The future of energy generation and storage

[Smurf1976]

But where is the solar and the wind in any if the cheapest power places on earth?

In my view the US is a good basis for analysis for several reasons - 50 states in the same country, so same currency and mostly comparable laws, and with plenty of data available from consistent sources.

Looking at US states with a high portion of wind there are 5 states where it's at least a third of total electricity supply as follows. Prices based on average price paid by all consumers in August 2024. Price data source is Electric Power Monthly statistics, Energy Information Administration (US government).

Price ranking is 1 - 49 (all states + DC but excluding Alaska and Hawaii since they're not directly comparable due to other obvious factors) with 1 being cheapest and 49 being most expensive. Note the average price across all states for reference is 13.61c / kWh. Prices are in USD.

Wind:

Iowa = 55.3% wind. Price ranking 14 (10.79c / kWh)
South Dakota = 52.3% wind. Price ranking = 22 (11.46c / kWh)
Kansas = 45.2% wind. Price ranking = 27 (12.06c / kWh)
Oklahoma = 41.4% wind. Price ranking = 9 (9.98c / kWh)
North Dakota = 34.1% wind. Price ranking = 1 (8.00c / kWh)

So 4 of the 5 are in the cheapest half and all are below the mean average of all states.

Now looking at the top 5 solar users:

California = 17.4%. Price rank = 49 (29.06c)
Nevada = 15.9%. Price rank = 21 (11.43c)
DC = 11.9%. Price rank = 40 (16.46c)
Massachusetts = 9.2%. Price rank = 47 (24.24c)
Vermont = 8.8%. Price rank = 42 (17.98c)

So 4 of the 5 are in the most expensive half and above the mean of all states, with the largest solar user California being the most expensive of the lot indeed it's even higher than Alaska which I've excluded for obvious reasons of not being comparable in other ways. But then Nevada is in the lower half and below the mean.

Looking at the top 5 US users of other generation sources:

Nuclear:
New Hampshire = 56.5%. Price = 44 (20.20c)
South Carolina = 53.8%. Price = 20 (11.43c)
Illinois = 53.3%. Price = 30 (12.73c)
New Jersey = 45.8%. Price = 41 (17.95c)
Tennessee = 43.4%. Price = 17 (11.12c)

Coal:
West Virginia = 90.8%. Price = 18 (11.21c)
Missouri = 74.4%. Price = 31 (12.95c)
Wyoming = 73.3%. Price = 5 (9.88c)
Kentucky = 70.7%. Price = 11 (10.41c)
Utah = 61.8%. Price = 3 (9.57c)

Gas:
Rhode Island = 90.9%. Price = 46 (23.96c)
Delaware = 85.8%. Price = 35 (13.27c)
Massachusetts = 76.9%. Price = 47 (24.24c)
Florida = 73.9%. Price = 28 (12.14c)
Mississippi = 72.1%. Price = 16 (11.02c)

Hydro:
Washington = 64.6%. Price = 10 (10.18c)
Idaho = 51.0%. Price = 7 (9.93c)
Vermont = 50.0%. Price = 42 (17.98c)
Oregon = 46.4%. Price = 19 (11.30c)
Montana = 40.0%. Price = 15 (10.97c)

Biomass:
DC = 25.5%. Price = 40 (16.46c)
Vermont = 25.2%. Price = 42 (17.98c)
Maine = 22.3%. Price = 43 (18.71)
Massachusetts = 10.3%. Price = 47 (24.24c)
New Hampshire = 6.2%. Price = 44 (20.20c)

I've left out oil since, apart from Hawaii, no state has it as a major portion of generation. Highest being Hawaii (65.4%), Alaska (14.9%), Louisiana (4.0%), Montana (1.8%) and Michigan (1.0%). So it's not a major influence on costs for any of the contiguous states.

Geothermal also omitted for the same reason. For the record the top users are Nevada (9.4%), California (5.8%), Hawaii (1.8%), Utah (0.8%), Idaho (0.5%), Oregon (0.3%) and New Mexico (0.1%). It's zero in all other states (or it rounds to zero).

Now for a bit more number crunching, generation in the 10 cheapest and 10 most expensive states as follows. Note that I've given each state an equal weighting.

