PJ - calculated as total domestic energy consumption (5,919.6 PJ) less renewable electricity (124.2 PJ), mainly hydro-electricity (48.4 PJ) and wind generation (41.3 PJ).

To generate 909 PJ of electricity in 2014-15 the Australian electricity generation sector consumed 1,667 PJ of coal and petroleum (28% of the total domestic energy consumption).  The difference is due to materials handling energy costs and conversion inefficiencies.  As an aside, this additional carbon overhead is before grid and other losses and is one reason that all-electric cars have a larger carbon footprint than hybrid-petroleum fuelled cars in Australia. Battery storage is not without further inefficiencies.

All this focus on electricity is playing at the edges.  Australia's domestic carbon footprint is dwarfed by our total, real, carbon footprint.   In 2014-15 this totalled 21,236 PJ (production and imports of carbon less total renewables) because almost three-quarters of this carbon (15,680 PJ or 73%) was exported in various forms to be burnt overseas. 

The bottom line is that all the South Australian pain and financial sacrifice has been made to install sufficient wind generation to reduce Australia's total carbon footprint by just over 15 PJ a year - or about 0.073%. Well done!  That's the Gallipoli spirit.

In the short term South Australia needs more fossil energy to provide energy when there is no wind.  Some have talked of renationalisation but that simply transfers private sector loss making assets to the taxpayer.  In the absence of a clean green solution suggested below profitability needs to be restored to the the intrinsically lower cost fossil-fuel sector.

To encourage the private sector the Large-scale Generation Certificates must be altered in some way to reduce the subsidy to wind energy when the demand for unsubsidised energy is low.  One such amendment might be to apply LGC's equally to renewable and non-renewable energy when demand falls below a benchmark to ensure a minimum base-load energy contribution.  Counterintuitively this would lower the cost of energy to the consumer, while simultaneously causing the wind generators to review the viability of their less productive turbines that are currently robbing the fossil generators of their profits.

Few politicians choose to mention that there is one bright light in all this; and here South Australia can do its bit for the nation yet again. 

Even adopting wind generation to the practical maximum of say 30% nationwide (about 303 PJ) will have little impact on the world climate or even on our own carbon footprint of over 21,000 PJ.  Australia's biggest contribution to reducing humanity's dangerously swelling carbon footprint is our export of uranium. 

Australian nuclear energy presently displaces carbon consumption equivalent to 3,000 PJ a year overseas.  But this light has dimmed over the past decade.  Recently uranium exports have fallen to less than half their peak back in 2004. 

Strangely, some of these who claim to be concerned about global carbon emissions, frequently 'dam busters' to boot, actually applaud this decline.  Yet increasing our annual uranium exports by just 10% would have the same impact on global carbon emissions as increasing our present domestic renewable electricity generation by 250%.  As hydro-electricity is the main renewable, that's a lot of dams.

Some concerns about uranium exports may be valid. As we all know some nations, like India, refuse to sign the Nuclear Proliferation Treaty, so letting them have our uranium is like giving matches to a baby. Others are geologically unstable.

So wouldn't it be better to keep those matches to ourselves?

Just 26% of current uranium exports (of approximately 3,000 PJ) could replace all the fossil fuels we presently burn in Australia to produce electricity.

Why don't we begin by replacing our base-load coal electricity generation with nuclear power, as they have in France?  Follow the link to see just one of these in its rural setting on the Rhône, not far from town: here  Très belle!

We could start in NSW by chucking out most of those dirty old furnaces, bag houses; smoke stacks; and coal handling systems where they are and putting nice clean high temperature reactors in their place.  We could even paint some big signs on them indicating out commitment to zero emissions, as they do in France, Europe's largest electricity exporter.

Simplistic?  Yes I know - but not too hard.  We could begin right now.

 All numbers courtesy of the Australian Government Department of Industry Innovation and Science - Australian Energy Statistics