The Fossil Future of Thermal Generation

11 July 2017

The calls for a 100% renewable energy market in NZ are often met with large amounts of criticism, “We are 85% renewable already”, “Thermal back up is required for periods of drought and low wind”, “Going 100% renewable will only increase prices as more generation will be required” etc etc etc.

Quite frankly, this is an outdated way to think of the market based on large scale generation models and long distance transmission.

New Zealand in transition

Unlike most other countries, NZ is well positioned to further reduce reliance on thermal generation, given our geography, population spread and isolated energy system i.e. we are not importing or exporting electricity to other countries like many do in Europe or North America.

A good first step could be to remove thermal baseload generation from the market, in recent time this has been achieved with Otathuhu closing in 2015, much of the “slack” was taken up by new and efficient running of Geothermal stations.

But how do we take this further, how do we remove the requirement for Huntly et al while still retaining large users such as NZ Steel and Rio Tinto?

Battery Storage and the New Zealand network

From my perspective the largest potential lies in battery storage whether it be fixed assets or leveraging the electric transport fleet in years to come.

If generators / network companies considered either installing large scale industrial batteries at remotely located or congested sub-stations or operating networks of small scale batteries installed across thousands of residential homes, massive amounts of money would be saved by not having to build new hydro dams or geothermal plants.

Ever increasing costs of maintaining such a large transmission and distribution system for such a small population is surely a compelling event for infrastructure owners to invest in new technologies and new business models to sustain revenue into the future. If we apply Moore’s law to batteries, they will half in price and double in capacity in the next 18 months which should see them become extremely viable.

Considering the above, the case for thermal becomes much less compelling.

Examples from abroad

In recent times, Germany has made huge steps to curtail the reliance on thermal generation with numerous renewable generation initiatives. The following article was written by Yaniv Vardi, CEO of Panoramic Power and highlights a number of valuable points that New Zealand might take on board.

In a world facing pressing challenges from climate change and rising carbon emissions, entire countries are becoming laboratories to test potential solutions. Nowhere is this truer than in Germany, where their aggressive plans to address climate change, encoded in the ambitious Energiewende, call to phase out nuclear and carbon-based energy sources and invest in renewable energy sources – such as solar and wind.

The Energiewende plan envisions a non-nuclear Germany that cuts its carbon emissions by 80% by 2050. As lofty a goal as this may be, the plan is on pace to meet and even exceed benchmarks. Even though not everyone is on board, and some claim the Energiewende is overzealous and could strangle business in favor of pushing an unrealistic energy policy, progress well underway.

What is the Energiewende, and what has it done so far?

The Energiewende is a sweeping plan for “the full-scale transformation of [German] society and the economy” along the lines of renewable energy. Passed in 2010 in its most recent form – but with social and political roots that stretch back 20 years prior – the Energiewende schedules a complete phase-out of nuclear-generated energy by 2022, an 80% cut in carbon emissions by 2050 and supports additional investment in renewable technologies such as wind and solar.

The Energiewende has three main components: proliferation of renewable energies, reduction or compete phase out of nuclear- and carbon-based energy sources and increased energy efficiency.  Germany is well on its way to completing these goals successfully and in a timely fashion. Currently, the first two components are well underway, while early progress has been made toward heightened efficiency. By 2014, 27% of German electricity was generated by renewable sources. Since 2011, Germany has halved its consumption of nuclear energy and shut down nine of its 17 nuclear reactors.

On its surface, the Energiewende appears to be working. It doesn’t mean, however, that the policy isn’t free of critics. Some have vocalized sharp critique, casting doubt on the viability of the energy plan. But do these arguments hold water?


The continuing energy debate

Not everyone is sold on the promises of the Energiewende. Some, like economist Heiner Flassbeck, argue that an energy system primarily supported by wind and solar, without any aid from nuclear sources or fossil fuels, is ultimately not tenable.

Flassbeck’s critique is related to what critics call “the intermittency problem,” that wind and solar don’t always generate electricity at reliable levels. If the renewable sources fail to produce enough energy to meet the nation’s demand, and Germany successfully phases out all nuclear- and carbon-based energy sources, there would be no fallback to generate the additional energy needed. Critics say removing that backup would be a crucial mistake.

However, proponents argue that intermittency can be solved with greater grid connectivity – geographical diversity, they suggest, should often balance out any shortages – and the development of better storage technologies. At present, wind energy must be used as it is generated; if cost-effective storage methods emerge, the intermittency of wind power becomes less of a concern.

In addition, alternative sources have proven themselves to be sufficient. Just last year, German solar power providers generated so much electricity that they actually had to pay to offload it. And while naysayers may declare this the product of a ham-fisted public policy that actually dims the long-term viability of commercial energy production, the fact that there’s enough clean energy production to bring this hypothetical conflict to life, is itself encouraging.

Energiewende critics also raise concern about inflated electricity costs. In Germany, utilities are required by law to pay energy producers that sell back to the grid. Those payments are set at fixed, above-market prices, which utilities pass on to consumers in the form of a surcharge on their electric bill. As a result, German consumers experience higher than average energy costs. In 2016, the surcharge amounted to 22.1%.

In the U.S., consumers pay less per kilowatt hour, a fact favored by critics of Germany’s energy policy. Despite the heightened electricity rates, German consumers are still widely in favor of the Energiewende. More than 80% of respondents of public opinion polls said they were in favor of a low-carbon and nuclear-free economy. Higher energy costs, it seems, do not deter the Germans in their bid for a cleaner energy system.

Toward a viable, national energy management model

Despite critics’ appeals to hold tight – at least for the time being – to the nuclear- and carbon-based status quo, Germany’s energy efficiency policy is making a compelling case study for a more sustainable model.

The methods may be bold, but they seem to be working. Germany reduced greenhouse gas emissions by 27% and produced 27.4% of its electricity from renewable sources. Renewable energy made up 13.5% of the market as well – all while shuttering nuclear facilities and growing the overall economy by 1.9% (the fastest rate in the G7).

While Germany is phasing out non-renewable energy sources like coal at a slower pace than nuclear energy, the Energiewende is setting the stage for a new system founded on renewable energy technologies. As storage methods improve and proliferate, and distribution networks become more connected, the problem of intermittency should become less and less burdensome – in other words, high-producing regions will be able to support low-producing regions.

While the Energiewende is aggressive bordering on single-minded, it has already demonstrated its viability as an energy system capable of supporting an advanced, forward-thinking economy. Even as the German policy has implemented drastic changes in a relatively short amount of time, the German economy has continued to grow unabated. If the world is serious about combating climate change and meeting the targets of the Paris climate accord, Germany’s Energiewende is a model to emulate, not dismantle.

Yaniv Vardi is the CEO of Panoramic Power, a leader in device level energy monitoring and performance optimization