Australia is so well positioned to transition rapidly to clean energy, with vast potential to rapidly clean up our manufacturing and value add clean energy in decarbonised exports. Our energy system is becoming more resilient and distributed, and households are likely to play an even bigger role in distributed storage, buffering the grid.
We were delighted to host energy insider Simon Holmes à Court, for his annual take on where our energy system is headed. Simon Holmes à Court is a Senior Advisor to the Climate and Energy College at Melbourne University.
We have the technology to “electrify everything” already – check out the presentation discussion on moving all electric here. More information can be found on the excellent Rewiring Australia website here. There are a bunch of other sectors that need decarbonising – video chapter point here.
Renewables is replacing coal in the National Electric Market (NEM)
Simon talks about the way renewables are displacing and coal and gas, and predicts that renewables (green) will cross the black coal line “in three or four years” Video chapter point here.
Where is the plan? Yes we have the two yearly AEMO updates (ISPs). Simon says that “the future moves forward five years every time”.
Decarbonising the electricity sector
Simon explains here that our energy system is heading towards a much faster rate of change than previously expected – AEMO’s ‘Step Change’ or even faster!
There are four different scenarios in AEMO’s current 2022 Draft ISP – starting with the most aggressive here ‘Hydrogen Power’, then ‘StepChange’ (we are exceeding this already) and then the less likely ‘Progressive Change’ and ‘Slow Change’. Check out Simon talking through these electricity decarbonisation scenarios here.
- With Hydrogen Superpower, this is when Australia “get’s its skates on, and takes advantage of our abundant renewables to transform our exports and manufacturing sectors, like in Ross Garnaut’s 2019 book “Superpower”. We would be out of coal by 2030, and and emissions falling from 140 Mt CO2e to about 4 Mt CO2e .
- ‘Step Change’ is now designated as the most likely central scenario, with renewables making up over 80% of the mix in the NEM by 2030, but leaving twice as many residual emissions.
- ‘Progressive Change’ – “if we keep bumbling along as we have been”.
- ’Slow Change’ if the world gives up on climate action.
Renewables penetration is accelerating much faster than expected – over 80% by 2030 for the Step Change scenario, or 100% for the more aggressive Hydrogen Superpower scenario – p 41 of the Draft 2022 ISP
Ten years ago the Greens forced Energy Market Operator to write a 100% renewables plan, even though that was said to be “impossible”. AEMO found that it would be possible but expensive. Now with the latest report we will get to 100% by 2030 with the fastest scenario, or at 85% with the central scenario. “Now we are getting the people who run the electricity market saying “totally doable” – the speed is merely a matter of political will.” Check Simon’s presentation at this chapter point.
The Draft 2022 ISP discusses coal retirements on pp 44-46, with 14GW of retirement likely by 2030 by 2030.
Simon Holmes à Court explains: how do we get to 100% renewables? “Obviously we have to get rid of coal. And coal is coming out of the market because it can’t compete.”
Last March Energy Australia put their closure date for Victoria’s dirtiest and oldest power station, Yallourn, to 2028 and this may be moved up again.
Shortly after the announcement that Eraring, Australia’s largest coal generator, would shut seven years earlier than expected, Mike Cannon Brookes joined with large Canadian investor Brookfield in a takeover bid that would see AGL out of coal by 2030, with a budget for a large replacement build-out of renewables and storage. Video chapter point here.
Dispatchables – households will become increasingly important
How do we keep the lights on with these coal closures? We need dispatchable energy (currently coal and gas) which increasingly will transition. For instance, fossil gas can move to biogas or hydrogen, and distributed customers and households will increasingly opt into aggregated storage programs. Catch the presentation here.
The National Electricity Market continues to grow, but will be balanced by progressively cleaner despatchable resources. Households will take an important role through aggregated distributed resources (DER). Dispatchable storage will also include longer term hydro, utility storage and non-fossil gases. These clean dispatchables will to continue to replace fossil “baseload”. This graph showing dispatchable resources (under the dotted line) transition can be found on page 9 in the Executive Summary of the Draft 2022 ISP
As prices continue to fall, AEMO states that non-utility and household storage, especially distributed storage that is coordinated through virtual power plant arrangements, will become increasingly important in balancing variable clean energy generation.
The grid will be balanced by:
- Distributed storage – includes non-aggregated behind-the-meter battery installations designed to support the customer’s own load
- Coordinated DER storage – includes behind-the-meter battery installations that are enabled and coordinated via virtual power plant arrangements. This category also includes EVs with vehicle to grid capabilities.
