Home > Economics - General, Environment > Reasons to be cheerful, part 2

Reasons to be cheerful, part 2

June 11th, 2011

There are plenty of reasons to be gloomy about the prospects of stabilising the global climate, but there are also some promising developments, so I’ve started a series on this topic.

I’ve been meaning to write this post for a while, but Stephen Lacey at Grist (via David Spratt on Twitter) has done much of the job for me, and better than I could have. The crucial point is that the cost of solar photovoltaic electricity has fallen dramatically and is almost certain to fall further. In particular reaching the point where it is the cheapest large-scale alternative to carbon-fuelled electricity generation, and competitive (at reasonable carbon prices and in favorable locations) with new coal-fired power.

This makes for some fundamental changes in the debate over climate change and mitigation, even as it reaffirms the central point that advocates of mitigation have made all along, namely that, with an appropriate policy response, the costs of drastic reductions in carbon emissions will be modest in relation to national or global income.

Until very recently, solar PV was just a promise, with a share in total electricity generation so small as to be negligible. As Lacey observes that changed in 2010, with 17GW of peak capacity installed. Allowing for availability, that corresponds to something like 4GW of coal or nuclear (standard plants are typically about 1GW). But that’s overly conservative because solar output is such a good match for peak daily demand.

The growth in solar PV has been driven by subsidy schemes like those in Australia. As in Australia, the decline in costs has produced massively more demand than expected, leading to succesive rounds of cuts. But while individual markets have bounced around, the market as a whole has grown massively, even as subsidies have been scaled back. At least so far, that’s true for Australia as well. As I said in the Fin a while back, this is one of the rare instances of an ‘infant industry’ outgrowing the need for subsidies.

Capacity for annual output of new solar modules is now approaching 50GW (peak), at which point solar PV would be one of the main sources of new generating capacity, comparable to wind and gas.

There is no obvious constraint on further growth. Until about 2005, the solar industry depended on offcuts from the semiconductor industry for silicon (the blip marked ‘silicon shortage’ on the graph represents the point where demand outgrew that source). And much of the ‘balance of system’ (installation, inverters and so on) still represents adaptations of devices developed for other industries, with the associated problems of supplies and inventories. But with recent growth, the whole supply chain will be optimised for solar.

At some point the share of solar PV will be large enough (say 30 per cent) that it will change the balance of supply and demand, ending the present situation where the excess supply of night-time power from coal must be sold at a discount. That will entail both changes in pricing structures, most obviously a premium for power supplied in the early evening or for storage technologies. But starting from a zero base, that’s quite a way off. For the moment, the main issue is cost

If the cost of solar PV continues to decline at rates similar to those we have seen in recent years, the whole debate over climate mitigation will be changed. Plausibly, a CO2 price of $50/tonne will be enough to drive a fairly rapid decarbonisation of the whole electricity sector. That means a smaller increase in prices than would otherwise have been expected, and therefore less of a role for adjustments in final demand.

Coming back to the claim of vindication made above, the sensible case for the claim that mitigation could be achieved at low cost was not to identify some particular technology as the anointed savior, but to argue that, with a carbon price (through a carbon tax, emissions trading scheme, or, less desirably, ad hoc measures that produce an effective price) and supporting policy instruments, some combination of options (renewables including solar, wind and geothermal, nuclear, CCS, energy efficiency, changes in demand patterns) would produce substantial reductions in emissions at relatively low-cost. At this stage, it looks as if solar PV and energy efficiency are the most promising candidates, along with wind, while most of the others look less hopeful than they did a few years ago. While this particular outcome could not have been predicted with any reliability, the general pattern could be predicted and was.

Earlier in this series Reasons to be cheerful (Part 1): Peak gasoline

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  1. Freelander
    June 11th, 2011 at 12:16 | #1

    Not too surprising. Given the massive reductions that have happened over the years in the prices of integrated circuits, a serious effort at producing photovoltaic units should see further dramatic decreases. What’s needed is more learning by doing.

  2. Peter T
    June 11th, 2011 at 13:01 | #2

    Except that the rate of use of fossil fuels has kept rising. Given that CO2 is a long-lived gas, and given the thermal inertia of the deep oceans, we have already locked in significant warming. Every addition of CO2 makes it harder to brake the thermal trend, and requires a faster transition to avoid a higher peak. On some counts, we need to make the switch in 12 years or less to avoid really major climate change. Hard to see solar or any other renewable growing fast enough to do that.

  3. Hermit
    June 11th, 2011 at 13:18 | #3

    Funny thing I’ve managed to pay less than $100 in electricity bills over the last 5 years due to PV and efficiency and I think PV is basically going nowhere. There is no way more than a few percent of the power needed to run an aluminium smelter for example can come from PV. I believe the mistakes in this optimistic assessment include the need for expensive energy storage, the seasonal effect, the fact that cessation of subsidies has not yet been tested and unjustified downward extrapolation of future costs.

    Without going into volumes on each point I’ll say just a little. Firstly there is no cheap massively scalable gigawatt-hour form of energy storage yet. That includes pumped hydro. Molten salt heat storage is for solar thermal not PV. Depending on latitude and cloud incidence the amount of PV required on short winter days can be several times that required in summer. Year round PV just in day time requires over-investment to meet the winter minimum. I suggest that PV cost reductions are more due to China entering the market rather than subsidies. The Chinese as we know have low wages and can smelt silicon using all the coal they want. As for the sudden absence of feed-in tariffs it hasn’t happened yet and we may be kidding ourselves as the effect of their loss. I think we’re in for a shock when they stop, as recommended by the Productivity Commission.

    Therefore I predict PV is not the future of energy, just an expensive niche player.

  4. John Quiggin
    June 11th, 2011 at 14:04 | #4

    “Depending on latitude and cloud incidence the amount of PV required on short winter days can be several times that required in summer.”

