June 12, 2018
UK government takes big step towards “renationalisation” of power sector with stake in Wylfa nuclear plant
ENERGY WATCH #1 by Karel Beckman
Fast vs. slow transition: the arguments
June 12, 2018
Every year the World Energy Council (WEC) surveys “energy leaders” around the world (this year more than 1,200 in 95 countries) to find out what “keeps them awake at night”.
According to the WEC, what this shows is that “innovation is the key area of concern. Issues such as digitalisation, electric storage, market design, decentralised systems, and renewable energies are receiving greater attention as their impact grows across the energy industry.”
The report adds that “The Global Issues Map also shows a decrease in attention around centralised technologies and greater certainty around electricity prices and energy affordability. We also see that increased impact of digitalisation is facilitating a rapid convergence of alternative technologies such as renewable energies, blockchain and data AI.”
Renewable energies, notes the WEC, “are ranked high in terms of certainty and their high potential to compete with traditional fuels across the world.” At the same time, however, the world’s energy leaders are convinced that “Fossil fuels remain an important part of the world’s global energy mix despite many countries increasingly incorporating clean energy policies”.
In short: the Big Shift is happening, that is not in doubt. But how fast it will go – in particular: how far renewables will go, and what new technologies can do to help move renewables along – is what we can only guess at.
In a recent scientific paper published in the journal Nature Energy researchers at Imperial College London, who explored a range of simulated scenarios for the British power system, conclude that we should not wait for any “unicorn” technology to save us. By unicorn technology they mean for example carbon capture and storage, or small modular nuclear reactors, or battery storage and demand response.
They warn that “The continuing debate about the cost-competitiveness of low-carbon technologies has led to a strategy of waiting for a ‘unicorn technology’ to appear. Here, we show that myopic strategies that rely on the eventual manifestation of a unicorn technology result in either an oversized and underutilized power system when decarbonization objectives are achieved, or one that is far from being decarbonized, even if the unicorn technology becomes available. Under perfect foresight, disruptive technology innovation can reduce total system cost by 13%. However, a strategy of waiting for a unicorn technology that never appears could result in 61% higher cumulative total system cost by mid-century compared to deploying currently available low-carbon technologies early on.”
In other words: what they are saying is that we should go all-out for wind, solar and nuclear, the technologies that are currently available.
What we should not be doing, they say, is “praying for an energy miracle”.
In a special report published by IEEE Spectrum on 3 June, called Blueprints for a Miracle, a number of authors have done just that: gone in search of “energy miracles”. They call it “the world’s most promising projects to cut greenhouse gases”.
Some of the projects they investigated:
- A power plant in Alabama, run by FuellCell Energy and ExxonMobil, which aims to capture 90% of CO2.
- NET Power’s power plant in Texas, which uses supercritical carbon dioxide to drive a turbine.
- TerraPower’s travelling-wave nuclear reactor and other new nuclear designs
- Cargo ships running on batteries and fuel cells
- Methanol-fueled cars
- Hybrid electric airlines
- Better batteries and supercapacitators
The report, which is freely accessible, comes with a big warning, though. It features a critical reflection by the famous energy expert Vaclav Smil, who observes that “these claims of impending innovation may be seen (although they are not labeled as such) as being largely aspirational.”
He notes that they “should be appraised with unflinching realism …. many of today’s ambitions will not become tomorrow’s realities.”
Smil warns that any comparison between the rate of innovation in IT and that in energy is misplaced: “Since the 1960s, there has been an extraordinarily rapid growth in the number of electronic components that we can fit onto a microchip. That growth, known as Moore’s Law, has led us to expect exponential improvements in other fields. However, our civilization continues to depend on activities that require large flows of energy and materials, and alternatives to these requirements can’t be commercialized at rates that double every couple of years. Our modern societies are underpinned by countless industrial processes that have not changed fundamentally in two or even three generations. These include the way we generate most of our electricity, the way we smelt primary iron and aluminum, the way we grow staple foods and feed crops, the way we raise and slaughter animals, the way we excavate sand and make cement, the way we fly, and the way we transport cargo.”
He concedes that “some of these processes may well see some relatively fast changes in decades ahead, but they will not follow microchip-like exponential rates of improvement. Our world of nearly 8 billion people produces an economic output surpassing US $100 trillion. To keep that mighty engine running takes some 18 terawatts of primary energy and, per year, some 60 billion metric tons of materials, 2.6 billion metric tons of grain, and about 300 million metric tons of meat. Any alternatives that could be deployed at such scales would require decades to diffuse through the world economy even if they were already perfectly proved, affordable, and ready for mass adoption. And none of the innovations presented in this issue fits fully into that category. In fact, these three critical prerequisites are notably absent from nearly all of the innovations presented in this issue.”
Smil then proceeds to put the “miracles” discussed in Spectrum IEEE’s special report into perspective.
- Today, we can fly for up to an hour in a two-seat, battery-powered trainer plane; in a decade, perhaps we’ll fly in a battery-assisted regional hybrid plane. The savings in energy use and in carbon emissions will be modest—and we are a very long way from all-electric intercontinental airliners.
