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Some unwelcome good news

May 3rd, 2015

The announcement by Tesla of a new home battery storage system, called Powerwall, costing $3500 for 10KwH of storage, has been greeted with enthusiasm, but also a good deal of scepticism regarding its commercial viability, which depends in any given market on such things as the gap between retail electricity prices feed-in tariffs for solar PV.

This is missing the forest for the trees, however. Assuming the Tesla system comes anywhere near meeting its announced specifications, and noting that electric cars are also on the market from Tesla and others, we now have just about everything we need for a technological fix for climate change, based on a combination of renewable energy and energy efficiency, at a cost that’s a small fraction of global income (and hence a small fraction of national income for any country) .

That’s something hardly anyone expected (certainly not me) a decade ago. And, given how strongly people are attached to their opinions, and especially their public commitments, there is bound to be a lot of resistance to this conclusion. Based on the evidence available a decade ago, people drew some of the following conclusions:

(a) decarbonizing the energy sector will require radical economic changes which will entail the end of industrial society/capitalism as we know it
(b) conclusion (a) is true and therefore climate change must be an enviro-socialist hoax
(c) any solution must involve a return to nuclear power on a massive scale
(d) any solution must involve the development and deployment of a “clean coal” technology
(e) a market-based solution will require a very high carbon price, say $100/tonne

I was in group (e), and was still talking about prices up to $100/tonne as recently as 2012. But it’s easy to revise a price number downwards in the light of technological change, much harder to revise strongly held and publicly stated conclusions like (a)-(d).

So, I’m not going to bother trying to demonstrate the assertion that a technological fix is now possible – from past experience, demonstrations of such points are futile. Rather, I’m going to spend some time thinking about the implications for the next round of global climate policy, and what constructive contributions I can make to getting Australia back on tract.

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  1. May 5th, 2015 at 20:01 | #1

    I think this is great news, and it makes me think about going off the grid again – as I have been for some time. My problem, as ever, is the three months of cold Melbourne winter, with little sunshine. However I’m thinking about ways round that.

    For the record, I’m extremely communitarian. That’s why I worry about the equity implications here. Solar power and a battery would be great for poor people – here, but even more in places like Kenya (I mention it because I know a little about it). But how could they afford it? We need some serious thinking about how the benefits of new technology can be distributed to poor people – it’s not impossible, it can be done, but we need to think seriously about the best and most efficient and effective ways to do it. I would like to see people turn their minds to that.

  2. Chris O’Neill
    May 5th, 2015 at 22:02 | #2

    So, I’m not going to bother trying to demonstrate the assertion that a technological fix is now possible

    So now we can sit back, relax, and let the magic of economically rational behavior shift electricity production to the soon-to-be-cheaper low Carbon electricity source.

    Our worries about Carbon emissions are over.

  3. David Irving (no relation)
    May 6th, 2015 at 17:13 | #3

    @Chris O’Neill
    I suspect the point Prof Q was making is that he didn’t feel like arguing about whether or not a technologocal fix is possible (as it clearly is), but was more interested in exploring the social and economic implications of that. (I may have misinterpreted him.)

  4. TerjeP
    May 6th, 2015 at 19:40 | #4

    What I was conflating was society with the market, or holding up the grid as a communitarian manifestation of both of them at once. Going off-grid is thus inherently libertarian, because libertarians effectively want to repudiate the concept of the collective. A contentious point, no doubt, but we’re not here to say boring things.

    Monty – Libertarians do not want to repudiate the concept of collectives. I’m a member of the Australian Libertarian Society and we often do things collectively. For instance the Australian Libertarian Society had a conference of a couple of hundred members last weekend and this entailed a collective effort to make it a success.

    What libertarians oppose is coersion as a dominant organising principle for society. Collectives as far as possible should be voluntary.

  5. Megan
    May 6th, 2015 at 21:28 | #5

    @TerjeP

    I think collectives should be voluntary, but I don’t get “as far as possible”?

  6. TerjeP
    May 6th, 2015 at 23:09 | #6

    Megan – some people think tax should be compulsory. Even some libertarians. So there are some collective purchases (eg national defence) that you can’t opt out of.

  7. Megan
    May 7th, 2015 at 00:51 | #7

    @TerjeP

    I still don’t get that.

    What “collective” is making the purchase (the government, I suppose you mean?), and purchases of what (weapons? the costs of having a standing army?)?

    And, “Why” should that be compulsory rather than voluntary?

    If some group within the collective thinks they need a JSF-16 (or whatever it’s called) then they can pass the hat around and fund it from their own pockets, surely? Why – in libertarian thinking – should a single cent of that funding be taken from a person in the group involuntarily?