    Conversely, and more relevantly, in the places where PV is most likely to be competitive first (that is, sunny places in the warm temperate zone or tropics), the peak demand coincides very nicely with peak PV output. Your approach seems to be to pick those applications which would be most problematic in a 100 per cent PV system and argue that this means PV can never rise much above zero.

    On China, your analysis would imply that China should be driving everyone else from the market. In fact, while China is gaining market share, there’s enough growth for everyone to expand. Here’s First Solar for example


  5. BilB
    June 11th, 2011 at 14:42 | #5

    And your conclusion, Peter T, therefore is………..

  6. iain
    June 11th, 2011 at 14:55 | #6

    Electricity generation is about a third of Australia’s emissions. A 30% share of this going to solar/low carbon technology would help reduce emissions by around 10%.

    But we would still need to be aware that we would have a lot of work to do to make any actual real cuts, especially considering that our emissions (particularly scope 3) will, realistically, still continue to rise over the next decade.

    A key uncertainty, in my mind, is not so much whether $50 / tonne will produce a grid that is 80-90% powered by renewables/low carbon supply. But whether the other 60-70% of emissions in the economy will be able to change as well. Some industries have no hope of changing at this price level, and others are very easily shipped offshore at this level.

    As an aside, is there any real evidence that energy efficiency reduces emissions? ie does it mostly result in Jevons paradox?

    The book Factor 5, as an example, suggests that energy efficiency will reduce emissions, but, the arguments are not convincing and it really reinforces why it hasn’t (and perhaps won’t).


  7. BilB
    June 11th, 2011 at 15:06 | #7

    Hermit you perpetually bring up the energy situation for aluminium smelters every time renewable energy is discussed. Aluminium smelters are a very small industry employment wise and are an optional extra for Australia. To bring that up is as relevent as suggesting that Wombat crossings should be a future of all suburban road systems, simply because Wombats do cross roads, somewhere.

    One has to ask what it is that attracts an aluminium smelter. In New Zealand it was electricity at 2.5 cents per unit when every one else was paying 16 cents per unit. Tiwai Point peed in their own cup when they thought that they could bully the country into handing over the dam, lake, and power station for a pityfully small amount of $millions. The country told them no and put their price of electrity up for their effort to what is still a pityfully small amount. In other words designing a renewable electricity system around the needs of aluminium smelters is bad business from anyones point of view. For the record, aluminium from Tiwai Point is exported to Japan at cost, thereby avoiding paying the NZ government any tax and all profits are made in Japan, as I recall reading at the time.

    As for feedin tariffs, Electricity is predicted to rise in retail price to a point where displaced consumption will be more than sufficient incentive to install PV on every roof…unsubsidised. Along the way smart electricity management systems and smart appliances will organise consumptionto make optimal advantage of fluctuating electricity supply.

    Technology marches on. The newest twist in geothermal is the use of CO2 as the energy transfer medium for bringing geothermal energy to the surface.

  8. BilB
    June 11th, 2011 at 15:17 | #8


    Electricity and transport together make up nearly 50% of Australia’s CO2 emissions. The expectation is that most of the transport sector can be fuelled by renewable electricity and useage efficiencies. A recent study, for instance, concluded that fuel for heavy lift machinery could be reduced by 50% with improved technology and design.

    There is a lot to be done to make this transition from a carbon wasting civilisation to a fully energy sustainable one. And that means…………………………employment.

    Quality employment.

  9. Peter T
    June 11th, 2011 at 15:28 | #9

    My conclusion is that, while we should do everything possible to mitigate the consequences, any way you look at it we are in for a rough ride. And the sooner we realize that – and start taking serious measures – the better.

  10. John Quiggin
    June 11th, 2011 at 15:30 | #10

    Iain, I’ve now linked to my previous post, noting that US gasoline consumption has peaked. So, it’s certainly possible to reduce transport emissions also.

    Peter, I should probably also restate the premise which is to look for the relatively hopeful aspects of a situation that gives plenty of reasons for gloom.

  11. Hermit
    June 11th, 2011 at 15:33 | #11

    BilB I think the big end of town likes to have a few aluminium smelters around the same way they want the military to have the latest toys. If we really wanted to I think we could put a 20c refundable deposit on soft drink cans or we could make smelters pay 50% rather than 15% of what households pay for electricity. Nothing seems to happen though. I do believe however threats to relocate to China are a bluff since that country is now at peak domestic coal production.

    On f-i-t, 20% renewables targets and so on now both Garnaut and the Productivity Commission have recommended they cease when carbon tax is introduced. I challenge the wind and solar industries to ‘man up’ and stand on their own feet. Instead I suspect they will complain loudly in the next 12 months that their important mission will be scuttled if they don’t get extra help. That’s two lots of bluff I’m calling; that aluminium smelters will move offshore and that renewables can survive just on carbon tax and no subsidies.

  12. may
    June 11th, 2011 at 16:19 | #12

    “manning up”(gawd,yet another american slang blow-in)

    just like the pilbara mining industry in it’s early days?

    intermittent power generation is happening and growing at a rate of knots.

    the infrastructure in place now is designed for fossil generation and at best can be described as aging.

    infrastructure designed for renewable input? the profit potential is more than intriguing.

    i’d subscibe to an IPO or two in that area.

  13. Donald Oats
    June 11th, 2011 at 16:40 | #13

    Personally, I would be interested now in understanding how a pull-back in solar PV subsidies affects consumer perception of the situation, and whether that has any short to medium term implications for demand. To get to the point of cheapest solar PV energy attainable economically, wouldn’t there be some scope for further hastening the demand (by subsidies, assuming the answer to my first question is that subsidies increase demand) and thus providing a mechanism for fast movement along the cost curve to an economically sustainable cost of solar PV, one that directly challenges daytime coal-based electricity?