- The traveling-wave nuclear-fission reactor has many obvious advantages over the dominant pressurized water reactor, including remarkably safe operation and the ability to use spent nuclear fuel. But our experience with developing fast-breeder reactors, which are cooled with molten sodium, indicates how extraordinarily challenging it can be to translate an appealing concept into a commercially viable design. Experimental breeder prototypes in the United States, France, and Japan were all shut down many years ago, after decades of development and billions of dollars spent.
- Using emitted carbon dioxide in fuel cellsand burning supercritical CO2 to run turbines constitute the latest in an increasing array of techniques aimed at reducing emissions of the leading greenhouse gas. These efforts at carbon capture and storage began decades ago and have increased since 2000, but all operating projects and those under construction have an annual capacity equal to just 0.3 percent of annual emissions from stationary sources (less than 40 million metric tons compared with some 13 billion metric tons). This is another perfect illustration of the scale of the challenge. All of the carbon-capture projects now scheduled to start operating at various dates during the 2020s would not even double today’s minuscule rate of carbon capture.
- Electric vehicles are the latest darling of the media, but they run into two fundamental constraints. EVs are meant to do away with automotive carbon emissions, but they must get their electricity somehow, and two-thirds of electricity worldwide still comes from fossil fuels. In 2016, electricity produced by wind and photovoltaic solar still accounted for less than 6 percent of world generation, which means that for a long time to come the average electric vehicle will remain a largely fossil-fueled machine. And by the end of 2017, worldwide cumulative EV sales just topped 3 million, which is less than 0.3 percent of the global stock of passenger cars. Even if EV sales were to grow at an impressive rate, the technology will not eliminate automotive internal combustion engines in the next 25 years. Not even close.
- Battery- or fuel-cell-powered designs for small ferries and river barges (see “The Struggle to Make Diesel-Guzzling Cargo Ships Greener”) offer a transport capability orders of magnitude below what’s required to propel the container ships that maritime trade depends on. Compare these little boats with the behemoths that move containers from the manufacturing centers of East Asia to Europe and North America. The little electric vessels travel tens or hundreds of kilometers and need the propulsion power of hundreds of kilowatts to a few megawatts; the container ships travel more than 10,000kilometers, and their diesel engines crank out 80
- Battery-powered jetliners fall into the same category: The big plane makers have futuristic programs, but hybrid-electric designs cannot quickly replace conventional propulsion, and even if they did, they wouldn’t save vast amounts of carbon emissions. If you compare a small, battery-powered trainer with a Boeing 787 and multiply capacity (2 versus 335 people), speed (200 vs. 900 kilometers per hour) and endurance (3 vs. 17 hours), you’ll see that you need batteries capable of storing three orders of magnitude more energy for their weight to allow for all-electric intercontinental flight. Since 1950, the energy density of our best batteries has improved by less than one order of magnitude.
Some reality checks here! Smil concludes: “While it is easy to extoll—and to exaggerate—the seductive promise of the new, its coming will be a complicated, gradual, and lengthy process constrained by many realities.”
Some researchers nevertheless believe in an impending disaster for fossil fuel companies. According to a new study published in the journal Nature Climate Change demand for fossil fuels will fall over the coming decades – and bring down prices with it.
This could result in significant stranded assets – regardless even of whether or not the targets of the Paris Agreement are fully met. “Our analysis suggests that part of the SFFA [stranded fossil fuel assets] would occur as a result of an already ongoing technological trajectory, irrespective of whether or not new climate policies are adopted; the loss would be amplified if new climate policies to reach the 2 °C target of the Paris Agreement are adopted and/or if low-cost producers (some OPEC countries) maintain their level of production (‘sell out’) despite declining demand.”
The magnitude of the loss from SFFA “may amount to a discounted global wealth loss of US$1–4 trillion”, the researchers write. And there will be winners, notably net importers such as China or the EU and losers, for example, Russia, the United States or Canada, “which could see their fossil fuel industries nearly shut down”.
Jorge Viñuales, a professor of law and environmental policy at the University of Cambridge and co-author of the study, warns that “A sudden and dramatic drop in the price of fossil fuels would lead to mass unemployment. This could fuel “public disenchantment and populist politics.”
As Jeremy Deaton reports on NexusMedia, Viñuales laid out five goals for investors and policymakers:
- First, don’t invest more resources in fossils.
- Second, if you have fossil fuels already invested, try to divest them, at least significantly.
- Third, if you’re a fossil fuel company, try to diversify as much as you can while you’re still alive.
- Fourth, if you’re a policymaker, don’t adopt policies that are conducive to more investment in fossil fuels, because that is going to be bad for your country.
- Fifth, if you are in the geopolitical game, you have to consider what could happen to you.
The study, incidentally, has drawn the ire of climate-skeptical Global Warming Policy Foundation which on 11 June issued a short paper heavily criticizing the study.