10 cheapest states are North Dakota (cheapest), Louisiana, Utah, Nebraska, Wyoming, Arkansas, Idaho, New Mexico, Oklahoma, Washington. Their equally weighted generation sources are:

Nuclear = 6.57%
Coal = 33.75%
Gas = 24.22%
Oil = 0.46%
Hydro = 14.05%
Geothermal = 0.14%
Solar = 1.8%
Wind = 17.66%
Biomass = 1.33%

10 most expensive states are California (most expensive), Connecticut, Massachusetts, Rhode Island, New York, New Hampshire, Maine, Vermont, New Jersey, DC. (Yes I know DC isn't technically a state, but it's near enough for the purpose given separate statistics are produced for it). Average generation being:

Nuclear = 17.46%
Coal = 0.46%
Gas = 47.87%
Oil = 0.25%
Hydro = 11.58%
Geothermal = 0.58%
Solar = 5.73%
Wind = 5.66%
Biomass = 10.38%

 

[Smurf1976]

gas makes up a very large portion of their policy.

The problem with gas is obtaining enough of it given most of it has been committed to sale overseas.

Separate to that, well AEMO is currently forecasting load shedding for NSW on Tuesday 26 November. Odds are they'll find a workaround but supply is tight yes.

 

[qldfrog]

In my view the US is a good basis for analysis for several reasons - 50 states in the same country, so same currency and mostly comparable laws, and with plenty of data available from consistent sources.

Looking at US states with a high portion of wind there are 5 states where it's at least a third of total electricity supply as follows. Prices based on average price paid by all consumers in August 2024. Price data source is Electric Power Monthly statistics, Energy Information Administration (US government).

Price ranking is 1 - 49 (all states + DC but excluding Alaska and Hawaii since they're not directly comparable due to other obvious factors) with 1 being cheapest and 49 being most expensive. Note the average price across all states for reference is 13.61c / kWh. Prices are in USD.

Wind:

Iowa = 55.3% wind. Price ranking 14 (10.79c / kWh)
South Dakota = 52.3% wind. Price ranking = 22 (11.46c / kWh)
Kansas = 45.2% wind. Price ranking = 27 (12.06c / kWh)
Oklahoma = 41.4% wind. Price ranking = 9 (9.98c / kWh)
North Dakota = 34.1% wind. Price ranking = 1 (8.00c / kWh)

So 4 of the 5 are in the cheapest half and all are below the mean average of all states.

Now looking at the top 5 solar users:

California = 17.4%. Price rank = 49 (29.06c)
Nevada = 15.9%. Price rank = 21 (11.43c)
DC = 11.9%. Price rank = 40 (16.46c)
Massachusetts = 9.2%. Price rank = 47 (24.24c)
Vermont = 8.8%. Price rank = 42 (17.98c)

So 4 of the 5 are in the most expensive half and above the mean of all states, with the largest solar user California being the most expensive of the lot indeed it's even higher than Alaska which I've excluded for obvious reasons of not being comparable in other ways. But then Nevada is in the lower half and below the mean.

Looking at the top 5 US users of other generation sources:

Nuclear:
New Hampshire = 56.5%. Price = 44 (20.20c)
South Carolina = 53.8%. Price = 20 (11.43c)
Illinois = 53.3%. Price = 30 (12.73c)
New Jersey = 45.8%. Price = 41 (17.95c)
Tennessee = 43.4%. Price = 17 (11.12c)

Coal:
West Virginia = 90.8%. Price = 18 (11.21c)
Missouri = 74.4%. Price = 31 (12.95c)
Wyoming = 73.3%. Price = 5 (9.88c)
Kentucky = 70.7%. Price = 11 (10.41c)
Utah = 61.8%. Price = 3 (9.57c)

Gas:
Rhode Island = 90.9%. Price = 46 (23.96c)
Delaware = 85.8%. Price = 35 (13.27c)
Massachusetts = 76.9%. Price = 47 (24.24c)
Florida = 73.9%. Price = 28 (12.14c)
Mississippi = 72.1%. Price = 16 (11.02c)

Hydro:
Washington = 64.6%. Price = 10 (10.18c)
Idaho = 51.0%. Price = 7 (9.93c)
Vermont = 50.0%. Price = 42 (17.98c)
Oregon = 46.4%. Price = 19 (11.30c)
Montana = 40.0%. Price = 15 (10.97c)

Biomass:
DC = 25.5%. Price = 40 (16.46c)
Vermont = 25.2%. Price = 42 (17.98c)
Maine = 22.3%. Price = 43 (18.71)
Massachusetts = 10.3%. Price = 47 (24.24c)
New Hampshire = 6.2%. Price = 44 (20.20c)

I've left out oil since, apart from Hawaii, no state has it as a major portion of generation. Highest being Hawaii (65.4%), Alaska (14.9%), Louisiana (4.0%), Montana (1.8%) and Michigan (1.0%). So it's not a major influence on costs for any of the contiguous states.

Geothermal also omitted for the same reason. For the record the top users are Nevada (9.4%), California (5.8%), Hawaii (1.8%), Utah (0.8%), Idaho (0.5%), Oregon (0.3%) and New Mexico (0.1%). It's zero in all other states (or it rounds to zero).