    My questions aren’t about whether some form of solar PV can survive in a subsidy-free market – it can and will, judging from Pr Q’s post. It is about whether helping it to move to an even cheaper cost by enhancing demand through subsidies has a place in the short to medium term? The aim isn’t to make it a winner against other alternative energy generation, but to place further downward pressure on coal-based daytime electricity for consumer use.

    To put the argument to Hermit, ‘manning up’ is possible but the rate at which the costs of solar and wind based energy reduce is going to depend upon a number of factors, and having the cost decrease rapidly is what will maintain a “virtuous circle” of dropping cost and increasing demand. I’m an optimist that solar and wind can drop in price a long way further, but I just think that in the market-based world that isn’t going to happen quickly enough to displace coal-fired energy carbon emissions, which is what this is all about.

  14. Ikonoclast
    June 11th, 2011 at 17:09 | #14


    I thought one of Hermit’s points was that a standard PV solar panel usually comes in an aluminium frame. Hence, the gist of his point was to ask essentially, can a PV panel produce (in an energy-economic and money-economic timeframe) energy equal to the energy needed for its own manufacture? Can it then go on producing, during its operational life, enough surplus energy to give an overall EROEI of the order* that will sustain out advanced high-energy use civilization? I think it is a valid question and it is also an open question to me. I will say, as I have said before, we better hope that renewables can deliver the EROEI that we need because in the end renewables will be the only game in town energy wise. Everything else will run out.

    I have seen suggestions that our major energy source(s) must give an EROEI in the zone of 5:1 to 10:1 for modern (21st century style) civilization to remain energetically viable.

  15. Ikonoclast
    June 11th, 2011 at 17:12 | #15

    Note to post above. That is to say, an EROEI somewhere in the range of 5:1 to 10:1 is the minimum we need. More would be better of course.

  16. Ikonoclast
    June 11th, 2011 at 17:25 | #16

    This impressively scientific-looking paper paper suggests energy payback times of 2 to 4 years depending on insolation rates. This is then related to a 30 year system life. Is this system life maximum or average? Let us assume it is average and assume an average payback time of 3 years.

    This would equate to a 10:1 EROEI. However if frames, transport and installation need to be included it might bring this down to 5:1. However, if current energy use had all upstream energy use in maufacture, transport etc. factored in we also might find the average quality fossils not doing much better than a net 5:1.

  17. Ikonoclast
    June 11th, 2011 at 17:26 | #17
  18. John Quiggin
    June 11th, 2011 at 18:01 | #18

    “As an aside, is there any real evidence that energy efficiency reduces emissions? ie does it mostly result in Jevons paradox? ‘

    This depends fairly crucially on whether the improvement in energy efficiency is exogenous (say, the result of an innovation in some related technology), in which case energy services will become cheaper or an endogenous response to rising energy costs. In the former case, Jevons paradox can arise (but may not). In the latter cost, it can’t.

  19. incurious and unread
    June 11th, 2011 at 18:52 | #19

    Currently, no single generation technology dominates internationally. We have thermal coal, CCGT and OCGT gas, nuclear and hydro. Relative economics depend upon fuel availability and reliability, capacity factor, flexibility and scale.

    I suspect we will similarly see an eclectic mix of renewables in the future: wind, solar PV, solar thermal and geothermal. We will also see demand reduction and shifting, and local storage.

    A complex mix that “the market” is best placed to determine.

  20. Alice
    June 11th, 2011 at 19:11 | #20

    @incurious and unread
    The market is not best placed to decide. A market doesnt have a brain. Try deciding on what is real. A market is people. People R markets. Markets R people. What people do you think should decide on future energy needs? Only buyers and sellers or should there be some other people ie people oustide the market who have the brains to determine if the market is functioning or not?
    Im sick of the fairy tale that we let the “market decide”. Why not say “we let the people decide?” (markets R us ie people) In which case, which people should decide?

  21. incurious and unread
    June 11th, 2011 at 21:07 | #21


    I agree. That’s why I put “the market” in inverted commas. It is composed of a lot of smart (and some not so smart) people prepared to take risks with their own money. Most importantly, it is a decentralised process where no one person or committee decides what “the answer” should be. That is really the point of the OP, I think.

    If it is a fairy tale, it is one we are all living in.

  22. Ikonoclast
    June 12th, 2011 at 05:35 | #22

    I think when people say “the market”, it is shorthand for all the buy and sell decisions by people in the market. By extension, it implies that what gets produced (what succeeds in a competitive market) will be determined by consumer decisions. Essentially, I agree with Alice that where we have gone wrong is to allow relatively unregulated markets determine outcomes (or fail to determine outcomes) which should be determined by the social democratic process. This latter process needs to determine matters subject to market failure and matters were the market process is inappropriate or irrelevant.

    The market is one tool in the toolkit. You don’t build a house with one tool and you dont build a heallthy social democratic mixed economy with one tool either. The problem arises when free market fundamentalists push the line that the free market is the one tool that fixes all problems. The key sign that an ideology is fundamentalist is a belief in pure categories and pure solutions. There is no such thing as a “free market” in any pure sense. Purist, one-dimensional solutions never work in the complicated and messy real world.

  23. Hermit
    June 12th, 2011 at 06:49 | #23

    I’ve read this paper and it has curiously failed to mention two elephants in the room, namely overnight energy storage and subsidies. The fast payback times of under 5 years would seem to imply generous feed-in tariffs a la Germany but the paper doesn’t say this specifically, merely deferring to an external database of prices. As for overnight energy storage we know battery banks are too expensive for large scale use. Thus the paper seems to cover only daytime demand for PV with subsidies. Therein lie further costs when generators (eg gas fired) for night time and cloud cover are kept hot with additional ‘shadow’ CO2. The paper omits any mention of this.

    That is a telling question about PV one day being able to power the smelting and fabrication of aluminium and silicon. That is, can the system self replicate? Apart perhaps from Germany in summer there are generally no surpluses of PV power to do this. If our modern industrial system needs an average energy return over say 8-to-1 then PV is not really helping that much. Key components of the system will need to be thermal generators with an EROEI of 50 or more.