- Shallow storage up to four hours, which supplies fast ramping and frequency control services
- Medium storage of between 4 to 12 hours, useful in balancing day to day variations
- Deep storage for interseasonal variation and variable energy “droughts”
Storage is discussed on pages 48-50 in the Draft 2022 ISP.
The grid will have enough resilience from a mix of shallow and deep (seasonal) storage to store excess generation and ride out periods of low wind generation as well as the evening peak. Check out the video at this chapter point.
The graph should be reassuring: “we don’t need too much more storage this decade above and beyond what Snowy is giving us”. Storage will certainly ramp in in the 30’s and 40’s. More detail in the presentation right here.
The government claims that Australia has reduced emissions by 20% in the last 15 years.
Simon Holmes à Court explains: Australia is exploiting a loophole of being allowed to count land clearing (only one of three countries globally with this provision), and cherry picking data by using the pandemic dip.
If you take out the land sector, emissions have only fallen by 2.6% in 20 years. The dip in the end is due to Covid. “At the moment Australia’s emissions reduction plan is to have a pandemic”. Check the presentation at this chapter point.
When you put the land clearing back in you can see the origin of the 20% claim. There is little change in the last few years but previously State governments reduced massive land clearing, so you can see this 20% is originated really by “simply stopping what we shouldn’t have been doing at the time”. Check the presentation here.
This comparison is not apples with apples. Firstly the other countries in the government’s comparison are not allowed to use land clearing in generating their emissions figures, and secondly the fine print says that Australia’s 2020 figures (post pandemic) are being compared with 2019 figures. “I still call that a lie”. More about this at this chapter point.
“Australia is one of the rare countries has has increased its emissions. Where most advanced economies have started decoupling from fossil fuels, Australia has barely begun.”
Is committing to net zero before Glasgow really a huge achievement?
Simon Holmes à Court continued: in November last year “a whole bunch of media were really proud of Scott Morrison” for forcing through “net zero just in time for Glasgow”.
But we had already committed to net zero in Paris. “In 2015 we signed up to the Paris Agreement.” The Paris Agreement was an agreement to limit to limit global warming to well below 2°C, preferably to 1.5°C, which means net zero. “We had to get to Net zero well before 2050.” Simon said.
Even before the Paris Agreement South Australia committed to net zero by 2050, Victoria and NSW followed in 2016 – the Federal government has showed no leadership. Check the presentation here.
“This is how we are going to get there” – chapter point here.
- 20% is the emissions “reduction” to date, from no actual action, merely accounting tricks
- 40% is a “technology emissions roadmap” but in fact its not actual deployment of technology: “apparently, if you go and do a bunch of R&D, magically emissions will reduce… Emissions don’t reduce because you invent stuff, emissions reduce because you deploy stuff”
- 15% because (magically) “global technology trends”
- 10%- 20% “because we are going to use international and domestic offsets” “there is no word on who is going to pay for them or how its going to happen”
- And lastly a final 15% left over relying on “further technology breakthroughs”
“There is not a lot in this whole stack that is actually anything”
Mike Connon-Brookes put it better than anyone, perhaps, when he said that he has “read all 129 pages of the pamphlet. Not worth the paper I didn’t print it on”. Its inaction, and avoiding choices. “I am going to bed. It’s just ridiculously embarrassing.” Enjoy!
Australian emissions reduction: 83 MtCo2e (-15.4% ) by 2030 says McKinsey
Simon Holmes à Court: “we did send projections to Glasgow, we said we were going to reduce emissions by 15% over this coming decade”. Huge.
How would this 15% to 2030 be achieved? There are eight sectors of the economy here.
“Each of the lines is level, meaning that there is no progress in any of these sectors except for one.. the electricity sector, and that’s being driven by the States” “The one thing that is going happen in our plan we sent to Glasgow is the thing that the Feds are trying to stop, everything else is a flat line, that is how bad the plan is.” Chapter point here.
I want to give you some hope
Electrification of the transport fleet is starting to take off. “Unfortunately Australia has the slowest uptake of comparable countries…. EU nearly 20% and we just cracked 2%, so we have got a way to go. Not surprising, we have got close to no policy.” Link to the presentation segment on EV’s here.
On EV’s: “Isn’t it crazy that half of the lithium that power this global fleet is coming from Australia.”
“Same slide but we added Norway on it.. That’s a country that said we want to decarbonise our transport sector. It started with good policy, about 2012 I think it was, and now look where they are now, nearly 90% in sales.” Obviously the fleet on the road takes a while to flush through, “they are going to get there decades before we do.” Chapter point here.