Now for a bit more number crunching, generation in the 10 cheapest and 10 most expensive states as follows. Note that I've given each state an equal weighting.

10 cheapest states are North Dakota (cheapest), Louisiana, Utah, Nebraska, Wyoming, Arkansas, Idaho, New Mexico, Oklahoma, Washington. Their equally weighted generation sources are:

Nuclear = 6.57%
Coal = 33.75%
Gas = 24.22%
Oil = 0.46%
Hydro = 14.05%
Geothermal = 0.14%
Solar = 1.8%
Wind = 17.66%
Biomass = 1.33%

10 most expensive states are California (most expensive), Connecticut, Massachusetts, Rhode Island, New York, New Hampshire, Maine, Vermont, New Jersey, DC. (Yes I know DC isn't technically a state, but it's near enough for the purpose given separate statistics are produced for it). Average generation being:

Nuclear = 17.46%
Coal = 0.46%
Gas = 47.87%
Oil = 0.25%
Hydro = 11.58%
Geothermal = 0.58%
Solar = 5.73%
Wind = 5.66%
Biomass = 10.38%

Well, it is pretty clear from this that if you want cheap power, you go hydro, wind or coal if you can, and avoid solar, biomass or oil(the later quite obvious))
For obvious reasons solar and wind are also highly dependant on geography so it is most silly to mandate it regardless of location.
Sun in Sahara making more sense than in Scotland, wind better in King island than in Ipswich plain.
After you take the calculator out.
Coal remain the king imho for a country who has plenty.Ask China, India and past Australia..now we can play spoilt rich kids fairy tales and go RE and nuclear free: ask Germany, or the Australian consumer where it leads...saving the world walking to the popular soup and salvos past closed industrial wasteland ....
These stats @Smurf1976 were quite informative and an eye opener for anyone awake.
I understand that generation alone is not enough to give competitive advantage, but that is the start, and for the rest of the issue, the unique Australian inefficiency and low productivity might need a nuke to be changed indeed, without even the need for a nuclear plant

 

[qldfrog]

The problem with gas is obtaining enough of it given most of it has been committed to sale overseas.

Separate to that, well AEMO is currently forecasting load shedding for NSW on Tuesday 26 November. Odds are they'll find a workaround but supply is tight yes.

And that further exploration or exploitation is legally or otherwise prevented.

 

[Smurf1976]

For obvious reasons solar and wind are also highly dependant on geography so it is most silly to mandate it regardless of location.
Sun in Sahara making more sense than in Scotland, wind better in King island than in Ipswich plain.

Bingo.

It's not just the resource type but key is having a high grade, low cost source of it.

Wind comes down not only to the achievable capacity factor on an annual or longer basis but also the profile of that. It's far better if the wind goes up when demand goes up, rather problematic if the opposite occurs.

Hydro is extremely site-specific as to the cost and no two are alike.

Coal well as an example there's plenty of coal in metropolitan Melbourne but economically it was cheaper to mine it 150km away and transmit the electricity. All comes down to the depth of the coal, quality of the coal, what else needs to be dug up to get to it and so on.

Gas can be cheap if it's otherwise stranded and of no value for direct use as gas. That situation does exist in some places but it's very different if you're paying $17.86 per GJ for LNG plus shipping and handling costs.

Solar will also depend on location and as with wind it's not just about total yield but it's about how that relates to consumption. It works a lot better in Queensland, where solar production is reasonably correlated with demand, both peak under the same conditions, than it does in Victoria where there's a rather nasty inverse correlation - solar yield drops as electricity consumption goes up.

The other key is about playing nicely together. Regardless of the arguments for or against building any particular generation source, once it's built then it's crazy to not get the best out of it and minimise ongoing costs. Eg if solar is built then it never makes sense to use something else in preference. Likewise it never makes sense to intentionally spill hydro water and burn gas instead. etc. It needs good co-ordination of how it all works, everyone needs to play nicely, much like an orchestra needs to all follow the same conductor.

This being a definite problem in Australia for political / ideological reasons which get in the way and demand that wind, solar, coal, gas, hydro etc all compete against each other constant basis for dispatch. Economic ideology says that'll lower costs. Engineering and sensible accounting says it can't possibly save money to turn a solar farm off and burn gas instead, it just can't given the full cost of the solar is incurred regardless of use.

That silly things of that nature occur is a significant part of the problem. Not the only problem, but it's a significant part of it.