  24. John Quiggin
    June 12th, 2011 at 07:01 | #24

    Again with the aluminium smelters! How about 70 per cent solar, 30 per cent gas. That would yield about 15 per cent of current emissions, with plenty of capacity to dedicate some to your smelters. And that’s not taking account of hydro or geothermal.

    In any case, aluminium can be recycled more or less indefinitely, at low energy costs, so at most we are talking about a constraint on consumption growth for this one item.

  25. Ben McMillan
    June 12th, 2011 at 08:33 | #25

    If you read the NREL document carefully, you will note that frames are included in the payback time (and are pretty negligible): see figure 6. Transport is also included, but you would have had to read reference 3 to find that out. The NREL document deals with only silicon PV.

    Obviously you would expect that energy payback times are dropping with lower prices since 2005 (often reflecting lower material use) and better module level efficiency.

  26. incurious and unread
    June 12th, 2011 at 09:49 | #26


    I agree. Why wouldn’t I? Just because I believe that “the market” is best placed to decide on the mix of renewables, doesn’t mean that I believe free markets are best for everything.

    That is like me saying, “I need a hammer to bang in this nail” and you replying, “you believe that a hammer is the answer to everything.”

    Get some grey in your life.

  27. BilB
    June 12th, 2011 at 10:09 | #27

    Ikonoclast @ 14,

    In response to your comment I have taken a quick look at the EROI for GenIIPV which at this stage of the design process is estimated to have an approximate total material weight of 900kg for its nominal 19200 annual Kwhr output. Assuming that the total material content is steel which has an energy content from ore to steel (by one assessment first page of google) of 15,000 kwhrs The basic energy content of the system is 13,500 kwhrs or less than 9 months energy conversion time to achieve positive energy status. One third of the weight of GenIIPV is glass which has a production energy cost of 700 kwhrs per tonne, so I think that even if our total weight increases as the design progresses then I think that it is safe to say that 9 months will be the maximum. And taking JQ’s point on recycled materials @24, if GenIIPV was built with 30% recycled material then that energy content is even less. Furthermore, GenIIPV has an indefinite life.

    So in summary, there are systems under development which will completely resolve the renewable energy limitations. And these newer systems have the potential to be fully environmentally sustainable. For instance ultra capacitors under development are now deploying carbon nanofibres (relatively unlimited supply of raw material…carbon). These capacitors fully have the potential to obsolete lithium batteries for storage capacity, efficiency and charging cycles.

    The only valid comment is regarding………..TIME.

  28. Ikonoclast
    June 12th, 2011 at 10:17 | #28

    @incurious and unread

    I was agreeing with Alice and yourself. Not sure why you took that as disagreeing with you. I just made my agreement with Alice upfront and my agreement with you implicit.

  29. June 12th, 2011 at 10:25 | #29

    If anyone is interested, I discuss the Jevons paradox with myself here:


  30. Ikonoclast
    June 12th, 2011 at 10:26 | #30


    If all that is true then it is very good news. I was concerned that renewables would not give us the EROEI “profit margin” sufficent to replicate themselves and fully power our modern economy (which they will hav eto do sooner or later).

    I would love to live in a post fossil-fuel, renewables age provided it is peaceful and prosperous. It will be very clean and aesthetically pleasing compared to hyrdocarbon and carbon industrialism. Doubt I will live to see it flower properly, if it does.

    (Gad, I might lose that bet with JQ yet.)

  31. BilB
    June 12th, 2011 at 11:26 | #31


    I recall predicting back in the early 90’s that the future of industry will be based on carbon, silicon, and highly processed metals. The Carbon component being for plastics, resins of many kinds, fibres, and chemicals. The Silicon is glass, crystaline silicone, building products (with calcium), plastics and resins. The highly processed metals are all of the bits that join the other materials together in various ways. If you know anything about sheetmetal as it was in the 60’s and how it is now you would understand the phenomenal change that industry has undergone in just 50 years, in all areas of manufacturing industry. Sadly it is the trash that makes the news.

    Within the next 30 years you will be seeing the all Carbon vehicle, everything but the axles, bearings and motor windings (caution there as even the motor windings could be carbon or silicon) will be made from carbon compounds.

    So where you refer to Carbon Industrialism no doubt you are refering to the energy source. I see the future as being describable as “Carbon Industrialism” but of a very different kind. The tradgedy will be if we use up every skerick of easily obtainable carbon simply for its energy content, a future sustainable civilisation will be cursing humans of the 20th and 21st centuries for their carbon wastefulness. Remember that all of the carbon that we disburse into the atmosphere becomes evenly distributed around the globe in soil sediments, on land and at the bottom of the ocean.

    This carbon can not be easily recovered.

  32. incurious and unread
    June 12th, 2011 at 12:28 | #32


    “This carbon can not be easily recovered.”

    Yes. Carbon doesn’t grow on trees!

  33. incurious and unread
    June 12th, 2011 at 12:33 | #33

    Ikonoclast @28,

    Since Alice and I are in clear disagreement, you did well to agree with both of us. Perhaps that is why I didn’t interpret your response correctly. Apologies.

  34. June 12th, 2011 at 12:43 | #34

    Pr Q said:

    Coming back to the claim of vindication made above, the sensible case for the claim that mitigation could be achieved at low cost was not to identify some particular technology as the anointed savior, but to argue that, with a carbon price and supporting policy instruments, some combination of options…would produce substantial reductions in emissions at relatively low-cost…While this particular outcome could not have been predicted with any reliability, the general pattern could be predicted and was.

    This sounds very Hayekian, arguing for the price-cost mechanism as the best way for society to utilise the decentralised distribution of knowledge. Right down to the use of the phrase “general pattern prediction”.

    Interesting that Pr Q whole-heartedly embraces the Hayekian approach as the best way to deal with problem of saving the world.

