Global Insight 5: 23-05-2017
Our weekly round up of stories that caught our eye from around the world on energy system change.
AEMO and ARENA pilot project for demand response
The Annual Market Performance Review 2016, released last week by the Australian Energy Market Commission (AEMC), the rule-maker for the National Electricity Market (NEM), highlighted possible problems to system security and reliability within the NEM due to the current and future closures of thermal generation. Following this, the Australian Market Operator (AEMO) and the Australian Renewable Energy Agency (ARENA) have announced plans for a 3-year pilot trial of demand response in South Australia and Victoria. The plan will include demand response from demand response aggregators, industrial and commercial users and also includes residential systems. The scope of trial is to assess how demand response schemes are able to make better use of existing infrastructure whilst reducing emissions and energy costs and improving energy productivity.
National body to promote EV uptake
Currently Australia is lagging behind the rest of the world with electric vehicles (EV) making up just 0.1% of new vehicle sales. In order to promote uptake, a new national body launched today in Canberra with support from the Australian Renewable Energy Agency (ARENA). Energy businesses ActewAGL, AGL Energy, Synergy and TransGrid; automotive manufacturers Audi, BMW, Hyundai, Jaguar Land Rover, Mitsubishi, Nissan, Porsche, Tesla and Volkswagen Group; infrastructure and fleet businesses JET Charge and Lennock Fleet; not-for-profit ClimateWorks Australia; project engineering firm ITP Renewables and motoring club Royal Automobile Club of Victoria (RACV) are all members of the new body. As Australia leads the way in domestic solar PV installations, EVs could be the next obvious choice for domestic consumers. If the new demand response initiatives (see above) include financial incentives for residential customers, this could provide an alternative revenue stream to pay for EV ownership.
Battery production gears up in Europe
In a similar way that the growth of solar PV spurred investment in silicon production in the late 2000s, anticipated demand for electric vehicles and home storage is now driving (excuse the pun…) investment in battery production. Bloomberg reports rivals to Elon Musks’ battery gigafactory across Europe, with a new plant in Germany being built by Daimler AG and more factories planned in Sweden, Hungary and Poland. Overall, battery-making capacity globally is expected to more than double between now and 2021, and the cost of lithium-ion packs to fall by more than 40%.
The biggest challenge for energy transition is integration, says leading energy consultancy
“We need to increase the utilization of renewable energy. For this we need to transform the energy system. That in turn requires new regulation.” So says the Ditlev Engel, CEO of DNV GL Energy, one of the largest global energy consultancy companies. Engel stresses the need for collaboration between countries, and for a combination of solutions, including storage, efficiency, grid integration and smart grids. DNV GL’s Technology Outlook also picks out the coming importance of the electrification of energy demand in transport, digitalisation, smart energy-producing buildings and bi-directional communications, amongst other key trends
Why the fight for a future energy system is complicated – the upcoming South California Edison rate case.
SCE has asked for $2.1 bn (out of a total $14.7 bn) to upgrade its grid for distributed energy resources (DER). The Solar Energy Industries Association (SEIA) and Vote Solar (interestingly originally set up by David Hochschild of the CEA (see news item below) argue that SCE has not valued DER appropriately. And then finally, TURN (the Utility Reform network) has argued that both SCE and SEIA in their different ways are arguing for gold-plating. The utility drive piece asked 4 questions of both TURN and SEIA, showing the very different outlook. SEIA is in many ways the argument of economics and technology development, whereas TURN is arguing for a ‘managed’ change and retention of traditional public service obligations. Whilst SEIA is saying in a system run in a different way, costs would be lower so alter the system values now. Whereas TURN is saying, evidence does not show that yet – so wait until they come through. Nevertheless, meanwhile the system is following the SEIA-type momentum but without coordination. It is a chicken and egg situation. This issue is playing out across all the US States – some coming down in favour of the SEIA argument, and others the TURN argument. We have seen Ofgem, with its minded to announcement take steps towards a TURN view which in our opinion – whilst complex is also avoiding reality.
Another contentious issue confronted by Calfornia
California is one of the most progressive areas of transformative energy policy in the world – but the model for change has hitherto been regulation, as a result of the disasterous electricity privatisation in 2001. As reported on last week, there is currently only limited domestic retail competition. However, community choice aggregation – one way to get more customer choice – is increasing. However CCA billing and services still goes through the area’s utility of last resort – mainly three independent owned utilities (IOUs). However, if CCA increases and the preferred generation remains solar, then questions about hwo to pay for networks, the public service obligation and so on will become a major issue for California. In the light of this, a CPUC White Paper has come out looking at retail competition and how it may be relaxed / altered to take account of customer wishes, without opening up the electricity industry to the risks of 2001. This is a major step for California.
While the SCE rate base discussion highlights the ‘fight’ for a sustainable energy system……
For anyone who wants to feel a bit of hope, an interview with Commissioner David Hochschild of the California Energy Commission (the State’s primary energy policy and planning agency – as opposed to the California Public Utilities Commission (the CA equivalent of the Regulator) provides that. The interview discusses the way he sees CA’s energy system developing. This is primarily moving from what he sees as the first stage of transformation to a sustainable energy system which is about adding capacity etc, to the next stage which he argues is about integration (ie bringing in smarter use of load management, storage, markets, networks etc). He also sees electric vehicles as hugely important to the integration problem – given the use of second age batteries – as reported on last week (when batteries are swopped in vehicles and can then be used as back-up storage for the energy system). Because of this, CA is undertaking MOUs with Mexico regions to strengthen the market.
Global Renewable Attractiveness Index
In May Ernst and Young published their latest review of the attractiveness of countries for renewable energy, which confirms the global shift to Asia. The report puts China and India as top of the league, with the United States falling to third, as a result of the ‘demise of the Clean Power Plan’, and nervousness over future reductions in production and investment tax credits. China’s top position was due to its intention to spend $363 billion on developing renewable power capacity by 2020 and India’s governments plans to build 175 gigawatts of renewable energy generation by 2022. The confidence of the private sector in domestic policies and measures matter, as international renewable finance, manufactures and project developers are able to move quickly between countries as conditions change, which in turn can affect the costs and effectiveness of the projects.
Car manufactures are moving into household storage
Tesla has gained a global reputation for top of the range electric vehicles, with its models S, X and 3. Confidence in the company has become so great, that its market capitalization has surpassed that of General Motors, making it the US’s most valuable automaker. However, the company has diversified and has become a significant manufacturer of domestic and retail level battery storage – its power wall – and more recently for its solar roofs programme. Tesla’s success have encouraged other manufacturers, with Honda, Nissan, Mercedes-Benz, and BMW developing battery storage systems for households. These joint business strategies, will both capitalise on the development of new technology and enable the reuse of vehicle batteries in stationary facilities and are likely to accelerate deployment in both areas.