 

[SirRumpole]

This being a definite problem in Australia for political / ideological reasons which get in the way and demand that wind, solar, coal, gas, hydro etc all compete against each other constant basis for dispatch. Economic ideology says that'll lower costs. Engineering and sensible accounting says it can't possibly save money to turn a solar farm off and burn gas instead, it just can't given the full cost of the solar is incurred regardless of use.

You seem to be implying that if several sources are needed, and they need to work together, then a competitive operation where the suppliers are trying to outbid each other is not the way to go and there needs to a body in overall control ensuring efficient integration of the different sources at different times?

I would assume that AEMO would be this body but I take it that something else is needed?

 

[Smurf1976]

You seem to be implying that if several sources are needed, and they need to work together, then a competitive operation where the suppliers are trying to outbid each other is not the way to go and there needs to a body in overall control ensuring efficient integration of the different sources at different times?

What I'm really saying is base it on the real cost of operation of the plant and run the cheapest.

Fixed costs are just that, they're paid regardless, so it's rational to base day to day operation on the variable costs only.

Versus at present where dispatch is based on numbers that are literally made up by traders seeking to maximise revenue in a manner much like share traders. Sometimes that works just fine, other times it leads to silly outcomes like gas being run in preference to solar.

The problem being that isn't just financial trading in the manner that share trading is but it's the basis of physical production. What traders do directly determines physical operation and that does lead to "silly" outcomes like gas being run when wind was available and could've been used instead.

Regardless of whether we go with nuclear or renewables, the first step to lowering prices is to get the best out of them, to stop doing silly things like that.

So basically I'm saying OK, let the traders to do business but don't have the tail wagging the dog, just run the physical production on technical criteria and real, actual costs. Noting this is exactly what a traditional utility always did - regardless of what generating plant they had, always run the system so as to minimise ongoing fuel costs. Suffice to say failing to do so would've been a career ending move.

That's the kind of detail that's really missing from the public debate that's focused solely on the means of generation. Missing the detail that we're not getting the best out of what we already have. Not because of any physical problem but due to administrative approaches leading to unnecessary costs being incurred on the physical side - and that's serious $ millions it's not loose change.

In layman's terms suppose you own or rent a home and are thus incurring that cost regardless. Now you come up with some plan to "save money" by staying in a local hotel tonight instead. No matter what arguments you come up with, no matter how you try and shuffle the money around, we all know that isn't really saving money but quite the opposite. Because most of the costs of your house are fixed, you won't avoid the mortgage or rent just because you didn't sleep in it tonight and that being so, the cheapest option is to make use of the house you've got and forget the hotel. That's a similar situation.

 

[SirRumpole]

What I'm really saying is base it on the real cost of operation of the plant and run the cheapest.

Understand that.

Who should be making the decisions on what gets run when?

AEMO, AI (like Kraken perhaps), another govt body?

 

[Smurf1976]

Who should be making the decisions on what gets run when?

Trying to heavily simplify a complex subject here.....

All generation sources have costs that can be split into three categories:

1. Fixed costs. That is capital cost and time-based maintenance. Once it's built, the money's spent whether it runs or not.

2. Operational costs. Fuel and usage-based maintenance that's directly caused by running the facility. The cost goes away if it's not in operation.

3. Opportunity cost. Primarily relevant to hydro where the operational cost is extremely low but, since the volume of water available is finite, there's an opportunity cost of using it now rather than later. Eg using it today to displace generation from relatively cheap coal has a huge cost if that results in insufficient water in storage to use it to displace much more expensive diesel tomorrow. But using it to displace coal is, of course, far better than not using it at all and spilling the water.

Now in the context of Australia we already have the National Electricity Market Dispatch Engine (NEMDE) which resolves for the lowest cost supply subject to compliance with technical constraints which are kept updated (by humans) constantly when anything changes. Noting for clarity that this is software running on a computer, not literally a physical engine.

Noting the above, the cheapest way to run the system is simply to ensure the cost data in NEMDE matches actual operational costs (2) apart from hydro, which needs to be simply placed at a price point that results in operation matching water availability over time. Price it at whatever level uses the water but no more.

Trouble is that's not what we're doing in practice. Due to the market design of having financial traders trying to maximise profit, the cost data in NEMDE is 100% made up and not based on actual real costs. It's simply based on everyone playing a game, trying to make as much money as possible with the problem that this drives physical dispatch. Someone gets outbid and that physically shuts something down and starts something else up.

That leads to perverse outcomes with high cost fuel being burned where it need not be burned as well as unnecessary start - stop cycles, thus increasing costs, resource use and environmental impact unnecessarily. The financial trading thus isn't a zero sum game but rather it's a negative sum game, it's adding real physical costs and real environmental impacts, it's not just moving money around.

