More Complex Than We Were Led To Believe

I love it when you get a new insight into something that on the surface looks like it is a booming success with nothing but benefits. For example, the booming installation of solar panels on the rooftops of Australian homes. If you look at this topic narrowly it’s a wonderful success story, but if you investigate more broadly it appears to have created negative flow on consequences for Australia’s energy transition, not readily apparent to the Australian public.

This is revealed by Matthew Warren, former chief executive of the Australian Energy Council, the Energy Supply Association of Australia, and the Clean Energy Council, in his recent piece in the Australian Financial Review entitled “Rooftop solar overload has blown up energy markets”. Here are some excerpts to give you a ‘taste’ of Matthew’s clear, stark, confronting message:

“The biggest hurdle to building a massed renewable engine to power our economy is the growing fleet of renewables already installed. Because they all run at the same time. These headwinds are already materialising relatively early into the renewables adventure.”

“Almost every day 3.4 million rooftops generate more than 10,000 megawatts at their midday peak. This creates chronic oversupply, sending wholesale electricity prices negative…....To manage this growing daily oversupply, every other type of generator that can be curtailed is turned off or dialled back. …..…The biggest hit is on the utility scale wind and solar farms – which are having their

generation increasingly curtailed during the daytime. They earn less and less revenue from the same capital outlay. This pushes up the cost of the electricity they produce and makes new projects less and less profitable. In other words, small-scale renewables are cannibalising the market for large-scale renewables.”

“Rooftop solar PV will deliver around 3 gigawatts of new capacity this year, but large scale is slowing rapidly with constantly eroding value from future electricity output. There are already industry rumours of fire sales of some wind and solar farms.”

“Renewable developers will be buoyed as each coal generator exits, but it will be temporary. Coal cannot exit until enough gas and storage is ready to fill in the big gaps. Gas peakers will keep the lights on, but they won’t fix the renewable oversupply problem. Large-scale storage will soak up surplus electricity, but is proving scarce and expensive.”

“Governments cannot avoid making tough decisions for much longer. Continuing with the status quo will mean each new renewable project will need an increasing injection of cash until governments are underwriting the lot.”

“Shifting electricity demand to the middle of the day would help, particularly passive loads like electric hot water tanks, most of which still heat up at night. More aggressive demand management sounds easy but gets hard because it involves reorganising industries, workforces and daily habits to follow the weather. We can’t even agree on daylight savings.”

“Probably the only way to build massed renewable generation will be as regulated assets, meaning the coup de grace of electricity markets and governments underwriting the whole nine yards. If energy is going to be publicly funded, then how we deliver the transformation should be subject to a lot more critical thinking than it has been to date.”

As Matthew so eloquently concludes, “Whichever way you cut it, energy is going to be more regulated and more expensive, not cheaper. The sooner we stop pretending everything is going OK, the quicker we can address these mounting challenges.”

I strongly encourage you to read Matthew Warren’s whole article here.