Simon Holmes à Court on green steel. “Since I last spoke, green steel has gone from something in the laboratory to something at mid scale. It’s a bit more than R&D, this is a demonstration plant. It still needs to be scaled up many times, but it is producing quantities of steel that are being used in early stage products, no coal is being used in the production of this steel.”
Volvo took the steel from the SSAB’s Hybrid plant and made and made some mining equipment out of it. “This is the first steel vehicle in the world that is made without coal.” More here.
AREH – a massive project, approved with the first generation in 2026
A massive project, approved with the first generation in 2026, which would be the largest generation project in the world on today’s terms – bigger than the Three Georges Dam. 10GW of solar, about 50% of all Australia’s solar energy, all in one projects and 16GW two or even three times of all wind capacity built to date. Chapter point here.
What are they going to do with this power? Simon Holmes à Court continues. AREH will make green ammonia from green electricity and desalinated water, and ship it to Japan. Japan has just put out an initial tender for 500,000 tons a year, and this facility will make 20x that a year. Japan will add ammonia to coal in coal fired power stations, initially in a blend, and gradually reduce the amount of coal. “It may not be the smartest thing to do with green hydrogen in the long term but its a great way to get the industry going.” Japan is big on creating demand to ramp up technology and deployment – “they have got a great approach to decarbonisation.”
WGEH – WA: vast lands and massive renewables resources in the Nullabor
The Western Green Energy Hub is a vary large energy project where the traditional owners will eventually take it over. Again very massive with 25-30 GW of wind, 15-25 GW of solar – . Energy could be exported as green ammonia or green steel. More here.
WGEH: “As much generation as we have built in the two decades built in one place”
Hunter Valley Industrial Precinct
A great example of systems thinking – firstly, massive battery storage with an electrolyser farm to make hydrogen, then ammonia with local fertiliser and explosive manufacturing, displacing gas. Some of the hydrogen will go into making clean H2 to service green iron or steel and then aluminium. More here
“With all those coming together you get an integrated, low emissions, heavy industrial zone”
European energy and security crisis
Germany won’t approve the connection of the new Russian gas pipeline Nordstream II.. there is likely to be a lot of thinking in Europe now. Simon Holmes à Court comments “We don’t want to be dependent on Russia for gas.”
Australian Thermal Coal Exports
All of our thermal coal importers have a net zero target.
By 2030 that demand will be significantly lower, by 2040, 2050, “it’s gone”. Chapter point here.
The Feds can’t stop Australia decarbonising
State governments and business are moving forward rapidly. More here.
Q1 New tech: coming down the cost curve
Chapter point here. Offshore wind is now starting to look good, especially the wind blows at different times of the day. “15km offshore gets you to a great wind zone, and you can build really big and fast at sea.” There are now 12 proposals for off-shore wind farms round the country.
Likewise with all the grid projects. In China in 2019, 19 large scale long grid, ultra high voltage, DC interconnector projects, more than 1000km at up to a million volts. 20 projects in the world, 19 in China. This is a precursor to Mike Cannon Brookes’ Sun Cable – from NT to Singapore 20GW solar farm. 20% of Singapore’s power – “Singapore is very concerned about energy security.”
Q2 AGL takeover bid.
Chapter point here. AEMO anticipates what the market will do rather than having central planning. There is a real tension between the government and private enterprise stepping up. AGL have a massive customer base and they are stuck with the old fossil generators, they became the dirtiest utility and largest emitter (8%). AGL was at $25 and it is now only above $7.50.
“The market has not rewarded AGL for picking up cheap coal power stations.”
Q3 Nuclear, hydrogen and green steel
Chapter point here. Nuclear – An incredible technology, hats off to all the engineers and scientists. “What the engineers haven’t been able to do is make nuclear cheap, and at the moment there are no products that suit our market. The world has stopped building very large ones and the very small ones are at least 15 years away from our market”
The second is on hydrogen. We have four H2 cars in Victoria.. expensive, inefficient, costs more to run. There are big uses for hydrogen, like steel making, ammonia making. “Hydrogen is a huge export opportunity for Australia”
“I would be very surprised if Hydrogen has any more than 10% of the energy share in Australia ever.”
The last question was about green steel making. There are two parts, you use renewable hydrogen in a process called direct reduction to make to make green sponge iron, to “use H2 instead of carbon to rip the oxygen off ferrous oxide. You then put these sponge iron briquettes into an electric arc furnace, to put some carbon back into the iron to make steel.”
Q4 What happens without Russian gas?