Now despite it being called a market and having all that trading, I'll argue we don't really have anything resembling an actual free market in electricity for a number of reasons. Most obvious and significant being that virtually everything built now is being built either by or at the behest of government. The wind farms might be privately owned, but they're being built because they won a government-run tender. Meanwhile only yesterday the SECV announced it's building a solar farm and battery.

SECV? Yep, that SECV, the State Electricity Commission of Victoria. It is indeed back in business, 100% state government owned, and it's even recycled the old logo. Meanwhile Qld, Tas, WA and NT all own generation assets, as does the Australian Government, and SA is in the process of building one. Then there's things like Tallawarra B - owned by Energy Australia but built at what was basically the personal request of the then Prime Minister, and yes there's government money involved.

Meanwhile the Coalition is proposing to build nuclear if elected so that's another one.

So point is there's no "free market" argument here, because we're already so far removed from that concept anyway, and that being so what's the point of pretending to have a free market based on the dispatch process? It's a charade and an expensive one at that.

So the model I'm suggesting is a much simpler one based on separating the costs. That is, run the system based on actual operating costs, real costs, then just pay the asset owners for the fixed costs separately. Rather than having the asset owners trying to recover fixed costs via a trading operation that ends up adding additional operating costs.

The reasoning isn't ideological, it's purely that mathematically this is certain to lower costs. First because it avoids running gas, diesel etc unless absolutely necessary. S

Second because it greatly reduces the administrative overheads that come with every generating company having traders working 24/365 and so on - added up across all the companies that alone serious $. It doesn't need a 24/365 army of workers to keep real cost data up to date, that's a "9 to 5" job for a small team at most.

Harder to quantify but it should also lower costs in two other ways. One is because the much more stable revenue should, in theory at least, lower the cost of capital. Getting someone to finance generation with entirely predictable revenue should be achievable at a lower rate of return versus financing something with highly volatile revenue. Second because the reduced pricing volatility in the market should reduce the cost of hedging or even the need for it in the first place.

That's the model I have in mind but it's not the only one. Any arrangement that results in minimising ongoing operational costs is guaranteed to save money when compared to not doing so. Any model that always runs solar or coal before diesel, subject to technical constraints, and which gets rid of the administrative and financial overheads is going to cut costs.

Now the free market purists will probably be seething at that suggestion, but bottom line is their approach simply hasn't worked. Consumers don't really care about having a market, what they care about is that supply works technically and it's affordable to use it. When the price has literally doubled in real terms compared to 30 years ago, it just isn't working all that well.

Noting that's only about the dispatch process, it's not answering the question of renewables versus fossil versus nuclear and I haven't addressed load control which is a subject in itself. Dispatch does cut across all of that however - any fair, proper comparison of generation technologies should logically be based on the optimal use of them. So running fossil fuels, nuclear or renewables as efficiently as possible.

Regardless of where anyone stands on the question of whether nuclear, solar or gas should be used in the first place, I doubt anyone would really disagree with the notion that if a solar farm has been built well make full use of it then. The money's spent, the materials have been used, the work's been done, so it's crazy to not get as much as possible out of it subject to any technical constraints. Same with nuclear if that's built, it'd be crazy to not fully utilise it given it's a high capital cost but low operating cost technology. Even with gas, it's entirely logical to run the most efficient facilities as "first on, last off" and to run the least efficient as "last on, first off". There's no point burning more gas for the sake of it.

Where this has gone wrong is ideology has overridden what works. Same with the gas export situation - it wasn't a failure of planning that happened there, it was a failure to plan at all. Amidst all the focus on competition, deregulation and so on nobody was paying attention to the physical supply of energy to consumers. Same of course with the means of generation - ideology getting in the way of what works really isn't helping at all.

 

[qldfrog]

Trying to heavily simplify a complex subject here.....

All generation sources have costs that can be split into three categories:

1. Fixed costs. That is capital cost and time-based maintenance. Once it's built, the money's spent whether it runs or not.

2. Operational costs. Fuel and usage-based maintenance that's directly caused by running the facility. The cost goes away if it's not in operation.

3. Opportunity cost. Primarily relevant to hydro where the operational cost is extremely low but, since the volume of water available is finite, there's an opportunity cost of using it now rather than later. Eg using it today to displace generation from relatively cheap coal has a huge cost if that results in insufficient water in storage to use it to displace much more expensive diesel tomorrow. But using it to displace coal is, of course, far better than not using it at all and spilling the water.

Now in the context of Australia we already have the National Electricity Market Dispatch Engine (NEMDE) which resolves for the lowest cost supply subject to compliance with technical constraints which are kept updated (by humans) constantly when anything changes. Noting for clarity that this is software running on a computer, not literally a physical engine.