    Interesting too that the Liberal Party, which was formed in a historical moment occasioned by Hayek’s critique of statism, has turned to central planning, direct action and picking winners as the best solutions to the problem of global warming. No doubt in bad faith, but this is the tribute that vice pays to virtue.

    Personally, I can see merit in both approaches, but thats me, ever the “unscrupulous opportunist”.

  35. Hermit
    June 12th, 2011 at 14:54 | #35

    @John Quiggin
    I suspect a PV/gas combo would cost six times as much as aluminium smelters currently pay for electricity, rumoured to be 3-4c per kwh 24/7. I understand that a third of aluminium is currently recycled and it is thought possible to get that to two thirds.

    Reliance on gas to take over night duties from PV may be a costly lock-in. The tiny nation of Trinidad and Tobago is pondering whether to use its dwindling gas reserves on a smelter … google those key words for a link. Not only T&T but the UK is wondering where its once formidable gas reserves went. In Australia most of the gas is now in WA and Qld, no longer in SA, Vic and Tas that need to wean themselves off coal. As oil derived diesel becomes prohibitive compressed natural gas will increasingly be powering heavy vehicles. Marrying renewables to gas may be short sighted.

  36. Catching up
    June 12th, 2011 at 15:20 | #36

    I believe there is a new process for producing aluminium that is cheaper, cleaner and does not produce pollutants. I think it has been developed in Canada and is at the stage of building a factory.

  37. Sam
    June 12th, 2011 at 15:21 | #37

    So we halve smelter production without affecting overall aluminium availability, and increase prices a bit for this metal. They were probably getting electricity too cheap anyway. We site smelters close to hydroelectric dams and geothermal plants, and make use of the fact that some places get wind most of the time at night. For the few times that fails, we have gas as a backup. It suggests some expensive structural change, but hardly disaster.

  38. Sam
    June 12th, 2011 at 15:24 | #38

    Also, no one has responded to my question about hydro from a while ago. I understand the problems with building new dams, but what about increasing the number of turbines in an existing dam? It wouldn’t give more electrical energy in a given year, but it would allow a ramp up of peak electricity during the rare times where multiple distributed fickle sources are inadequate.

  39. BilB
    June 12th, 2011 at 16:16 | #39

    Aluminium smelters have a huge problem coming their way over the coming decades, which will be caused by increasing Solar PV output.

    At the moment PV output is a relatively small contributor to the nation’s electricity production. But as PV systems become cheaper private individuals and businesses will increase the size of their systems. This poses a direct income from energy threat for the utility scale grid energy providers.

    At the moment Australia’s grid energy through put is about 228 billion units per year.

    A few years ago the retail price for a unit was $0.17
    Now the retail price for a unit is……………………$0.22
    Yes, a 30% increase. Not only an increase in price to the consumer, but an increase in revenue from $38 billion dollars to $50 billion for the electricity energy sector.

    But as individuals solve their own personal energy needs using free solar energy the grid energy throughput will start to decline.

    At the moment that decline is fairly small. But as electric vehicles start to become available the incentive for individual families and small business to install larger systems will strongly increase. So looking forward 20 years what I believe the energy generation reality will transition towards a grid energy sector balanced against a throughput equally rated distributed energy sector.

    This shift is going to cause massive upheaval for the grid energy sector. What it will look like is this

    6 million rooves with 10Kw rated PV systems putting out a total 114 billion units per year.

    balanced against a highly reactive 28 gigawatt peak capacity grid electricity generation system.

    The grid system will see a substantial drop in its revenue which it will have to make up for with higher prices. So the grid generators will be keen to hang on to consistent loads such as smelters. However, they will not be able to maintain the present low prices to the smelters as they will have a much smaller retail patronage from which to draw their profit.

    With the uptake of electric vehicles the demand for electricity will grow, but I am predicting that the grid sector will not share in that growth. And the reason is that as the distributed energy sector expands to become a real share of Australia’s generated capacity the selling price for rooftop electricity will drop to below the retail buying price, so there will be real competition to provide energy for the charging of electric cars in local sub grids.

    The future is going to be very interesting.

  40. June 12th, 2011 at 16:21 | #40

    The most intriguing “reason to be cheerful” on the non-carbon energy front is the recent advances made in cold fusion, so-called “energy catalyser”, by Rossi et al at the University of Bologna. If it is not too good to be true it will be the next best thing to a perpetual motion machine.

    Granted the researchers have not yet published their theoretical basis for their technology in a reputable peer-reviewed journal. But the gadget itself appears to go like a bomb (pun intended) and has so far survived critical inspection. A case of works in practice, whilst not being true in theory.

    Rossi has admitted that he does not fully understand the physics underlying the mechanism. Which makes the chemical reaction a bit of a “black box”. This theoretical lacunae is not necessarily a deal breaker. We can say much the same thing about quantum technology. Thats one of the strengths of positivism.

    All we know is that they start with nickel (28) and hydrogen (1) and end up with copper (29). So somehow the nickel and hydrogen got “fused” to make copper. There is a marked absence of high levels of gamma radiation which implies either no fusion or some other unknown process is at work.

    More generally, there is a whole lotta energy out there in the universe, approximately equal to the amount of matter in the universe. In theory all we need is the know-how to figure out how to commute these domains. In practice we need some incentive to get out of our carbon comfort zone.

    I am pretty confident that we will figure this out, particularly now that the Chinese communist nerds are putting their heads together.

  41. Chris Warren
    June 12th, 2011 at 16:44 | #41


    I am not sure what point is being made using the fact that some capitalists get subsidised inputs, such as electricity – if this is:

    rumoured to be 3-4c per kwh

    Where is this “rumoured”????

    Is not the issue more the fact that we do not know what the economics of electrity (ie energy) actually is, in the secret commercial society we suffer?