“This paper is essentially an op-ed piece in academic garb”, note Gordon Hughes and John Constable of the GWPF. “It is not a research paper, since it produces no new empirical information, and simply reports the output of a black box modelling exercise using data that is poorly documented and without any evidence of forecasting reliability.”
Hughes and Constable write that “whether the graphs and other outputs tell us anything useful about the future depends very much on whether the reader accepts the reliance that the authors place on their selection of input data and the formulation and calibration of their model. The predictions made are on the largest scale imaginable and entirely misrepresent the degree of forecast uncertainty.”
Predictions of this type should be treated with extreme caution, note the two authors. “Unfortunately many journalists, and even the editors of Nature Climate Change, seem to have swallowed the bait hook, line and sinker. The correct reaction would be to remind oneself: that the calibrated model has no demonstrable forecasting record and that models are prone to construction bias arising from wishful thinking, that 2035 is a very long way off for this sort of prediction.”
That’s alright for policymakers and investors perhaps, but what is a poor fossil fuel producer to do?
Bassam Fattouh, Rob West and Rahmatallah Poudineh of the Oxford Institute for Energy Studies (OIES), wrote a paper recently, addressing this topic: The rise of renewables and energy transition: what adaptation strategy for oil companies and oil-exporting countries?
Their recommendation for oil companies: “moving beyond their core business is risky, but a ‘wait-and-see’ strategy could be costly, therefore oil companies need to gradually ‘extend’ their business model and rather than a complete shift from hydrocarbons to renewables, they should aim to build an integrated portfolio which includes both hydrocarbon and lowcarbon assets. The strategies designed to make this happen need to be flexible and able to evolve quickly in response to anticipated changes in the market.”
That may not be a very surprising recommendation, yet the report does contain interesting insights. The authors point out, for example, that the difference between earlier energy transitions and the current one is that this one “is being managed and coordinated through government policy aimed at decarbonization and reducing air pollution”.
This may seem like an obvious point, but it deserves stressing: governments are in charge. If they decide the transition will happen fast, it will. If they decide it won’t, then it most likely won’t. The authors mention the example of the French nuclear effort, which completely transformed the French energy system in a very short period of time.
They also note that the growth of renewable energy is in line with similar growth spurts in earlier transitions, e.g. from wood to coal and from coal to oil: “Our conclusion from studying the 250-year history of the energy markets is that wind and solar are inflecting in a way that resembles coal in the 19th century and oil in the 20th century, and are therefore likely to be equally transformational over the 21st century.”
They note that “in 2011–16, we estimate that final consumption of global energy rose by 810 TWh pa (terawatt hours per annum). Solar met 54 TWh pa of the new demand (7 per cent) and wind met 105 TWh pa (13 per cent). This gave wind and solar a 20-per-cent share of the new growth in demand, up from zero prior to 2000.”
The chart below shows the longer-term history of different energy sources competing to supply new demand for energy. “Coal supplied 15 per cent of new demand in 1800–30, before inflecting to 50 per cent of new demand in 1830–60 and 70 per cent of new demand in 1860–80. Oil supplied 9 per cent of new demand in 1900–20, accelerating to 17 per cent in 1920–40, and 29 per cent in 1940–80. At the same time, gas supplied 12 per cent of new demand in 1920–40, before accelerating to 30 per cent in 1940–2000.”
They also quote the BP Energy Outlook 2018 which noted that “the pace at which renewables gain share in power generation over the Outlook is faster than any other energy source over a similar period”.
Does this mean that the energy transition will be slow or fast? The authors list reasons why either a slow or a fast transition would be likely.
Arguments for a slow transition:
- Historical data and evidence indicate that past energy transitions have been slow.
- The scale and complexity of energy transformation is such that it tends to create lock in and path dependency.
- The transition of the energy sector relies heavily on the availability of infrastructure, which often takes time and is very costly to build.
- New energy sources gradually improve their performance and competiveness (through learning curves and economies of scale). This will result in the slow replacement of incumbents in energy markets.
- Innovation diffusion is a lengthy process. It takes time for an innovation or new system to move from a niche to a mass market.
- There is a huge sunk cost involved in existing infrastructures of the current energy system, which creates inertia and provides an economic incentive to utilize them until they are written off. For example, for large power plants, capital costs, which are so large, play a key role in the decommissioning of plants. Generators’ owners tend to keep existing assets running for as long as it is economically and technically feasible.
- As transition causes disruption, incumbents and declining industries will fight back and this delays the transformation process.
- Fast transitions rarely happen and, when they do, they are anomalies that are related to small countries or specific contexts with little scope for replicability elsewhere.
Arguments for a fast transition:
- Comparison with the past is a biased view because the drivers of the current transition differ fundamentally from the drivers of past transitions.
- A key feature of historical transitions is that they were more opportunity-driven, whereas lowcarbon transitions are more problem-driven, which involves a collective public good (climate change). Therefore, policy plays an important role in the current transition.
- Historical transitions were more about variation (in energy mix) whereas the current transition is also about adjusting to the selection environment.
