In my article arguing that electricity from solar PV (and wind) could soon be too cheap to meter, I didn’t mention transmission networks. That was for space reasons.
The case for public investment is actually stronger for transmission than for generation. Electricity transmission lines have the same cost structure as renewables (low operational cost and long lives), if anything more so, meaning that the cost of transmission depends primarily on the need to secure a return to the capital invested.
More than this, the electricity grid as a whole is a complex network in which valuing the services of any individual component is just about impossible. That in turn means that relying on markets to make optimal investment decisions is untenable.
For these reasons, the electricity transmission network should never have been privatised. I’ve been arguing for renationalisation for years.
Amazingly, in the new low interest environment, this idea seems to be gaining traction, at least as regards new investment. Labor has proposed a $20 billion public investment. The government hasn’t gone that far, but is seeking to use its own borrowing capacity to provide low cost finance for transmission investment ( a half-baked compromise, but better than nothing).
That’s the headline for my latest piece in Inside Story, looking at the implications of zero interest rates for renewable energy sources like solar and wind. Key para
Once a solar module has been installed, a zero rate of interest means that the electricity it generates is virtually free. Spread over the lifetime of the module, the cost is around 2c/kWh (assuming $1/watt cost, 2000 operating hours per year and a twenty-five-year lifetime). That cost would be indexed to the rate of inflation, but would probably never exceed 3c/kWh.
The prospect of electricity this cheap might seem counterintuitive to anyone whose model of investment analysis is based on concepts like “present value” and payback periods. But in the world of zero real interest rates that now appears to be upon us, such concepts are no longer relevant. Governments can, and should, invest in projects whenever the total benefits exceed the costs, regardless of how those benefits are spread over time.
It’s now clear that we have the technology we need to run a completely decarbonized electricity generation system. South Australia is the world leader generating more than 50 per cent of its energy from renewable sources, and aiming for 100 per cent renewables by 2030.
The unit cost of renewables is now well below that of carbon-based generation (and nuclear). The remaining big question regarding the economics of the transition is the cost of storage, taking account of the variable nature of solar PV and wind.
As I’ve pointed out before, any reversible process that uses energy is a potential storage technology – that’s true of batteries, pumped hydro, flywheels, stored heat and many more. But hydrogen is a particularly appealing storage technology, because it offers the potential to decarbonize major industrial processes.
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That’s the headline for a piece I just wrote for Independent Australia, looking at a new report from Greenpeace about the harm done by air pollution from coal-fired power, in addition to the climate-destroying effects of CO2 emissions. The report estimates 800 deaths per year, and is, from what I can see, consistent with other studies.
As a possible recovery from the COVID-19 pandemic comes into sight, it’s time to place human health above the desire to maintain the economic status quo. Australia can and should get off coal by 2030, without harming workers employed in the industry. In doing so, we will be saving both lives and money.
One of the consequences of the pandemic has been the realization that reliance on the ready availability of imported goods may be a problem in a crisis. This isn’t new, particularly in relation to oil, which plays an outsized role in geopolitics. The supposed need to protect sea lanes, and particularly oil supplies against disruption has been a major part of the rationale for naval defence spending. And we have repeatedly been criticised for failing to maintain stocks of refined petrol.
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I’ve been underwhelmed by some of these arguments, but it seems as if it’s time to take them seriously, particularly in relation to oil. If we are to decarbonize the economy, we need to reduce our consumption of oil, ultimately to zero. The obvious place to start is by reducing imports of oil, with a medium-term goal of self-sufficiency.
Michael Shellenberger’s “apology essay” is the last gasp of “ecomodernism”
Although ecomodernists make a lot of claims, the only one that is distinctive is that nuclear power is the zero-carbon “baseload” energy source needed to replace coal, and that mainstream environmentalists have wrongly opposed it.
Historically, there is something to this. It would have been better to keep on building nuclear plants in the 1980s and 1990s than to switch from oil to coal, and it was silly for Germany to shut down nuclear power before coal
. But none of that is relevant anymore, at least in the developed world. Solar PV and wind, backed up storage are far cheaper than either nuclear or coal. As a result, there have been very few new coal or nuclear plants constructed in developed countries in recent years.
Several countries (Belgium, Austria, Sweden) are already coal-free and most developed countries will be by 2030. So, ecomodernism is obsolete.
At this point, Shellenberger is faced with the choice between admitting that the mainstream environmentalists were right or explicitly going over to the other side. He has chosen the latter.
(From Twitter using Spooler)
… , we can exit coal by 2030. Here’s how to do it.
That’s the title of my recent article in The Conversation. It’s a summary of a report, titled Getting Off Coal: Orderly, Early Transition to Minimise Impact for Australian Economy which was published recently by The Australia Institute.
The government has released a report on energy policy it commissioned from former Origin Energy boss Grant King. I prepared a brief response for the Australian media science centre
The government’s thinking remains five to ten years behind the times. Although the idea of new coal-fired power stations seems finally to have been abandoned, the report focuses heavily on technology options that seemed promising in the past but have now been abandoned everywhere in the developed world, such as nuclear power and carbon capture and sequestration. More important is the failure to recognise that gas-fired electricity generation is increasingly being supplanted by the combination of renewables and battery storage. The policy remains fixated on extractible resources such as coal and gas, ignoring our massive endowment of solar and wind resources.
The more fundamental problem is that the approach to climate policy that underlies all of this is the same as the denialist approach to the pandemic, exemplified by Trump – since dealing with impending disaster will be inconvenient, let’s just keep ignoring it. After all, it might never happen.
I’m one of 10 000 Australian academics who signed an open letter to Unisuper (our industry superannuation fund) calling for a policy of divestment from carbon-based fuels. The first step in such a policy has to be divestment from thermal coal. Purely on fiduciary grounds, getting out of thermal coal is now a matter of cashing out before the assets are completely unsaleable. Just in the last week, here’s a list of investors, ranging from small institutions to financial giants that have made announcements along these lines
- JP Morgan
- Moody’s (saying that insurance companies should divest to reduce climate litigation risk)
- The Royal College of Psychiatrists
- The Jesuit Order in the UK
- Creighton University (Jesuit University in the US)
- Bristol University (UK)
- Danish pension fund APG (selling its holding in KEPC)
That’s certainly a partial list, indicating that divestment decisions are now being announced on a daily basis, with many more happening quietly.
As the Wall Street Journal reported today, the exodus has reached the point where many coal companies have only a handful of institutional shareholders. These institutions, are too put it mildly, exposed to a lot of risk. And, for any other investors, a divestment decision by one of the remaining institutional shareholders would imply a big drop in the share price and therefore a capital loss.
Part of this flight is the toxic reputational risk associated with coal. As coal industry magazine CoalZoom has observed, reporting a study by Alva Group the bushfire catastrophe has had a huge impact in this respect to the point that
public awareness and a latent activist momentum which may only take one more high-profile incident to trigger concerted action have been built.
Sooner or later (as Moody’s notes above) that concerted action will include attempts to recover the damage caused by carbon dioxide emissions first from emitters, and then from their financiers and insurers.