Antinuclear

Australian news, and some related international items

Australia’s transformation from centralised to decentralised energy generation

A ‘new normal’ has not yet been established but all the indications are that the emerging model will lower the cost of new infrastructure, improve competition and greatly improve the degree to which existing infrastructure is used efficiently.

Distributed generation has already succeeded in moving beyond a characterisation as a niche part of the energy industry. However the speed of that transition will depend on the extent to which the market allows for innovation and how quickly the new entrants of today are allowed to become the incumbents of tomorrow. 

environment-renewable-Australia

Centralised to decentralised energy: What does it mean? REneweconomy, By  on 16 March 2014 We are in the early stages of a transformation in the way we build, operate and finance our electricity infrastructure in Australia. For decades, Australia’s electricity sector – just like most across the western world – has operated on a model of centralised, state-owned power plants, typically co-located with major sources of fuel. This has meant that not only have a small number of large power plants provided the vast bulk of electricity needs, but that often these plants have been physically clustered together in places like the Latrobe Valley in Victoria and the Hunter Valley in New South Wales. Today, Australia’s energy market is increasingly integrated into one large east coast market and several smaller grids, with the Victorian market fully liberalised. Others, such as Queensland, Western Australia, and Northern Territory are still largely state-owned, and the remaining states are in various degrees of transition.

The core logic behind the physical co-location of generation plants was that the economic efficiency gains from being positioned close to the fuel source (typically coal or large hydro) were greater than the economic inefficiency of transmission losses from transporting power long distances to major population and industrial centres.

New technology and the economic dynamic of the market mean this is now changing. Along with increasingly empowered consumers and communities, shifts in the basic cost parameters of many sources of energy allow generation to be built closer to where it is used. So, what if, instead of a small number of large power plants being owned by a few companies, we had a much larger number of generation facilities, with a larger number of owners? And what if consumers were mobilised to participate directly in the financing of much of the new infrastructure, lowering barriers to entry and spreading the risks and rewards of investment?

The advantages of such a system could be enormous – more competition, lower cost infrastructure and more efficient use of resources. Each of those outcomes would have benefits for consumers, and the combination of all three could transform the industry and the role of consumers in it.

While we still have a long way to go, and the path ahead includes many uncertainties, Australia, along with a number of other economies, is, in reality, embarking on exactly this type of transformation. The stresses and strains of this are increasingly appreciated, as are the predicted benefits, with profound implications for the nature of the infrastructure that will be needed.

As with all disruptive technologies, a more distributed form of generation creates winners and losers, and many of those who have benefited from the traditional system will have an obvious tendency to resist change. Others will embrace it. It is potentially an exciting and dynamic time for the energy sector to drive innovation and reach for the future………

With the enormous cost reductions that have been achieved by solar photovoltaic (PV) technologies, households and businesses can now generate much of their own power needs, and export any temporary surpluses to their neighbours. That means that while overall demand might stay the same (or even increase), demand for energy from large-scale generators might fall, and that creates a supply and demand imbalance that puts downward pressure on electricity prices.

What has just been described is essentially what has been occurring in Australia over the last five years, and looks set to continue for many more years to come. Already more than two million household clean energy systems have been installed across Australia (mostly solar PV or solar hot water) and this has had a real and measurable impact on demand levels.

There are some other factors that are also contributing to demand reductions in specific states, but the spread of PV is part of it and the continued growth in the use of PV will further entrench this effect.

The impact on the wholesale electricity generation sector has been substantial. Around 1000 MW of coal-fired generation capacity has been mothballed and, despite this, the wholesale price of electricity remains at historic lows in many places. This is great news for price-driven consumers – but what does it mean for our infrastructure needs?……..

The operating costs of renewable energy projects are typically significantly lower than for the same capacity of thermal plant, primarily because there is no direct fuel cost associated with most renewable energy technologies such as wind, solar and, in many cases, hydro.

However, it is true to say that the commercial viability of large-scale renewable energy projects in Australia is currently fundamentally tied to the existence of the Renewable Energy Target and the obligation for liable parties to purchase Large-scale Generation Certificates (LGCs). This ‘risk’ is usually managed by entering into long-term off-take agreements with electricity retailers, which gives wind projects a fairly stable revenue stream with relatively low risk. This in turn attracts institutional investors.

Moreover, at the smaller-scale end of the renewable energy technology spectrum, up-front costs have come down dramatically for solar PV, and this allows even households on fixed or relatively low incomes to invest in solar. Evidence shows that lower-income suburbs have the highest concentration of solar PV ownership, while wealthy suburbs have a lower take-up of solar PV.

The recent emergence of innovative business models such as leasing arrangements (with no up-front costs to consumers) and community ownership (allowing people to invest at any scale) are providing new ways to bypass the old capex-intensive models of financing energy infrastructure and opening up the market to a new tranche of consumers………

The pace of innovation in distributed generation technology, the demand by consumers for greater involvement in, and control of, the ownership and usage of electricity, and the international drive to address climate change are all promoting real and fundamental change. A ‘new normal’ has not yet been established but all the indications are that the emerging model will lower the cost of new infrastructure, improve competition and greatly improve the degree to which existing infrastructure is used efficiently.

Distributed generation has already succeeded in moving beyond a characterisation as a niche part of the energy industry. However the speed of that transition will depend on the extent to which the market allows for innovation and how quickly the new entrants of today are allowed to become the incumbents of tomorrow. http://reneweconomy.com.au/2014/centralised-decentralised-energy-mean-34072

March 18, 2014 - Posted by | AUSTRALIA - NATIONAL, energy

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