- A key feature of the current energy transition is that it is managed or incentivized (or planned and coordinated) whereas past transitions were more naturally occurring (or even accidental or circumstantial) as a result of changes in technology, price, demand, or consumer preferences.
- In a managed transition, political will and a sense of urgency in society to mitigate the adverse impacts of climate change, may lead to policies that change markets and selection environments in a rapid manner or even phase out technologies before they are written off.
- Historical evidence does not unanimously point to slow transitions. There are also examples in history of fast national-scale transitions as well as fast transitions in end-use technologies.
- In essence, the energy transition is a multilayer and multi-actor phenomenon. In such a situation, changes that are seemingly slow within one isolated layer (for example, national energy conversion and supply) can multiply when one takes a more holistic and systematic perspective.
- The current transition is not just influenced by changes in the energy sector. It draws on synergistic advances in multiple domains at once, such as 3D printing, blockchain, computing, nanotechnology, materials science, and biological and genetic engineering. Therefore, it can be accelerated in ways that have not been possible in past transitions.
- As human knowledge is a cumulative process, we can benefit from what we have learned from past transformations in order to expedite future transitions. In addition, the rates of learning and innovation in various sectors can produce technologies that previous energy systems could not, with technological characteristics that predispose them to accumulated breakthroughs that were hitherto unseen.
Reviewing the evidence, they come up with the following key insights:
- First, historical evidence regarding the speed of transition is inconclusive, with both cases of slow and fast transitions populating the history.
- Second, historical data about slow transition are instructive but not necessarily predictive about future transition.
- Third, the speed of transition differs across sectors and regions and has multiple layers that make it difficult to draw a concrete conclusion at the global scale.
- Fourth, policy plays a key role in the current transition at least in the short to medium term before market fully takes over.
- Fifth, today the challenge of gaining market share is amplified because the energy market is larger than ever before: 12 times on 1900 levels and 35 times on 1800.
ENERGY WATCH #2 by Karel Beckman
Do Energy Efficiency Obligation Schemes work?
June 12, 2018
Two things we do know the energy transition will involve: electrification and energy efficiency.
Eurelectric, the European Industry Association, published a new study on 4 June, “Decarbonisation pathways”, which says that “for the EU to reach 95% emissions reduction by 2050, electricity needs to cover at least 60% of final energy consumption. This is achievable with a 1.5% year-on-year growth of EU electricity use whilst at the same time reducing the EU’s energy consumption by 1.3% per year.”
It is not surprising, of course, that Eurelectric would recommend electrification. Then again, virtually all analysts agree that electrification is key to the future energy system. Shell, for example, also sees electricity grow from less than 20% today globally to 60% by mid-century.
And Eurelectric does not rule out other solutions, including energy efficiency, green gas, hydrogen and CCS for industrial processes.
One thing that is interesting about the Eurelectric study is that it shows how far electrification still has to go, particularly in transport, as is clear from this table:
This is what the future system should look like, depending on the scenario, with the third scenario the most ambitious and the first the least:
None of this will happen without strong government measures. Electric cars, in particular, will require strong measures from EU member states and Brussels.
In scenario 2 and 3, all new cars sold will be zero-emissions. This will require “various bans on internal combustion engine (ICE) vehicles” by 2035 and “accelerated infrastructure rollout”.
The requisite infrastructure (charging) build-up will look as follows:
Eurelectric stresses that alongside electrification energy saving remains crucial to achieve climate targets.
We all know that of course. Yet it may be useful to spend some time thinking about it again. The good news is that energy efficiency will happen “automatically” up to a point, regardless of any measures taken.
Sverre Alvik, director of the Energy Transition research programme at technical consultancy DNV GL, considers energy efficiency “the often overlooked hero of the transition”.
In a recent blog post, he writes that “we see the world’s annual efficiency gains playing a greater role in helping to cut emissions over the coming two decades than the combined contribution of the switch to wind, solar and electric vehicles.”
In its annual Energy Transition Outlook, DNV GL projects “an annual average 2.5% improvement in the world’s energy intensity”, which is the “most important factor for reducing overall energy-related CO2 emissions”.
One important reason for the expected gains in energy efficiency is … electrification.
DNV GL projects electrification to rise from its current level of 18% to 40% by 2050. And: “In a more electrified world energy system, efficiency is higher and energy losses lower, simply because electric processes have smaller losses than their non-electric alternatives. Further, as the renewable share in electricity accelerates, energy intensity benefits from there being lower losses in power generation from renewables than from fossil fuels.”
Nevertheless, Alvik does note that energy efficiency alone is not going to get us out of our hole. Even a doubling of DNV GL’s projected rate to 5% would “NOT result in global energy use being low enough to meet the 2 °C target from the Paris Agreement, let alone the 1.5 °C target. While energy efficiency is the quiet revolution underpinning the energy transition, it is not sufficient in its own right to secure the future we want. A mix of technical and policy solutions is needed.”
Nor will all of the needed growth in energy efficiency come about “automatically”. Regulations and guidelines will be needed to “force change where market forces do not suffice”, writes Alvik.