  8. TerjeP
    May 7th, 2015 at 07:03 | #8

    Megan – there is a class of libertarian (anarcho capitalists – sometimes just called anarchists) who say everything should be voluntary, even national defence. I’m very sympathetic to their arguments but not quite sold. But with more liberal firearm laws and a more armed citizenry we would need a much smaller standing army. We have plenty of scope to shift away from compulsion towards solutions based on freedom. And no good excused for not moving in that direction.

  9. daniel
    May 9th, 2015 at 10:07 | #9

    It should be kept in mind that within 5 to 10 years Tesla will hit $100 / kWh, by their own estimates (this is based on 30% economy of scale from the gigafactory, plus an existing trend of 8% on average improvement in battery technology y-o-y).

    With this price storage pays for itself very quickly. So the only requirement really to push forward, is to allow this technology to sell in every market and not have it illegal for any reason. It’s really that simple.

  10. Dan S
    May 9th, 2015 at 14:09 | #10

    @Ikonoclast

    Need to conceptually separate grid and central generation. A grid is also useful for distributed generation. Also, need to factor out those who think the goal is to sell energy to a utility who has to buy it.

    If we define off-grid as self-sufficient under most conditions (rarely need the grid), then the grid can remain and other producers can back you up under exceptional conditions whether they be utility-operated power plants or the next town’s home solar/batteries.

    Utilities need a path forward that does not give them or their regulators incentive to restrict home production. Again, unrestricted home production does not mean unlimited ability to sell back to the utility. You could sell to the market at demand prices but no utility should have to pay a set rate for it. As more capacity comes online, that opportunity fades. It is not the point.

    What was needed was a market maker to get beyond the chicken/egg problem. Enter Musk. Anyone who wants a piece of the battery pie now has to invest deeply, compounding the solution.

  11. John Quiggin
    May 9th, 2015 at 15:13 | #11
  12. Ikonoclast
    May 9th, 2015 at 15:38 | #12

    “Rather, I’m going to spend some time thinking about the implications for the next round of global climate policy, and what constructive contributions I can make to getting Australia back on tract (sic).”

    Actually, there is not much wrong with “tract”. We need to get back on “tract” (correct message) as well as back on “track”.

    Would not the first logical step be to remove all perverse incentives to consume fossil fuels? Thus we should remove all fossil fuel subsidies. The second step would be to attempt to cost negative externalities for all power sources. All power sources do have or produce negative externalities although they may vary widely in type, quality and quantity.

    Once we have costs or cost estimates for negative externalities (which might be arrived by a market means if such could be devised or might be arrived at by appropriate economic theory), then we need to find the best way to levy those costs be it by taxes, charges or “Trading Schemes”.

    One possibility here is that it could be all “of the above”. We do not try to find the one best pure tax but rather have an eclectic (sometimes messy) tax mix and many types of taxes. It might be that an eclectic regime for charging for negative externalities would also be needed. Different types of negative externalities might be amenable to being “priced” in different ways. Just throwing these ideas into the mix. Of course, straight regulation is also a possible solution in some cases.

    There are many different ways of doing the job (decarbonising) economically. Different methods may be chosen on a cases bny case basis.

    What we have to get clear are the basic principles:

    (1) No energy generation system should receive perverse incentives.
    (2) Every energy generation system should pay its negative externality costs as well as these can be estimated.
    (3) Regulation and/or pigovian taxes should be used where it is assessed that no market mechanism is moving changes fast enough to avoid dangerous climate change.

  13. Donald Oats
    May 9th, 2015 at 16:55 | #13

    @Ikonoclast
    Agree with first logical step. Second logical step is to ensure there are alternatives available which meet the needs of the ex-fossil fuel consumers. As I mentioned in an earlier comment, the Kentucky police have been provided with some very decent all electric motorcycles, so there are ways and means of ramping up the penetration of electric vehicles into the communities where it is feasible in the initial instance.

    Because the big problem of AGW is in large part due to humanity’s GHG emissions, there should be either a tax on emission, or a tradeable pollution credit, or deep penalties for big offensive emissions. The first two are less likely to cause major distress. In any case, some kind of bonus scheme for early adopters in the business world of alternative energy based, zero emission power, would encourage more rapid uptake while further reducing outstanding pollution credits (i.e. the company sells back the now unnecessary GHG credits to the government, for a bonus over the market prices). Something like that.

    I am extremely sceptical of the schemes which rely on land re-vegetation to draw down carbon from the atmosphere. In the first instance, for how long will the land remain vegetated? Under the current government, the land could be cleared shortly after the expiry of the contract, thus defeating the whole purpose of the exercise. True, some GHGs would remain in the vegetation charcoal (burning of it being one way of disposing of the vegetation after land clearing), but a lot would be sent straight back up into the atmosphere.