  42. BilB
    June 12th, 2011 at 16:48 | #42


    I’ve been watching that one too, though you seem to have more information than I have seen to date. Wow, copper as a by product of producing electricity. Nickel prices would go up. But there is always that good old nuke industry standy of extracting it from seawater, 2 parts per billion nickel versus 3 parts per billion for uranium, only with the Rossi system you get a good price for the scrap.

  43. Ikonoclast
    June 12th, 2011 at 17:22 | #43

    Re. Last few posts about cold fusion and getting minerals from the sea water at 1 or 2 parts per billion. This is pie in the sky stuff. Cold fusion defies all the known laws of physics and hot fusion is “always 30 years away” due to containment issues, It’s a bit hard to contain plasma except with a massive magnetic field. It aint been done and probably cant be done, ever. And getting minerals out of seawater at 1 or 2 parts per million has prohibitive energy costs.

  44. BilB
    June 12th, 2011 at 18:09 | #44

    I think that you need to keep an open mind on this one, Ike. Quite a few experienced scientists who are very wary of smoke and mirror science have viewed the experiment and are saying that there could be something to this. By the way cold fusion is (apparently) occuring all the time naturally, so no, it does not defy the laws of physics. It has been postulated that the Rossi experiment may work with muons acting as a kind of nucleic catalyst. We will have to wait and see how well the experiment can be reproduced in many labs.

    Nickel from sea water, that was really flying a kite, for entertainment sake, and to pre-empt dismissive remarks from the happy nukers.

  45. June 12th, 2011 at 18:21 | #45

    Ikonoclast @ #44 said:

    Cold fusion defies all the known laws of physics

    Well I did say that cold fusion was “intriguing” possibility, not a done deal. Possibly too good to be true.

    I also pointed out that the researchers have acknowledged that they do not fully understand the theoretical basis for their gadget’s operation.

    More generally, I understand and sympathise with the conservative attitude most scientists have towards possibly crank technological ideas. They have been a plague, although not nearly so bad as crank sociological ideas – blank slate, gold bugs, deconstruction,

    But some pie-in-the-sky constructivism, as opposed to head-in-the-sand conservatism, is worthwhile in sci-tech. Not all “laws of physics” are fully “known”. We have not reached the End of Science, yet. So it is worth throwing some research dollars at sci-tech long shots with a big pay-off.

  46. June 12th, 2011 at 18:55 | #46

    Let’s see, we know that it takes about 15 kilowatt-hours to produce a kilogram of aluminium, and we know that low emission sources of electricity in large scale use right now such as geothermal, hydroelectric, wind and biomass can produce electricity at less than four extra cents a kilowatt-hour than coal. So, even if electricity went up by four cents a kilowatt-hour it would only increase the cost of a kilogram of aluminium by about 60 cents, which is less than a 25% increase at today’s prices. Now a 25% increase isn’t great, but it’s not exactly scary, and I detect no warm dampness in my trousers at all as I contemplate the it.

  47. Salient Green
    June 12th, 2011 at 19:31 | #47

    catching up #36 here is the link to the new aluminium smelting process.
    Aluminium is a wonderful material and vital, along with titanium, for the coming energy constrained future. I think it is underpriced and the recycling rates bear this out.

  48. Ernestine Gross
    June 12th, 2011 at 23:48 | #48

    “But as individuals solve their own personal energy needs using free solar energy the grid energy throughput will start to decline.” (BilB)

    My best guess is the grid owners’ response will be to introduce a fixed rental and this fixed rental will increase with the decline of throughput. This is already a problem with gas and water supply in Sydney. A fixed cost of $51 + GST per quarter for 0 consumption of gas during summer months is not obviously incentive compatible with the objective of reducing C02 emissions by means of switching from coal power generated electricity to gas heating. As for water, the first IPART review of water and sewerage pricing in 2005 included a statement on efficiency gains for consumers that ignored fixed costs. As a consequence, the alleged efficiency gains were overstated for a non-trivial range of actual consumption.

    Recently I checked with the regulator regarding gas. The fixed costs are allowed.

    It seems to me there is a policy coordination problem (ghg emission reductions and price regulation) which is at least partly due to the industry restructuring and possibly partly due to advisers thinking in terms of marginal costs only and partly due to the structure of the regulatory system and partly due to ‘industry’ being allowed to do what is prohibited for wage earners, namely to get prices to keep up with what is happening somewhere else. (The gas supplier told me they only do what the telephone companies do.)

  49. June 13th, 2011 at 01:34 | #49

    It sounds like a lot of people who are light to moderate users of gas might be better off getting rid of their gas connection and using bottled gas.

  50. BilB
    June 13th, 2011 at 08:02 | #50

    Here is a reasons to be cheerful “bob each way” extract from Robert Rapier’s Blog


    “China is one of the world’s largest producers of renewable energy, leading in categories like wind power and solar hot water. A statistic I recently read said that China’s energy production from solar hot water is equivalent to the energy output of 40 nuclear power plants.”


    “China’s potential for growth is frightening. China uses about two barrels a year of oil per person. In the United States we use 23 barrels of oil per person per year. If China’s usage grew to the U.S. equivalent, it would be 85 million barrels a day, which is about the total consumption of oil for the world. However, there simply isn’t enough oil available for that to happen, so it sets up some challenges in the years ahead.”

    On a trip to Quindao (level with Seol in Korea and well into the snowline) I saw evacuated tube solar water heating elements on every roof of this city of 10 million. It snowed at least 4 inches while I was there and still the water was hot, so solar water heating is not a tropics only technology.

    Message for Tony Abbott, and Julia Gillard: building and fitting solar water heating for all of Australia’s buildings equals……..JOBS. And lots of them, not to mention a huge drop in Australia’s CO2 emissions.

  51. adelady
    June 13th, 2011 at 09:36 | #51

    BilB “With the uptake of electric vehicles the demand for electricity will grow, but I am predicting that the grid sector will not share in that growth.”