Noting the above, the cheapest way to run the system is simply to ensure the cost data in NEMDE matches actual operational costs (2) apart from hydro, which needs to be simply placed at a price point that results in operation matching water availability over time. Price it at whatever level uses the water but no more.

Trouble is that's not what we're doing in practice. Due to the market design of having financial traders trying to maximise profit, the cost data in NEMDE is 100% made up and not based on actual real costs. It's simply based on everyone playing a game, trying to make as much money as possible with the problem that this drives physical dispatch. Someone gets outbid and that physically shuts something down and starts something else up.

That leads to perverse outcomes with high cost fuel being burned where it need not be burned as well as unnecessary start - stop cycles, thus increasing costs, resource use and environmental impact unnecessarily. The financial trading thus isn't a zero sum game but rather it's a negative sum game, it's adding real physical costs and real environmental impacts, it's not just moving money around.

Now despite it being called a market and having all that trading, I'll argue we don't really have anything resembling an actual free market in electricity for a number of reasons. Most obvious and significant being that virtually everything built now is being built either by or at the behest of government. The wind farms might be privately owned, but they're being built because they won a government-run tender. Meanwhile only yesterday the SECV announced it's building a solar farm and battery.

SECV? Yep, that SECV, the State Electricity Commission of Victoria. It is indeed back in business, 100% state government owned, and it's even recycled the old logo. Meanwhile Qld, Tas, WA and NT all own generation assets, as does the Australian Government, and SA is in the process of building one. Then there's things like Tallawarra B - owned by Energy Australia but built at what was basically the personal request of the then Prime Minister, and yes there's government money involved.

Meanwhile the Coalition is proposing to build nuclear if elected so that's another one.

So point is there's no "free market" argument here, because we're already so far removed from that concept anyway, and that being so what's the point of pretending to have a free market based on the dispatch process? It's a charade and an expensive one at that.

So the model I'm suggesting is a much simpler one based on separating the costs. That is, run the system based on actual operating costs, real costs, then just pay the asset owners for the fixed costs separately. Rather than having the asset owners trying to recover fixed costs via a trading operation that ends up adding additional operating costs.

The reasoning isn't ideological, it's purely that mathematically this is certain to lower costs. First because it avoids running gas, diesel etc unless absolutely necessary. S

Second because it greatly reduces the administrative overheads that come with every generating company having traders working 24/365 and so on - added up across all the companies that alone serious $. It doesn't need a 24/365 army of workers to keep real cost data up to date, that's a "9 to 5" job for a small team at most.

Harder to quantify but it should also lower costs in two other ways. One is because the much more stable revenue should, in theory at least, lower the cost of capital. Getting someone to finance generation with entirely predictable revenue should be achievable at a lower rate of return versus financing something with highly volatile revenue. Second because the reduced pricing volatility in the market should reduce the cost of hedging or even the need for it in the first place.

That's the model I have in mind but it's not the only one. Any arrangement that results in minimising ongoing operational costs is guaranteed to save money when compared to not doing so. Any model that always runs solar or coal before diesel, subject to technical constraints, and which gets rid of the administrative and financial overheads is going to cut costs.

Now the free market purists will probably be seething at that suggestion, but bottom line is their approach simply hasn't worked. Consumers don't really care about having a market, what they care about is that supply works technically and it's affordable to use it. When the price has literally doubled in real terms compared to 30 years ago, it just isn't working all that well.

Noting that's only about the dispatch process, it's not answering the question of renewables versus fossil versus nuclear and I haven't addressed load control which is a subject in itself. Dispatch does cut across all of that however - any fair, proper comparison of generation technologies should logically be based on the optimal use of them. So running fossil fuels, nuclear or renewables as efficiently as possible.

Regardless of where anyone stands on the question of whether nuclear, solar or gas should be used in the first place, I doubt anyone would really disagree with the notion that if a solar farm has been built well make full use of it then. The money's spent, the materials have been used, the work's been done, so it's crazy to not get as much as possible out of it subject to any technical constraints. Same with nuclear if that's built, it'd be crazy to not fully utilise it given it's a high capital cost but low operating cost technology. Even with gas, it's entirely logical to run the most efficient facilities as "first on, last off" and to run the least efficient as "last on, first off". There's no point burning more gas for the sake of it.

Where this has gone wrong is ideology has overridden what works. Same with the gas export situation - it wasn't a failure of planning that happened there, it was a failure to plan at all. Amidst all the focus on competition, deregulation and so on nobody was paying attention to the physical supply of energy to consumers. Same of course with the means of generation - ideology getting in the way of what works really isn't helping at all.