    The second big issue is that this does nothing for the atmospheric GHGs which are absorbed into the oceans: unless there is a huge drop in GHG concentrations in the atmosphere, the ocean isn’t going to relinquish its load any time soon. The extra acidity from dissolved CO2 puts aquatic life under stress. Coupled with the increases in temperature of oceanic water, the aquatic environment is changing very rapidly indeed. I don’t know enough about aquatic ecology to make a stab at how much damage this could do, but a quick look at literature shows widespread concern. So, we need to find ways of stopping this increase in acidity, and soon.

    It may well be that an emissions tax is best for some industries, and a tradeable credit scheme is better for other industries; personally, I have no axe to grind on what mechanism is used, so long as it results in sustained reduction in GHG emissions, down to zero, and soon. Whatever is workable, with room to adapt as time passes.

    Personally, I think that while the theo-neo-con element of the LNP is dominant, there simply isn’t the intellectual capacity to appreciate that i) a problem of enormous magnitude exists; ii) humans are in the driving seat, creating the problem; iii) humans can put the car into reverse if they have the collective will; iv) every further day’s delay make the problem larger and more prone to irreversible changes; v) fear of one-world-government is firmly in the tin-foil hat category.

    Our economies handle significant transformative forces quite often, usually technological in nature, and we thrive. Some of our worst recent experiences have been through endogenous bubble manufacturing. When bubbles burst, we wring our hands and say never again, but then we go and pump up another part of the economy; this behaviour, while undesirable, seems to be accepted (more or less) as just normal economic travel, even though it is incredibly disruptive.

    This acceptance of bubble-then-bust behaviour is a neat counterpoint to the absolute abhorrence of introducing alternative energy products into the economy, there being an irrational fear that it could trigger a recession or depression as people stop consuming—or something. The fear can manifest itself in different ways, sometimes it is all about one-world-government, some are concerned for jobs in the fossil fuel industry, and yet are completely oblivious to the ructions in other labour markets (ITC for example); for others they are locked into a denial that there are alternatives to fossil fuel: they see some buried treasure, they want it. Well, sunlight is an unburied treasure.

    I sincerely hope that this government doesn’t do a wrecking ball tactic at this year’s conference, but given their past form on climate change issues, I am not holding my breath.

  14. daniel
    May 9th, 2015 at 21:56 | #14

    Let me emphasis a point: within less than 10 years Tesla will have batteries that cost less than $100 / kWh !
    This is a big deal. ‘Free market’ alone (even taking into account fossil fuel subsidies) will solve climate change.
    This is great news. The most important thing is not making the field even more tilted by banning grid defection, or giving even more subsidies to fossil fuels or taxing the hell out of green energy. The new green is free market, spread the word.
    This is not to take away from the idea of a carbon tax, which would be great.
    Going along these lines, it could be great to make grid defection easier from a regulation standpoint, and support more competition for PV cell installers and batteries. Another great idea could be low cost loans to local companies invested in low cost inverters for example, you know – local manufacturing. Honestly you can make this into a proposal no excuse could help with short of ‘but… I just want to help my buddies!’

  15. daniel
    May 9th, 2015 at 23:07 | #15

    A lesson from Germany: Chancellor Angela Merkel announced recently incentives for EVs, not incidentally, after a local player – BMW, got into the EV market.
    I would claim that it would not be possible for Merkel to offer incentives without a local champion. Even more – Germany being conservative, the environment was likely secondary to the goal of supporting a local manufacturer.

    For the same reason Abe of Japan has supported Hydrogen Fuel Cells (where did he get the idea??).

    So the lesson – find local companies are most prepared and willing to benefit from the green trend. Make them the local champions. Show the growth potential.

  16. BilB
    May 10th, 2015 at 04:31 | #16

    I have always, I believe, been in group “f”.

    f. Decarbonizing the economy is possible with minimal disruption and cost, utilizing a simple levy on the retail price of electricity (or energy in general).

    I originally began researching rooftop solar systems based on concentrating energy to power a micro closed cycle gas turbine. I quickly discovered concentrating solar thermal systems and thought they would be the prime driver or future electricity production and could be funded with a 3 cents per unit retail electricity levy. That was when electricity was 13 cents per unit.