One type of regulation used in the EU are energy efficiency obligation schemes (EEOS), which the EU has encouraged since the adoption of the Energy Efficiency Directive in 2012.
But how effective are they? And what is their likely future role?
In a recent paper, three researchers (Jan Rosenow, Tina Fawcett, Paolo Bertoldi) note that only 15 of the 28 EU countries have an EEOS in place. Moreover, in Denmark and the UK reforms are being planned because the EEOS did not deliver as promised.
Nevertheless they do conclude, on the basis of a detailed analysis that “on balance there is still good policy space for EEOS for those member states which choose to use them.”
However, “there are also risks, most notably a lack of energy company, public or political support for this policy. Energy companies can have internal reasons for opposing the policy (too burdensome, not their core business etc.), which they may present as protecting their customers from rising prices due to unnecessary government policy. In order to maintain public and political support, it is vital that the policy has support from trusted actors and interest groups (e.g. consumer groups, environmental and social NGOs), and that the evidence is available to show its benefits. This evidence must be communicated clearly and persuasively. EEOS cannot remain a policy only understood by a few experts.”
So, EEOS are not going to do the job “automatically” either. “An important conclusion from the experience over the past decade”, the authors write, “is that a rigorous and public process of review can drive innovation in delivery routes, can build greater public awareness of the services being offered and is quite useful, perhaps essential, to ever-deeper savings levels over a period of years. EEOS are unlikely to meet deeper savings targets over multi-year periods without the discipline of programme reviews, including ex-post evaluation and policy redesign, leading to innovations in implementation.”
The authors also warn that “experience shows that relying on EEOS as the only instrument to deliver energy efficiency measures is risky. When political support for levy-funded energy efficiency policy drops, this could have significant repercussions for the sustainability of the energy efficiency market. Using EEOS as a single instrument also does not exploit the potential synergies with other, complementary measures and a policy mix has been shown to be more effective than relying on single instruments. The significant carbon reduction required following the Paris Agreement is likely to require the full suite of policy instruments in order to achieve energy efficiency improvements at scale. This includes innovative instruments such as energy efficiency feed-in tariffs, linking carbon offset mechanisms with tradable ‘white certificates’ from EEOS and auctions.”
The researchers believe that “EEOS are likely to continue to evolve in objectives, design and delivery as the energy and policy landscape changes around them. The new European framework of ‘energy efficiency first’ supports EEOS, and the planned extension of the Energy Efficiency Directive to 2030 is also vital. EEOS have a very strong track record in securing savings from low-cost measures and they are expected to continue to do so.”
A recent study from the Netherlands shows that the potential for energy efficiency in the industry sector is “enormous”.
In the Netherlands, plans are in place for investments totalling € 2.2 billion, according to the study, which was commissioned by the Netherlands Enterprise Agency, with support of a wide range of Dutch business associations as well as the Dutch Ministry of Economic Affairs and Utrecht University.
But for all the plans to be implemented, extra efforts are needed.
The researchers analysed the proposed energy saving measures of some 1,000 businesses for the 2017-2020 period. They concluded that, of those investments, “half are either uncertain or are not being implemented, due to a lack of investment capacity, enforcement, coordination, knowledge or suitable financing arrangements.”
And that is a pity, because according to the researchers, “industrial energy efficiency offers high returns on investment. The effect of the proposed energy saving measures, for instance, would be 4 times that of a large offshore wind farm in terms of reducing fossil fuel consumption per euro of offshore wind generated.”
The investment volume of € 2.2 billion “would provide economic opportunities as well, and these would not be limited to industry alone. It would offer an attractive investment opportunity for financers, and technology suppliers would gain a large sales market and thereby contribute to the spread of innovation.”
The report contains recommendations that would allow the industrial sector to realise more of the energy savings potential. “One possibility would be to establish a fund for the purpose of bundling project financing. This would require energy intensive industry, financiers like institutional investors and project developers to develop a uniform method. Such a fund would unite the demand from industry with the supply from investors and technology providers. This might involve residual-heat exchange or high-quality technology to improve internal processes.”
Secondly, “the industrial sector would be able to meet its obligations by issuing contracts for energy efficiency projects to Energy Service Companies (ESCOs). These companies, which (especially in Italy) have expanded into an entire sector, have been successfully providing project development, financing and energy performance contracts to industrial businesses for a decade. ESCOs help these businesses so they can focus on their primary process.”
The recommendation for energy companies to develop into ESCOs is interesting, as the study by Jan Rosenow, Tina Fawcett and Paolo Bertoldi mentioned above notes that “the evidence shows we are a long way off energy companies becoming ESCOs.” The only exception indeed seems to be Italy.
ENERGY WATCH #3 by Karel Beckman
Renewables revolutions: an Australian solar-powered economy – Enel not afraid to cannibalise
June 12, 2018
Fortunately, on the renewables front progress is continuing apace. Despite the size of the challenge, as noted by Vaclav Smil (above), the renewables revolution may yet deliver results that will surprise many.
