THE ENERGY INDUSTRY TIMES - JANUARY 2018 Final Word 16 The world if… only marriage was simple Predicting the future is always interesting – even if those predictions seldom turn out as expected. The Economist hosted a panel at its recent Energy Summit based on a publication it issues once a year entitled: ‘The World if?’ During the session, panellists discussed three imagined but plausible scenarios for the global energy mix: What would happen if renewables made up half of the electricity mix? Or if batteries came down to $100/kWh? What if oil demand started to plummet? Although rising rapidly, at the moment wind and solar only account for about five per cent of the global energy mix. Meanwhile, battery prices are currently around the $300/kWh mark. So clearly there is a long way to go. Mark Jacobson, Professor of environmental engineering at Stanford University, USA, set the tone for the debate by focusing on the first question. He fired the opening salvo of the session by stressing that 50 per cent renewables should not be the endgame. He believes the target has to be much higher. “Electricity is only 20 per cent of all energy; so 50 per cent of electricity means we are only decarbonising 10 per cent of the energy. So we look at situations where we decarbonise 100 per cent of all energy sectors – electricity, transportation, heating and cooling, industry, agriculture, forestry, fishing, everything. The reason we look at this is because to avoid 1.5°C warming, and to eliminate the 4-7 million deaths that occur each year by burning fossil and biofuels, we need to transition to 80 per cent of all energy to clean renewable energy by 2030 and 100 per cent by 2050. This would get us down to 350 ppm by 2100.” He stressed that there was much to be gained by electrifying all energy sectors, noting that 42 per cent of all energy use could be eliminated by transitioning to clean renewable energy and implementing additional energy efficiency improvements, with another 15 per cent saved through the use of heat pumps for low temperature heating and cooling. It is certainly possible to get to 50 per cent renewables in electricity. Places like California, with 32 per cent (excluding large scale hydro), are already well on the way. The US state expects to reach 50 per cent by 2020 – well ahead of a proposed law to reach 50 per cent by 2027 and 100 per cent by 2045. A crucial unknown, however, is what the other 50 per cent of global electricity generation will look like. Laura Cozzi, Co-head of the World Energy Outlook at the International Energy Agency, observed that much depends on India and China, which are both adding huge amounts of wind and solar in particular. “By 2025, solar PV will be the least-cost solution to produce electricity in India. It will also be the least-cost solution in China. However, the key question is: who wants to be the other half? Who wants to engage in this marriage where you are married to a very volatile person that doesn’t always behave as you would like them to?” But volatility is not the only challenge. In a marriage where renewables are also driving down the wholesale cost of electricity, it is also a question of ‘who’ will become the other half in what will be an economically challenging arrangement? Much will depend on how carbon markets and carbon prices develop, as well as a country or region’s particular circumstances, as to which form of conventional generation it might be. But it will also hinge on the nature of renewables availability. Christoph Frei, Secretary General and Chief Executive Officer, World Energy Council explained: “In California, there is almost homogenous wind and sun… but in many places it is very inhomogeneous in the way that it comes in. In India, for example, two thirds of the wind energy is available in three months. That poses the question of seasonal storage. So it’s not only about ‘who’ is the other half, it’s also a question of how you manage the massive difference in incoming renewables.” Essentially we are going from living in a world where we have had an unstable demand taken care of by a stable supply, to one where it is the supply that it is unpredictable. This means that the marriage of renewables with other generation will require widespread deployment of digitalisation, a trend that is already well under way. Louis Shaffer, Distributed Energy Segment Manager, Europe, Middle East and Africa Region, Eaton, echoed Frei. “In every different country and every different region, how the wind and sun come about are different, depending on the time of year. With BNEF Bloomberg New Energy Finance we did quite an in-depth study looking at specific countries and what happens on the days (hours, weeks, months, etc.) when you have lots of sun and lots of wind, as well as on days when there is very little sun and very little wind.” He agreed that technologies such as hydrogen and digitalisation to help match demand and supply were key but added that markets and policies are going to be important. For example, many argue that because storage is often classed as a generating asset, it diminishes its economic case. “We need transparency and markets that allow people to get the value out of something. The storage market is clearly something that will grow very fast as we remove these market barriers,” said Shaffer. He added: “In the past, generation was a generating plant; now generation can be on the roof… today there are technologies that allow us to balance supply and demand cost-effectively – more costeffectively than the way we run the grid today. Yet just having the technology to facilitate the integration of large amounts of wind and solar will not be the main driver. The reason a growing number of experts believe the power industry will get to 50 per cent renewables is due to falling costs. Shaffer said: “With regards to whether we will get to 50 per cent renewables, the answer is yes. Clearly the costs of solar and wind are coming down. People are realising that not only are they lower cost compared to building a new plant, but soon we will see the case where it’s actually lower cost to install wind and solar than running your existing fossil plant.” If volatility and economics of the marriage are key, then in essence the big question is: what will be the lowest cost option while keeping the grid stable? Professor Jacobs believes cheap renewables married to a host of non-fossil burning options is perfectly feasible and cost-effective. He pointed to a recent study by Lazard looking at the levelised cost of energy in the US. “For the first time they looked at combining solar and batteries; it was 8.2¢/kWh. Onshore wind was the cheapest form of electricity by far in the US, followed by utility-scale solar at about 5¢/kWh, with baseload gas at around 6 ¢/kWh. Nuclear was about 15¢/kWh. Solar plus batteries is already cheaper than nuclear and cheaper than new coal. “We did a study for the entire world. We developed renewable energy plans for 139 countries broken down into 20 world regions and came up with stable grids in all 20 regions. Each one had a different mix of wind and solar but we found we could have a stable grid everywhere, so we do believe it is possible.” No doubt it is technically feasible but some believe storage will not be the single affordable partner for renewables any time soon. The Lazard report stated: “Although alternative energy is increasingly cost-competitive and storage technology holds great promise, alternative energy systems alone will not be capable of meeting the baseload generation needs of a developed economy for the foreseeable future.” Going forward, digitalisation will provide flexibility in the system, and at the same time the cost of storage will come down. But in most countries – even by the time renewables reaches 50 per cent in the electricity system – it is unlikely that renewables will have a monogamous relationship with any single technology. Junior Isles Cartoon: jemsoar.com
Energy Industry Times January 2018
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