A breath of fresh Eyre?

Business Spectator
Wednesday 4/8/2010 Page: 1

The federal government has made much of its promised $1 billion injection into green grids to bring the country's mostly remote renewable energy sources to the doorstep. And they have received just as much publicity from being criticised for doing too little, too slowly. It may be, though, that some particularly rich areas of renewable resources do not need so much support in direct subsidies. All they need is a change in the rules, and for those changes to be made promptly.

A study into a possible green grid on the Eyre Peninsula by Macquarie Group, legal firm Baker and McKenzie and engineering firm WorleyParsons showed that a grid linking 2000MW of wind power and delivering it to the national grid at Port Augusta could be self-funding. The study estimates a new 500kV grid suitable for up to 2000MW of wind power would cost around $613 million. But such is the strength of the wind resource in the area that the investment could be funded by the developers themselves, at an ongoing annual cost of around $50 million.

Four wind developers - Origin Energy, Pacific Hydro, Acciona Energy and Transfield Services - have expressed an interest in the proposal. This approach would require that a raft of regulatory changes currently under discussion are passes, as expected, early next year. Principal among them is a mechanism known as Scale Efficient Network Extensions (SENE) which allows costs to be recovered from generators rather than having the sole burden on financing the project placed on a developer.

That changes the nature of the game somewhat and the Eyre Peninsula proposal is being touted as a potential model for future investments to modernise the nation's energy transmission infrastructure - a grid to unlock combined solar and geothermal provinces around Mount Isa or in the Pilbara come to mind.

The green grid proposal does require an upgrade of the shared network and the grid interconnector into Victoria, which would allow South Australia to export its excess wind resources. This would be decided by an economic test, but the backers are confident that the potential of unlocking nearly $6 billion in investment and creating 5,000 full-time jobs would be a powerful argument.

A more ambitious plan could seek to unlock a further 2000MW of Eyre Peninsula wind power, but this would require a new interconnector, most likely a HVDC line, into New South Wales. The advantage of this line, however, is that it could pick up some of the geothermal resources being developed in the Cooper Basin and elsewhere in the state.

There are other attractions for a green grid in a location such as the Eyre Peninsula. Apart from being an excellent wind resource, the area is sparsely populated, meaning less risk of a confrontation with local townships and farmers. Here, Australia has an advantage over the UK, for instance, which has virtually run out of land-based options for wind power expansion and is now proposing a massive government-funded investment to unlock offshore wind resource.

It would also help ensure Australia meets its 20% renewable energy target by 2020. This is an important consideration given that delays in legislation and the slump in the price of renewable energy certificates, along with difficulties in obtaining power purchase agreements, is putting the RET target at risk.

Grid games
What could be more fun for an energy boffin than to draw up - according to his or her own preference - their ideal energy grid in 2050? The UK Department of Energy and Climate Change has offered just this opportunity as part of their 2050 Pathways program, which analyses different paths to achieve the government's target of an 80% in greenhouse gas emissions in 2050 from 1990 levels.

The analysis in the 2050 Pathways work presents a framework where people can consider the scale of change required and some of the choices and trade-offs that have to be made over the next 40 years. The analysis canvasses various levels of ambition - ranging from not much, to extreme - and half a dozen different pathways, the first canvassing an equivalent level of effort across renewables, nuclear, and fossil fuel power installations, along with carbon capture and storage, as well as bioenergy.

The other pathways canvass scenarios where CCS was not an option, if no nuclear plants were built, if only limited new renewable capacity was built, if there were limited supplies of bioenergy, and if there was little change in behaviour from consumers and businesses. The reference case assumes no efforts to decarbonise, and therefore no new technologies. It is not a good result, as it would leave the country extremely vulnerable to supply shocks. Its energy security would be minimal, the DECC says.

Interestingly, the DECC notes that although the primary rationale for moving to a low-carbon pathway is not to reduce energy costs, the analysis indicates that low-carbon energy generation can actually be less expensive than conventional energy generation under high fossil fuel price scenarios, and this did not take into account any carbon price.

Boffins can use the 2050 Pathways calculator tool, which allows users to explore different combinations and rates of change in various economic sectors to reach the target, all the while making sure that energy supply meets demand. It is, admittedly, a UK model, so you won't find much here on geothermal and you will see more emphasis on nuclear. But it is fascinating to explore, and wouldn't it be interesting if Australia produced a similar document? Where is that energy white paper?