    I always thought the great advantage of electric vehicles was that they would be integrated into the grid. The batteries of x million vehicles would act mainly as an overnight battery storage system for the grid as a whole. So a large fleet of electric vehicles will become the smoothing mechanism for a highly distributed grid – powering up with solar (mainly) during the day, available for drawdown overnight.

    By the time we have enough EVs to be a significant part of the system, refrigeration and air conditioning systems as well as lighting for commercial buildings and advertising should be designed for interactive signalling throughout the system to compensate for variations in generation.

  52. BilB
    June 13th, 2011 at 10:49 | #52


    What you say is entirely possible. However, I imagine that few people will make their vehicle batteries with their finite number of recharge cycles available to the grid for smoothing when the possibilityis that in the morning they could find that the grid has sucked their batteries dry to power an aluminium smelter in Queensland.

    You second point is on the money. Intelligent appliances and smart grids are the future and already being installed in Europe. I believe that the grid will not need as much smoothing as some “experts” suggest. It is less reported that PV panels convert light to electricity even on cloudy days at about 30%. So when people install systems in the 10 kw range the cloudy day output is still sufficient to provide regular energy needs. It is the extras such as charging cars, pumping pools, pump watering lawns, etc, that will be put off till full sun solar output returns. I nthe future we will see more refrigerators with eutectic energy (cold) strorage panels built in to smooth energy consumption to match solar output.

    If sat here for a day and listed the adaptations (relatively low cost) that we can make to our energy hardware to be compatible with the solar energy cycle, I think that the list would run into thousands. This all means extra business for our economy (read: all of those Coalition voters have the most to gain commercially), and huge energy cost savings for consumers. And the uptake of such changes will occur over a 20 year period as people replace ageing hardware and buy new. ie no aditional cost.

    What it takes to kick this off is strong and positive commitment from government, which means that we are waiting in limbo for Tony Abbott to drop politically dead.

  53. Sam
    June 13th, 2011 at 11:27 | #53

    Agree with your general point here. However, you could tell your car; “sell x% of your stored electricity back to the grid only under two conditions. 1) The price differential is high enough to make money even after allowing for the battery degradation AND 2) if you have at least y% of reserve charge.” This could put a maximum limit on price volatility while making sure no one is caught out.

  54. BilB
    June 13th, 2011 at 12:13 | #54

    On reflection, Sam, that is indeed the case. Other variables are the number of cars available per garage and the energy storage type. Ultra capacitors in place of batteries may be only 10 years off, hopefully sooner, and these devices have relatively unlimited charging cycles without the progressive loss of capacity. You could add a rule 3) that power borrowed must be returned by 7am.

    What I think is more likely that houses with larger PV systems will have pregressively larger stationary storage capacity. The advantage will be to be able to charge the “all day out car” at night where remote charging is not available.

    Remember that as the size of the distributed energy sector increases grid providers who will be steadily loosing market share may not be cooperative. The government has an important regulatory role to play here (and this is largely why I have revealed as much of GenIIPV’s feature parcel) in ensuring that the distributed energy generation sector has commercial access to the electricity transmission grid. The alternative is that independent local area grids will arise ie cable connection down the back fence line (important to note synchronised with the grid phasing).

    It sounds complicated when you start to delve into detail, but the reality is that this is a far more attractive world than the one we reside in today. I’m excited by the prospects. when you have the time have a look at


    to see how micro aviation is changing. It is mind blowing to consider what is coming up in the next 10 years.

  55. Sam
    June 13th, 2011 at 13:09 | #55

    Will do. Personally, I think the grid itself (as opposed to generators) should really be seen as a natural monopoly that ought to be government owned and run in the interests of the public. But then, I’m a raging pinko commie.

  56. quokka
    June 13th, 2011 at 13:20 | #56

    A couple of points:

    1. 17 GW nameplate capacity of PV is not in general equal to 4 GWe of nuclear – this is probably the upper bound. Depends on location. In Germany PV capacity factor is about 0.12. About 8 GW of that 17 was installed in Germany which makes that about equivalent to one AP1000 NPP at 0.9 capacity factor.

    2. In the chart provided by Stephen Lacey at Grist, he shows solar PV production charted against summer demand. But the solar PV he shows is tracking and the output from the far more common fixed PV is much more bell shaped with mid-day/early afternoon peak.

  57. Sam
    June 13th, 2011 at 13:25 | #57

    What’s the capacity factor in favourable parts of northern Australia? Do you know?

  58. June 13th, 2011 at 14:40 | #58

    Cloncurry averages about 25-26% capacity for a fixed panel, but goes up to about 40% with two axis tracking. Brisbane is about 22% for a fixed panel and the vast bulk of Queesland gets more sun than Brisbane. Australian electricity demand is very peaky compared even to California and so fixed panels are a pretty good match here, although I’d be tempted to tilt them a little to the west.

  59. stockingrate
    June 13th, 2011 at 16:28 | #59

    The graph notes the blip up in prices due to the silicon shortage, but is silent on the current large inventory of modules which may be causing a blip down in prices at the moment. A detail.

  60. June 13th, 2011 at 16:44 | #60

    Stockingrate, the silicon shortage resulted in higher prices because demand outstripped supply. If anyone had a warehouse full of modules the silicon shortage would have been the exact time to sell them, not stockpile more.

  61. doug
    June 13th, 2011 at 17:01 | #61
  62. stockingrate
    June 13th, 2011 at 17:45 | #62

    Ronald Brak, no disagreement on that. The inventory surplus (that I see reported on the net) would have built more recently.

  63. Ken Fabos
    June 13th, 2011 at 19:57 | #63

    The well of innovation is far from dry yet, in both PV and in energy storage. Get storage, even bulky stationary storage, sorted out and both solar and wind will leap ahead. I suppose that chances are this ‘biggest battery breakthrough ever’ will end up being more hype than substance, yet you never know.