You should be the energy minister in the hopefully soon coming Australian Trump government, i will join you in the revamp of taxation and mining royalties.
Now we need a leader.... Would @Joe Blow be our fatherly figure for PM?

 

[sptrawler]

Trying to heavily simplify a complex subject here.....

All generation sources have costs that can be split into three categories:

1. Fixed costs. That is capital cost and time-based maintenance. Once it's built, the money's spent whether it runs or not.

2. Operational costs. Fuel and usage-based maintenance that's directly caused by running the facility. The cost goes away if it's not in operation.

3. Opportunity cost. Primarily relevant to hydro where the operational cost is extremely low but, since the volume of water available is finite, there's an opportunity cost of using it now rather than later. Eg using it today to displace generation from relatively cheap coal has a huge cost if that results in insufficient water in storage to use it to displace much more expensive diesel tomorrow. But using it to displace coal is, of course, far better than not using it at all and spilling the water.

Now in the context of Australia we already have the National Electricity Market Dispatch Engine (NEMDE) which resolves for the lowest cost supply subject to compliance with technical constraints which are kept updated (by humans) constantly when anything changes. Noting for clarity that this is software running on a computer, not literally a physical engine.

Noting the above, the cheapest way to run the system is simply to ensure the cost data in NEMDE matches actual operational costs (2) apart from hydro, which needs to be simply placed at a price point that results in operation matching water availability over time. Price it at whatever level uses the water but no more.

Trouble is that's not what we're doing in practice. Due to the market design of having financial traders trying to maximise profit, the cost data in NEMDE is 100% made up and not based on actual real costs. It's simply based on everyone playing a game, trying to make as much money as possible with the problem that this drives physical dispatch. Someone gets outbid and that physically shuts something down and starts something else up.

That leads to perverse outcomes with high cost fuel being burned where it need not be burned as well as unnecessary start - stop cycles, thus increasing costs, resource use and environmental impact unnecessarily. The financial trading thus isn't a zero sum game but rather it's a negative sum game, it's adding real physical costs and real environmental impacts, it's not just moving money around.

Now despite it being called a market and having all that trading, I'll argue we don't really have anything resembling an actual free market in electricity for a number of reasons. Most obvious and significant being that virtually everything built now is being built either by or at the behest of government. The wind farms might be privately owned, but they're being built because they won a government-run tender. Meanwhile only yesterday the SECV announced it's building a solar farm and battery.

SECV? Yep, that SECV, the State Electricity Commission of Victoria. It is indeed back in business, 100% state government owned, and it's even recycled the old logo. Meanwhile Qld, Tas, WA and NT all own generation assets, as does the Australian Government, and SA is in the process of building one. Then there's things like Tallawarra B - owned by Energy Australia but built at what was basically the personal request of the then Prime Minister, and yes there's government money involved.

Meanwhile the Coalition is proposing to build nuclear if elected so that's another one.

So point is there's no "free market" argument here, because we're already so far removed from that concept anyway, and that being so what's the point of pretending to have a free market based on the dispatch process? It's a charade and an expensive one at that.

So the model I'm suggesting is a much simpler one based on separating the costs. That is, run the system based on actual operating costs, real costs, then just pay the asset owners for the fixed costs separately. Rather than having the asset owners trying to recover fixed costs via a trading operation that ends up adding additional operating costs.

The reasoning isn't ideological, it's purely that mathematically this is certain to lower costs. First because it avoids running gas, diesel etc unless absolutely necessary. S

Second because it greatly reduces the administrative overheads that come with every generating company having traders working 24/365 and so on - added up across all the companies that alone serious $. It doesn't need a 24/365 army of workers to keep real cost data up to date, that's a "9 to 5" job for a small team at most.

Harder to quantify but it should also lower costs in two other ways. One is because the much more stable revenue should, in theory at least, lower the cost of capital. Getting someone to finance generation with entirely predictable revenue should be achievable at a lower rate of return versus financing something with highly volatile revenue. Second because the reduced pricing volatility in the market should reduce the cost of hedging or even the need for it in the first place.

That's the model I have in mind but it's not the only one. Any arrangement that results in minimising ongoing operational costs is guaranteed to save money when compared to not doing so. Any model that always runs solar or coal before diesel, subject to technical constraints, and which gets rid of the administrative and financial overheads is going to cut costs.

Now the free market purists will probably be seething at that suggestion, but bottom line is their approach simply hasn't worked. Consumers don't really care about having a market, what they care about is that supply works technically and it's affordable to use it. When the price has literally doubled in real terms compared to 30 years ago, it just isn't working all that well.