    At the time I knew very little about photovoltaics and hence had not considered them. I then discovered the SpectroLab 40% efficient devices that produce 40 watts from a device just 20mm by 20mm, and embarked on conceiving a hybrid rooftop concentrating solar energy solution based on these devices which I dubbed for the exercise GENIIPV, which would otherwise be classified as a TCPVT (Tracking Concentrated PhotoVoltaic Thermal). This is still a viable solution despite the huge advances in flat panel solutions.

    In between time the aborted CPRS triggered an electricity price rise that went horribly wrong (HT Robert Merkel’s highlighting Jess Hill’s article “Power Corrupts” subsequently verified by the Senate inquiry into Grid Goldplating) leading to a doubling of electricity prices nation wide, with very little of the proceeds from which going to serving the public good. The end result being a greed driven defacto Carbon Price effect market force which has served to encourage continued uptake of rooftop solar systems, arguably a defacto public good.

    More recently I decided to take a halfway Solar Energy position with a simpler hybrid which is classified as a PVT (PhotoVoltaic Thermal) which has some of the benefits of the TCPVT without the higher technological platform, but which can be supplied as a user self install (relocatable) system.

    This, as yet unnamed, off grid capable system (package) is spec’d as being

    4.5/9 Kw Solar PhotoVoltaic/Thermal (ie 4.5 Kw electricity and 9 Kw energy equivalent thermal energy) rooftop solar
    10 Kw Powerwall (many thanks to Elon Musk)
    2.5 Kw water cooled Liquid Piston engined gas fuelled backup power and thermal energy system
    (thanks to Robert Merkel for validating this option)
    Gas for cooking.

    This package provides sufficient energy to fully power a household of four including providing energy for an Audi A3 equivalent hybrid one charge per day (50 klms electric only commute range per day).

    In a recent discussion on Brave New Climate (I have since been banned from commenting there) I argued that in our high consumption economy our domestic renewable waste, ie paper and cardboard, if gassified contains sufficient energy to power domestic gas fuelled backup energy plus cooking energy some four times over. Meaning that domestic rooftop solar is a full offgrid capable solution for Australia.

    I still believe that the 3 cents per unit electricity energy levy is a necessary element for an on tine completely decarbonised economy. The difference now being that I believe that the levy should be applied to the energy industry itself and paid from its windfall profits from the aborted CPRS induced electricity price explosion.

    Such a levy should perhaps now be a 4 cents per unit levy which would yield about 9.4 billion dollars per year which would be used to build government directed alternative energy infrastructure such as CSP, infrastructure that the grid energy industry is loathe to otherwise indulge in. Even at the worst cost estimates and without any further technological improvement this would build 1 gigawatt of base load capable CSP every 2 years, meaning that by 2045 there would be a minimum 15 gigawatts of full baseload carbon free infrastructure to power industry into the future.

    The recent discussion on Australia’s future population needing to be considered as being an additional 35 million people is entirely on top of this. I feel though that building the future will be easier and far more successful than building the past, given some politics free applied intelligence.

    I have just returned from a trade show in Europe where I found a manufacturer (manufactures components for VW cars) for a key component of the PVT’s that I have defined above. This component is a cost effective thermal energy collecting structure which beds immediately behind the photo voltaic array panel to collect the heat energy that the panel cannot convert to electricity. This energy is collected and transported away to heat water, heat air, and to power (in future versions) absorptive airconditioning. The backup for this system comes from the water cooling jacket of the backup power generator. Over time and with even modest production volumes the system I have defined will become elegantly condensed, affordably priced, consume very little natural resources, and be an essential component of new building construction. With Elon Musk’s contribution the of grid capable PVT system defined is believably deliverable for under $15,000, and that can only decrease with volume.

  17. BilB
    May 10th, 2015 at 05:02 | #17

    Val @ 1

    Lookup “Barefoot College” for Kenya energy solutions, especially the solar mothers.

    The mistake that is commonly made is to superimpose our situation upon “the rest of the world”. What we have created is a monster with unsustainable resource consumption, but it is always difficult to step backwards.

    As an aside I have decided to advocate for nuclear shipping. Out of site is out of mind, but the fact is that there are some 45,000 bulk carriers and container ships, rarely seen while they ply the seas out of sight, producing a huge amount of CO2. The nuclear industry has the opportunity to build small 80 megawatt propulsion systems in real production volumes and refine a solution that really solves a problem in a situation where there is no other tangible solution other than fossil fuel. I believe that this is one adjustment that we will have no other option but to accept.

  18. daniel
    May 10th, 2015 at 19:41 | #18

    I found a local industry that will greatly benefit from the green trend: Nickel mining. Australia has a third of the known Nickel reserves. Nickel is a main cathode component in both NMC and NCA li-ion batteries.

  19. May 14th, 2015 at 06:02 | #19

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