For evidence: in Australia, the website Reneweconomy.com reports that “UK ‘green steel’ billionaire Sanjeev Gupta has unveiled a stunning, landmark agreement to provide cheap solar power to five major South Australian companies, promising to slash their electricity costs by up to 50 per cent.”
Giles Parkinson and Sophie Vorrath of Reneweconomy write that “the eight-year deal – signed with a consortium brought together by the SA Chamber of Mines and Energy (SACOME) – and including some of the heavy hitters in the resources industry – is the just latest in a flood of contracts between large energy users and solar companies to slash their electricity costs by sourcing power directly from their own or third-party solar farms.”
Examples are companies such as CUB, Mars Australia, and University of Queensland which have signed contracts “to meet all their electricity needs with large-scale solar plants, and others such as zinc refiner Sun Metals, Telstra and CC Amatil will use solar and/or wind to supply a large part of their needs.”
Gupta’s deal “is doubly significant”, the authors note, “because it is the start of his own plans to create an Australian solar-powered economy, with plans to build 10GW of large-scale solar to slash the energy costs of his own manufacturing businesses and others.”
“It is also another stake in the heart of the coal industry and their apostles in the right wing of the Coalition, whose claim that only coal power can deliver cheap and reliable energy is looking more ridiculous by the day.”
“We wanted energy affordability, energy reliability and energy security, and this deal with SIMEC ZEN Energy delivers all three,” Rebecca Knol, the CEO of SACOME, told RenewEconomy.
“Knol kicked off the plans for a corporate bulk-buy of renewable power way back in 2016, in response to wholesale electricity prices that she describes as the highest and most volatile in Australia, if not the world.”
“This outcome demonstrates what can be achieved when businesses decide as a collective that the status quo is not acceptable,” said Gupta.
The authors note that “while South Australia’s high and volatile power prices have been blamed by conservatives and ideologues as the fault of renewables, in reality the state has always experienced such high prices, even causing the state grid provider to investigate wind energy more than half a century ago.
Now it is patently clear that wind and solar – combined with the plunging cost of storage and the emergence of ‘firming contracts’ – is easily beating fossil fuel generation as the most reliable source of cheap energy.”
One company that has long been in the vanguard of the energy transition is Italian utility Enel, which has grown into one of the largest renewable energy generators in the world over the last few years.
But the company’s plans are by no means completed. At the start of this year, writes Leigh Collins in a fascinating article on Recharge News (subscription), Enel launched a new global unit “dedicated to future solutions such as demand response, electric vehicle (EV) charging and home energy management: Enel X.”
“We put everything in Enel X that is not strictly related to what you would call the traditional utility business model,” Enel X boss Francesco Venturini tells Recharge. “If you don’t knit the new things together, they’re never going to be able to fly.”
Already in 2008, Enel set up its renewables unit Enel Green Power, which now manages 40 GW of renewable energy projects. Nevertheless, Enel apparently was still not satisfied with the way the renewables business was developing. “… instead … letting people play with very long-term pilot projects, we said, let’s take all of this, isolate it, decide which is priority one, two and three, and based on the potentials, the level of development and so on, let’s try to make sure they have enough room to learn to fly. And that’s our job.”
Importantly, Collins notes, “Enel X has the authority to take its own business decisions, ensuring freedom to innovate even in more traditional segments.”
Said Starace: “We [Enel X] have the freedom to cannibalise our traditional business, so I’ve been told go out and break things, which means I don’t have to phone my colleagues and say, ‘Look, I’m going to do PV on the roof, be careful, you’re going to sell less energy.’ It’s what is good for Enel X I am going to look at. Otherwise, we won’t be able to do what we need to do.”
Enel X is split into four global product lines: e-Industries, e-Mobility, e-Home and e-City.
- E-Industries offers demand response, demand-side management, energy efficiency, distributed generation and energy consulting services to businesses.
- E-Mobility offers public and private EV charging facilities and related services such as vehicle-to-grid.
- E-Home offers PV panels, storage systems, home energy management and smart appliances to residential customers.
- E-City offers demand response, demand-side management, distributed generation and integrated energy services to public administrations and municipalities, in addition to smart lighting (including lampposts with built-in EV chargers) and a wholesale fibre-optic network.
According to Recharge News, “Enel X expects all four product lines’ gross margins to grow substantially between 2017 and 2020: from €183m to €448m in e-Industries; €2m to €86m in e-Mobility; €98m to €261m in e-Home; and €132m to €216m in e-City.”
“Modest growth is expected in the more mature business lines, but rapid expansion is predicted in the up-and-coming technology areas. Demand-side management is due to grow from 3MW installed last year to 224MW in 2020; the number of installations of public EV charging stations is expected to rise from 1,100 in 2017 to 9,100 in 2020, while residential charging boxes are predicted to expand from 26,000 in 2017 to 304,000 annually in 2020.”
Demand response, Venturini tells Recharge News, “is exploding, it’s the perfect solution, the perfect product in so many markets.” Enel X is “already the biggest demand response player in the world, after acquiring US firm EnerNOC in August last year.”