Noting that's only about the dispatch process, it's not answering the question of renewables versus fossil versus nuclear and I haven't addressed load control which is a subject in itself. Dispatch does cut across all of that however - any fair, proper comparison of generation technologies should logically be based on the optimal use of them. So running fossil fuels, nuclear or renewables as efficiently as possible.

Regardless of where anyone stands on the question of whether nuclear, solar or gas should be used in the first place, I doubt anyone would really disagree with the notion that if a solar farm has been built well make full use of it then. The money's spent, the materials have been used, the work's been done, so it's crazy to not get as much as possible out of it subject to any technical constraints. Same with nuclear if that's built, it'd be crazy to not fully utilise it given it's a high capital cost but low operating cost technology. Even with gas, it's entirely logical to run the most efficient facilities as "first on, last off" and to run the least efficient as "last on, first off". There's no point burning more gas for the sake of it.

Where this has gone wrong is ideology has overridden what works. Same with the gas export situation - it wasn't a failure of planning that happened there, it was a failure to plan at all. Amidst all the focus on competition, deregulation and so on nobody was paying attention to the physical supply of energy to consumers. Same of course with the means of generation - ideology getting in the way of what works really isn't helping at all.

Try getting a politicians head around that, then think about the fact in a lot of cases power companies have employed non engineering people to run them and you start to grasp how difficult the issue is.

A big problem I envisage with renewables is scaling up, if it is necassary, putting another unit in a power station is fairly straight forward.

Having to factor in the cost of a 24/7 base load renewable supply, when doing a feasability study on a new major project, could be the make or break of it.

Whereas having a taxpayer funded source of power readily available at a reasonable price, could well make the project feasable.

It actually has already been done with the NBN, the taxpayer funded the upgrade, so the media could charge for t.v content.

The real issue is, are we going to try and grow our industry, or not.
If it's not, well fine we can muddle along, with a very vague plan of renewables with gas.
Untill gas is either no longer available or no longer allowed to be used.

It is just looking add hock IMO.

 

[sptrawler]

Well it isn't as though we haven't being saying this is a very likely outcome of the legislated emission targets.

So the Governments are already paying coal miners to supply coal to foriegn owned power stations, to keep them running and also paying coal fired power stations directly to keep them running.

Now it is looking like the aluminium industry is going to ask for taxpayers to pay them to keep running.
Oh what a mess, why the hell did they legislate targets before they had a plan? Because that's what they do, great ideas with pizz poor planning, situation normal.
So now will we have a situation develop where the Government pays the coal power station to make the electricity and then subsidies the user to use the electricity, that's novel.
Meanwhile Twiggy Forrest has pulled the pin on his green can dreaming plans for Australia, this isn't looking good.
Hopefully some good news comes soon, because 2030 and penalties are fast approaching.

The country’s biggest aluminium smelter says green target unreachable

Rio Tinto-backed Tomago, which uses more power than any other industrial operation in Australia, says renewable energy is too expensive and in short supply.

www.afr.com

The new chief executive of Tomago Aluminium, the country’s biggest electricity user, says the smelter’s goal of switching to a predominantly clean power later this decade is not achievable, derailing its emissions reduction targets for 2030 and putting the plant’s future at risk.

Jerome Dozol, who took over as chief executive in July, said the energy price on offer was too high for the Tomago smelter near Newcastle to keep running without government assistance. He called for “urgent action” to secure continued operations at the plant, whose existing electricity supply contract with AGL Energy ends in 2028.

 

[SirRumpole]

Smart meters, do they benefit consumers?

As household solar and batteries grow in Australia, a new market is emerging and a few players want to control it

Household clean tech set-ups like solar and batteries can mean huge savings. But what's sitting behind the meter may become the most valuable asset as a new energy market emerges.

www.abc.net.au

 

[qldfrog]

Smart meters, do they benefit consumers?

As household solar and batteries grow in Australia, a new market is emerging and a few players want to control it

Household clean tech set-ups like solar and batteries can mean huge savings. But what's sitting behind the meter may become the most valuable asset as a new energy market emerges.

www.abc.net.au

It would be naive for anyone to believe this will be in the consumer advantage imho.
Seriously...
Meanwhile in the NetZero aspirational country:

Blackout risk lingers in NSW as coal outages hit

The tight electricity supply in the state follows an unusually large number of unexpected outages at coal power units.

www.afr.com

 

[sptrawler]

It would be naive for anyone to believe this will be in the consumer advantage imho.
Seriously...

They are quietly putting them in for free in W.A, yet when I put solar on a while back, I had to pay for a smart meter.
Now that one has been replaced with a new and better one for free.

As you say Frog, seriously , is it for my benefit.

If it was for my benefit, I'm sure I would be paying for it.