Chapter point here It’s expensive to get gas from Australia and US to Europe. With the new German government having a more aggressive policy on climate targets it’s more likely to accelerate gas substitution in Europe.
Q5 What about direct capture of carbon?
Chapter point here. There are some very early stage trials, but costing around $300-900/tonne, meanwhile its free to put CO2 into the atmosphere, to use the atmosphere as an open sewer. “There is no market unless we force people to do so. The cheapest carbon abatement is the carbon you don’t abate.” About a third industrial processes can be reduced at a net negative cost (energy efficiency, process changes) and about another third revenue neutral, for the last third you can do a lot at about $20-40/tonne.
“There may be eventually a market at around $50-100/tonne, but not while it is free just to put CO2 into the atmosphere.”
Q6 A question about the various energy sectors.
Chapter point here. Electricity is only about one third of emissions. If we do the Hydrogen Superpower trajectory it will be going from 140 MtCO2e to 4MtCO2e. That will bring the rest of the economy into sharp focus. Only 2% of new cars are electric. The average of a car when it is scrapped is 19 years. “It’s very slow to move the transport fleet.”
We have done nothing to green up aviation in Australia, or heavy transport. The government could work on the tweaks to get things moving on that front. “There have been a whole lot of plans put to the government to do that in revenue neutral that don’t just end up subsidising the rich.” To speed up things in the electricity sector we have to make sure that the transmission is there.
“How crazy is it that is easier to get a cable from the Northern Territory to Singapore than to get one from the Northern Territory to Sydney.’
Q7 – Seasonal variation
Chapter point here. If you add of the technologies, including hydro, and look at all the locations across the whole national electric market “a lot of that seasonality is removed”.
Modelling from Windlab: if we had 5x as much solar and 3x as much wind and a certain amount of batteries, using current amounts of generation but scaled up, “his model has been 99.9% renewable for the last eight months he has been running it. We do get a lot less variation if you look at all that spread. I do think that we will get to that point where adding solar will be cheaper than adding storage.” When there is surplus, can we do good things with it?
Q8 Adding value to hydrogen “to supercharge our economy”.
Chapter point here. “In Australia we are not good at value adding.”
The ratio of transformed goods to raw goods – the ratio of transformed goods is dropping. An example – we used to export quite a bit of aluminium, then this dropped to alumina, and now its much more just raw bauxite where other people are transforming this overseas.
“They’re gradually dumbing down the goods”.
“Fortunately in the lithium space there are two separate refinery projects in WA using cheap energy over there to upgrade lithium ore to lithium hydroxide, and then to lithium carbonate, and then there are considerations of battery cell manufacture.” We may have to have some of these lessons forced upon us. “It’s really easy to ship coal, to throw it on a barge and ship it to China. It’s very difficult to ship hydrogen. It’s much cheaper to combine the hydrogen and the iron here and make green steel here.” “It will be foreign capital that comes here, recognising that we have the minerals, we have the energy and so we will do the upgrading here.”
The large expansion in jobs will more than offset the 50,000 jobs in coal, “which is about the same number as KFC.”
Q9 What is the role of the community?
Chapter point here. Local Member for Indi, Helen Haines, has put forward a local power plan which encourages communities to generate their own power and receive local benefits.
“Hepburn Wind was an amazing community project with local benefits – “two turbines that generates enough power for two thousands homes, owned by 2,000 members in the cooperative – the first significant community owned project in the country. We thought we were the first and we found out that one hundred years before Daylesford residents had built their own little hydro scheme.” As well as local jobs and keeping people’s energy spend within the community, it really helped build social licence, reducing the anti wind farm sentiment at the time “give you cancer, herpes, kill your goats.” People were deeply engaged, and now that community has gone on to look at all the other emissions in the community with Z-Net, including solar hot water, bulk buy of second hand EVs for about $20,000, “they’re putting batteries everywhere”.
“You put a stake in the ground with one thing, and soon people are looking at all the other things they can do to decarbonise.”
“AEMO don’t have much of a vision for a middle level, but they have totally flipped their thinking about the importance of households, where the biggest amount of storage in coming decades comes from the community as coordinated distributed energy resources, which means batteries which are signed up to a subscription for someone to manage your battery to maximise the value out of your battery.”
Compared to previous decades with about 60 generators, there are “about 3 million”, sure most are just rooftops but “there are over a thousand projects that are over 1MW”, and that makes the grid a lot more resilient “than having a few big generators with skinny cables connecting us to the grid.”
“As the grid gets more distributed our reliability also goes up.”
We have uploaded Simon Holmes à Court’s full presentation and Q&A with handy chapter points on our YouTube channel. Enjoy!