The second step in this arena, Venturini says, “is demand-side management, in which customers use batteries to help manage their loads and reduce capacity charges — the specific line items on electricity bills where utilities charge a fee corresponding to the customer’s peak demand during the billing period.”
“And then number three,” says Venturini, “is how do you use electric cars to do exactly the same thing. How do we use electric cars to provide services and exchange energy into the grid? I think we are way ahead of others in developing the technology to allow something like this.”
Enel is the first utility to build a network of EV charging stations without any public financial support, Venturini tells Recharge. “EV is the future. We are going to deploy up to 14,000 public charging stations [in Italy] by 2022, we’re going to create the biggest and most comprehensive charging network in the world. At the end of 2018, we will already have 2,700 of these charging stations operating — you will be able to go all over Italy with an electric car with no problem.”
The three services together “will all help to balance the grid and postpone or eliminate the need for grid expansions”, Collins points out. “What you try to do is provide solutions that are not as expensive as using gas-fired [peaker] power plants for 200 hours a year,” says Venturini.
ENERGY WATCH #4 by Karel Beckman
A 100% hydrogen gas grid? Yes, we can
June 12, 2018
No gas-fired peaker power plants will be needed in the future, says Enel. So what will be the role of gas in the European energy future?
At the Flame gas conference in Amsterdam in May – one of the biggest European gatherings of the gas industry – a lot of the sessions revolved around this question. In particular, how gas can be “greened” so that the existing gas infrastructure does not have to be written off.
Torben Brabo of Danish transmission system operator Energinet summed up the “similar findings” of “many studies” that have been recently done:
- “All electric is not the solution”
- “The more use of existing gas infrastructure, the cheaper the transition”
- “Gas can become 100% green, but different gas-futures in the EU”
- “Consumption patterns and segments should be completely changed”
- “The more decarbonization, the more hydrogen, the more P2G” (power-to-gas)
I think these conclusions very well summarize the main “feelings” in the gas sector.
One of the hopes of the gas (infrastructure) sector is hydrogen. Dan Sadler of Northern Gas Networks in the UK gave an interesting update of the H21 project in Leeds, asking: “‘If the gas industry in the 19th Century was dominated by towns gas and the 20th Century by natural gas could the 21st Century be dominated by hydrogen?”
Although the H21 hydrogen project is carried out from Leeds, and is initially looking at the potential of hydrogen for this town and the north of England, its ultimate scope is much wider: it’s about a conversion to 100% hydrogen in the UK gas grid, which could then also serve as a model for other countries.
Sadler presented a graph from Dr Grant Wilson from Sheffield University to demonstrate the “size of the decarbonisation challenge” in the UK:
Sadler explained: “Currently the UK requires circa 1,500 terawatt hours (TWh) of energy to support heat, transport and electric generation. Around 83 TWh (Digest of UK Energy Statistics 2016) of this energy comes from renewable sources. This is 5% of net energy demand i.e. 25% of the red line on the graph. Almost half of the energy consumed in the UK is to provide heat (760 TWh). That is more than that used to produce electricity or for transport. Around 57% of this heat (434 TWh) goes towards meeting the space and water heating requirements of our. Great Britain has a world class gas grid which heats 83% of its buildings as well as providing almost all commercial and industrial heat.”
Clearly for Sadler it would not make sense at all to discontinue using the gas grid: “The existing gas grid is well proven in provision of energy through a secure network which is unaffected by weather. The network is designed to meet the energy demand for weather conditions occurring once every 20 years, i.e. exceptionally cold requiring all appliances etc. are on. If the gas network can be repurposed to transport a low/zero carbon gas it will allow the UK to capitalise on paid for existing assets (the gas grid) whilst ensuring customers do not require disruptive and expensive changes in their homes versus alternative low carbon solutions. Furthermore, providing a long-term solution to climate change which utilises both the gas networks and electricity networks presents customers of tomorrow with the same choice and security as customers of today, gas or electricity.”
This is hardly an unreasonable argument. But then how to “green” the gas in the grid?
Biogas, notes Sadler, is useful, but will “always be limited by feedstock availability and competition for the ‘bio’ feedstock from the transport and electric sectors. Optimistically, bio feedstock may be able to supply up to 10% of net UK energy. This would be an incredible achievement at circa 150 TWh. However it falls significantly short of the energy required to decarbonise the entire UK gas network in the context of the 2050 challenge.”
So that brings us to hydrogen.
The H21 project has already demonstrated, said Sadler, that “the conversion of the UK gas network to 100% hydrogen was both technically possible and economically viable.”
Already in 2016, H21 released a report which “provided evidence that the UK gas networks are the correct capacity to be converted to 100% hydrogen, low carbon hydrogen could be credibly sourced at scale, conversion of UK cities could be achieved incrementally, appliances could be converted to operate on 100% hydrogen, and hydrogen could be stored to manage intraday and inter-seasonal swings in demand.”
