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Cost, Reliability and Scale: Can Renewables Deliver?

By Tom Biegler

The science of climate change is more certain than the economics of how to tackle it.

Economics, and not science, will dominate the future political debate about climate change. The reason is simple – the science is more certain than the economics.

Scientific knowledge about carbon dioxide as a greenhouse gas has a long and respectable history. The 43% increase in atmospheric CO2 caused by fossil fuel combustion since the industrial revolution is undisputed. It’s prudent, at the very least, to accept that CO2 emissions affect climate.

So the question is not whether to reduce emissions but how. Economics will determine the answer.

Take, for example, the 10-year roadmap Zero Carbon Australia, which was published in 2010 for an all-electric economy 100% powered by zero-emission renewables. As with many similar plans, implementation would be cheap and painless. We need only summon enough political will, support renewable technologies and correct wasteful energy habits.

Yet by 2014 solar and wind power comprised less than 1% of Australia’s energy.

Prominent political journalist Greg Sheridan had a different view. Treasury models predicting a cost to the GDP of only 0.1% per annum for cutting emissions were “based on insane assumptions about the economic worth of technologies which had not yet been invented”. There was “a widespread pattern of a disinclination by Western political leaders to tell their electorates (that) a low carbon economy would come at a massive cost to their living standards”.

Whom should we believe?

The first step is to recognise energy’s key role in creating prosperity. GDP tends to track energy usage closely. For example, Australia’s ratio of GDP to energy, called energy productivity, sits within a cluster of OECD economies, around 5% lower than the average.

Globally, energy productivity has gradually been trending upwards. Could more dramatic rises bring about larger drops in energy usage and emissions? The broad consistency of energy productivity suggests not. As for thrift with household energy, more than 90% of Australia’s total energy is accounted for in the goods, services and infrastructure that we rely on, not the kilowatt-hours or megajoules in our domestic energy bills.

Low-emission renewable electricity technologies feature in most climate policies. There is considerable debate about how cost and reliability affect their feasibility at the required scale.

R&D has produced huge advances in solar and wind technologies, but their low intensity and intermittent nature are immutable. Energy storage to improve reliability will add further to costs. In the face of ongoing subsidies, the optimism one sees in projections of costs and feasibility of these renewables at utility scale seems hard to justify.

Geothermal and carbon capture and storage technologies were at one time central to energy scenario planning. They are still not commercially proven and their remaining technical risks look significant.

Meanwhile the role of electricity is set to rise. There will be increased electrification of transportation and industrial technologies. For smaller vehicles, rechargeable batteries will displace current liquid fuels. Battery power for heavy transport, industrial machinery, aircraft and the like looks more problematic. Efficiency concerns rule out hydrogen as a replacement transport fuel. Land constraints will limit biofuels.

A broad portfolio of lower-emission technologies will be needed. Electricity demand could well double, and costs must be kept down. At the scale required it’s hard to see how both climate and economic concerns can be met without nuclear power.

There have also been important advances in energy economics. Energy Return on Investment is increasingly recognised as a critical indicator for energy technologies. It’s a simple concept for a fuel like oil: the ratio of energy in a litre of oil to the total energy used in finding, extracting and refining it. Typically oil had an EROI around 30. This has been decreasing as grades decline.

EROI calculations for complete renewable energy systems like solar photovoltaics are complex and contentious. Results are generally lower than for fossil fuels and depend on how the system boundary is set. Rational energy technology choices will rely on resolving such issues. Too low an EROI might rule a technology out.

Governments like to believe that more investment in research will inevitably lead to energy solutions. To a scientist this faith is touching, but R&D is not always successful. Energy technologies seem peculiarly subject to waves of uncritical optimism. A degree of both technical and economic scepticism will be important for sound energy policy. Mistakes can be costly.

Dr Tom Biegler FTSE was the author of the 2009 ATSE report titled The Hidden Costs of Electricity: Externalities of Power Generation in Australia. A former research chemist, he was a divisional head in CSIRO’s Institute of Minerals, Energy and Construction, and later managed CSIRO’s Corporate Business department.