  64. BilB
    June 13th, 2011 at 20:40 | #64


    You equivalence factor for nuclear to PV is wayout. One of Nuclear at 90% is equivalent to 5 of PV in Australia.

  65. ajwak1
    June 14th, 2011 at 10:02 | #65

    John, the link at the bottom is broken, it should point to: http://johnquiggin.com/2011/05/16/reasons-to-be-cheerful-part-1-peak-gasoline/

    Belatedly fixed, thanks – JQ

  66. derrida derider
    June 14th, 2011 at 12:11 | #66

    I reckon those who argue aluminium smelters don’t matter in thinking about electricity grids aren’t thinking globally. Of course any one country (including Oz) would barely miss them, but that is missing the point.

    A high-tech low-carbon world economy will have far stronger demand for Al and other electrically refined metals (eg titanium refining is moving to an electrolytic process, a heavy tax on coal makes arc furnaces for steel more attractive, most of that rare-earth exotica is electrically smelted). Economically aluminium is already basically crystallised electricity and many other metals will become increasingly so.

    Put another way, the very high price of all these metals will greatly increase the rewards to freeloading countries. Which is to say that technologies that can’t accomodate the needs of smelters aren’t a global solution to AGW, however locally competitive they might be.

    I also think people are being way too optimistic about the cost of solar panels – the sharp drop in panel prices in recent years is mostly a one-off as China geared up. I reckon solar thermal, nuclear and hot rocks might all be better long-term prospects. But let’s put a hefty carbon price on and see which technologies win out; get social and private costs aligned and it is amazing how well markets can work.

  67. June 14th, 2011 at 14:15 | #67

    Stockingrate, I haven’t been able to find anything about a current large inventory of modules, but if you can provide a link I’ll happily read about it. I do know that poor economic performance in Europe and elsewhere has caused some people to downgrade the rate of expansion of PV they expect, but that’s not quite the same thing.

  68. Hermit
    June 14th, 2011 at 17:12 | #68

    RB your info upthread that a kg of aluminium require 15 kwh of electricity leads to a good case for carbon tariffs. Aluminium imported from a greenhouse ‘rogue nation’ should be slapped with an equivalent carbon input penalty. If carbon tax was $20 per tCO2 here that’s about 2c per kwh on black coal fired electricity. Per tonne of aluminium the tariff would then be 15 X 2c X 1,000 = $300 on top of the current price of $2,500 or so. That’s on ingot or slab while recast or machined aluminium should be charged more.

  69. sam
    June 14th, 2011 at 17:50 | #69

    @derrida derider
    Well how much new aluminium (as opposed to recycled) will the average global citizen use in a year by mid century? If we assume 100 kilograms, then that’s 1.5 Mwh of electricity per year, or 166 watts constantly. If you install a 600 watt panel in a sunny desert area, then that gives at least 166 watts for 10 hours. For the rest of the day, use solar thermal, biogas, regular gas, geothermal or hydro. It doesn’t sound like an insurmountable target.

  70. stockingrate
    June 14th, 2011 at 19:42 | #70
  71. June 15th, 2011 at 00:03 | #71

    Thanks for the link, stockingrate. It seems the inventory buildup has occured in the first half of this year and is expected to clear out in the second half. As it occurred this year it isn’t shown on the graph at the top of this post. While it may have an effect on prices in the short term, I don’t think it will effect the overall trend of steadily decreasing prices, as even if the basic design of the cells themselves aren’t improved on there still appears to be plenty of scope for further price decreases.

  72. derrida derider
    June 15th, 2011 at 16:05 | #72

    Hermit – you’re saying that photovoltaic solar can in fact accomodate the needs of local smelters. I have my doubts there, but in any case you’ve missed my point.

    My point is that any technology that is competitive locally but that can’t accoomodate a local smelting industry is unlikely to be competitive GLOBALLY, because someone somewhere has to smelt.

  73. Hermit
    June 15th, 2011 at 17:16 | #73

    @derrida derider
    I agree with you. I think PV is and most likely always will be a show pony not a work horse. Smelters need power sources with massive round-the-clock grunt .. coal, hydro or nuclear. Since they have cheap energy the Russians even use silicate rock as a source of aluminium rather than the typical bauxite. As I mentioned upthread with the proposed Trinidad smelter gas is getting too precious to use for baseload power. I think we simply have to pay more for aluminium (either local or imported) and recycle more.

  74. John Quiggin
    June 15th, 2011 at 19:50 | #74

    As I said previously, I’m mystified by this focus on aluminium smelters as the test case. It’s like arguing that, because some people have gluten intolerance, wheat will never be a major food source.

  75. stockingrate
    June 15th, 2011 at 20:59 | #75

    Ronald Brak,
    I agree that costs and prices are trending down – but perhaps not quite at the slope indicated.

  76. June 16th, 2011 at 11:17 | #76

    I would like to point out that if the Australian aluminium export industry went into an orderly decline, it would not be a disaster for Australia. It would mean we would be gradually reducing the force with which we smash our heads against a brick wall. On average, Australians appear to be paying money for the privilege of burning lignite so people in other countries don’t have to pay so much for aluminium. While I’m a great believer in foreign aid, I do think we should focus our efforts a little more precisely than this.

  77. Hermit
    June 16th, 2011 at 13:17 | #77

    I think the cheap power prices paid by Big Al stem from circa Menzies era competition between the States to host a prestigious smelter, a bit like hosting the soccer World Cup or the Olympics. Now we have implicit subsidies via electricity discounts of well over $100,000 annually per worker. We could pay the Australian workers $50k to go to the pub all day and let the Chinese make all our aluminum for us. The catch being that it gets slapped with a $300-$500 per tonne carbon tariff when it arrives on our shores.

    What might be called ‘offshoring’ seems to be the new paradigm for the easily offended. It covers cattle for slaughter, immigrant processing, sweatshop labour and buying a lot of your electricity from France.

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