In addition, just as importantly, the report “provided a financing methodology which would keep the impact on UK customers’ bills to a minimum taking advantage of the natural expenditure profile of the UK gas industry and its established financing methodology.”
Sadler notes that the H21 report led to great enthusiasm in the gas sector and among policymakers: “There have been numerous publications acknowledging the potential of a 100% hydrogen gas grid conversion and calling for urgent action to provide the outstanding pieces of critical evidence. Most notable of these is the independent body ‘The Committee on Climate Change’ (CCC) and their October 2016 publication ‘Next Steps for UK heat policy’. This was followed in October 2017 by the UK Governments ‘Clean Growth Plan’ which shows a 100% hydrogen conversion as one of the large scale credible options for decarbonisation.”
So what are the next steps? A number of follow-up studies are being carried out, including a £25m ‘Downstream of the Meter’ Programme led by the UK governments Department of Business Energy and Industrial Strategy (BEIS) and a £10.3m ‘H21 – NIC’ Programme led by Northern Gas Networks focusing on providing the safety based evidence for 100% hydrogen conversion ‘Upstream of the Meter’. In addition, the project H21 – North of England, developed in conjunction with Statoil and Cadent, will present a ‘conceptual design’ for converting the North of England.
Note that the hydrogen to be used in future will – at least initially – come from steam methane reformers at the Teesside facility, which has access to carbon capture and storage. Renewable-power-to-gas is not (yet) part of the project, but of course it could be added later or used in other countries that are interested in adopting the model. CO2-free hydrogen could also be produced with nuclear power of course.
Sadler notes that “H21 interest is growing and H21 based studies are under development in Australia, China, Europe, Ireland, Japan, Hong Kong, Scotland and New Zealand. There is strong and growing local support across many of the Northern local authorities (West Yorkshire, Liverpool, Manchester, Teesside, Newcastle) recognising the benefits to air quality, job creation and climate change targets.”
Indeed, he sees a global green hydrogen economy emerging:
Although Sadler notes that “big problems need big solutions”, he is careful to note that hydrogen will not be the “miracle technology” that will make all other technologies redundant: “We need to be clear that a 100% hydrogen conversion does not negate the need for other measures, i.e. energy efficiency improvements, increasing renewables, some nuclear, district heating, ‘bio’-energy etc.”
Nevertheless, he does add that “whilst there is a common ‘no silver bullet’ consensus, we need to be collectively realistic and recognise different ‘bullets’ have very different contribution capabilities when considered against the 2050 targets. Furthermore, we also need to remember that 2050 is only over 30 years away and large energy infrastructure construction takes time. Deployment timescales of different ‘bullets’ are often not realistically considered instead preferring economic analysis over credible deliverable actions.”
In short, hydrogen can be a big part of the solution, according to Sadler: “The H21 project represents an opportunity to do something fundamental and for the UK to lead the world in large scale decarbonisation strategies. With continued national, local and international support we can gather the remaining pieces of evidence to make this a reality.”
Clearly, however interesting Sadler’s viewpoint is, it does come from someone in the gas industry. There are also voices that insist we do not need natural gas (nor its substitutes) in future.
Thus, Joshua S. Hill, writing on Cleantechnica, cites a new report from the Rocky Mountain Institute (RMI) which purports to show that investing in “clean energy portfolios made up of clean energy sources and distributed energy resources is a more cost-effective method of replacing aging fossil fuel-powered power plants in America than replacing them with new gas-fired power plants.”
Admittedly this is a different situation from the UK: not only is this the U.S., but RMI is comparing investment into renewables with investment into new gas-fired power plants.
As Hill writes, “over half of the country’s generating capacity of power plants is more than 30 years old and will reach retirement age by 2030. As things currently stand and encouraged by advances in power plant technology and natural gas prices which have hit historic lows, the country’s developers, utilities, and merchant generators have already announced plans to invest over $110 billion in new gas-fired power plants through to 2025.”
According to the Rocky Mountain Institute (RMI), “if this trend continues through to 2030 then over $500 billion will be necessary to replace all the aging and retiring power plants with new natural gas-fired capacity. Add on to that another $480 billion in fuel costs and 5 billion tons of carbon dioxide (CO2) emissions through to 2030 — and as much as 16 billion tons of emissions through to 2050 — and that’s nearly $1 trillion in future investments and fuel costs, and unnecessary additional CO2 emissions.”
A new analysis from researchers at RMI has concluded “that a more cost-effective and environmentally friendly method of replacing retiring fossil fuel-powered power plants is to rely instead on clean energy portfolios made up of renewable energy sources like wind and solar, and distributed energy resources (DERs) such as energy storage batteries.”
“Relying on clean energy portfolios may have been prohibitively expensive 10 years ago, and would have relied solely on doing things for environmentally friendly reasons. However, over the last decade, the cost of renewable energy and DER technologies have fallen dramatically and, according to RMI, are now not only cheaper based on a levelized cost basis than proposed natural gas-fired power plants but are increasingly threatening the levelized cost of existing gas plants.”