Global Insight 6: 30-05-2017
Our weekly round up of stories that caught our eye from around the world on energy system change.
Carbon Capture and Storage now financed by Clean Energy Finance Corporation
The Australian coalition government has announced that legislation prohibiting the financing of carbon capture and storage (CCS) technology by the Clean Energy Finance Corporation (CEFC) is to be removed. The government say that this is to provide a ‘technology neutral, non-ideological, approach to national energy policy’. The move has also been welcomed by the Energy Networks Association. The government see CCS as the answer to reducing carbon intensity in LNG production and also other industries such as iron, steel and cement production. However, opponents to the proposition suggest that as CCS is still at pre-commercial level, and considering that Australia’s generation mix is largely coal-based, this could lead to higher energy prices with coal generation combined with CCS four times the price of onshore wind.
South Australia energy security target rules out battery storage
The use of the term ‘real inertia’ in South Australia’s consultation document for energy security has caused concern amongst the battery storage industry. The term would effectively rule out the ‘synthetic inertia’ capabilities of battery storage and could cause a halt in the development of wind and solar. Critics of the draft ruling have said that the effective subsidising of gas plants to provide this ‘real’ inertia would lead to a rise in the cost of energy for consumers considering the cost of gas in the country. It would also be contrary to the renewable energy targets of the state.
Regulatory Cyber-Security Shortfalls Threaten European Grids
A report for the European Commission, by the Energy Expert Cyber Security Platform has identified 39 gaps in existing European policies and regulations that need to be closed if a sufficient level of cyber security is to be achieved in the European energy sector. The report notes that digital technologies are playing an increasingly important role in the energy sector as ICT and data communication are becoming the foundation for the functioning of the infrastructure underlying the energy systems. The report identifies four strategic priorities to reduce the cyber threat: the introduction of an effective threat and risk management system; establish a cyber response framework; a focus on organisational readiness to improve cyber resilience; and to build up adequate capacity and competences.
Large distribution operators make a bid for official European Union position for Clean Energy Package
The larger distribution companies (known as distribution network operators (DNOs) in the UK and distribution system operators (DSOs) in the rest of Europe) have submitted a proposal to the EC for the establishment of an EU-DSO Entity. This would be an EU-wide organisation which would play a key role on the transformation of the electricity market, with DNOs/DSOs not only developing smart grids but also enabling new local markets for consumers and communities. Currently there are four different trade associations representing DNOs/DSOs at the Europe-wide level. The proposal comes from EDSO, which represents the bigger players. The move thus raises a key question about whether the now much-anticipated transformation of electricity to a decentralised model will see the continued dominance of large commercial players.
Switzerland turns back on nuclear, embraces renewables
Switzerland’s recent referendum has placed the country on a clear path away from nuclear power and towards renewables. Currently the country relies on nuclear for about one-third of its power. Following the vote on 21 May, there is no specific phase-out plan, but no new plants will be built. The first closure, of the reactor in Mühleberg, is expected in 2019.
OECD Climate Report Highlights Need for Environmental Economic Growth
A new report by the Organisation for Economic Cooperation and Development (OECD), produced during the Germany presidency of the G-20, highlights both the relatively small additional cost of meeting sustainability goals and the role that renewable energy is already playing in achieving these objectives. The report notes that the shift towards renewable energy has started and that two-thirds of global electricity capacity under construction is based on renewable energy technologies. The report also estimates that annually $6.3 trillion of investment in infrastructure is required through to 2030 to meet development needs globally. However, making these investments climate compatible would require only an additional $0.6 trillion a year, less than 10% more. The report also highlights the need for new systems and importantly practises to enable a sustainable energy system as it notes that ‘a full low-carbon transformation will require widespread innovation and deployment of new infrastructure, technologies and business models’.
Emerging Narratives on the Future of Utilities
As the energy system continues to change around the current incumbent business models, the risk of falling profits and death spirals sharpens the attention in utility board rooms. Central to this is the falling cost of PV and other renewables combined with the uptake of storage that can see people defect from the grid – South Australia being a leading example of this change. A recent analysis from the Brattle Group puts forward an alternative approach in which the utilities business models evolve so that they remain playing a leading role – based on the central premise that heat and transport have to be electrified and that they can capture this market. As well as using renewables, Brattle suggest that CCS and nuclear will have to grow to enable this.
Machine Learning within the Energy Sector
Two interesting blogs on Energy Analyst provide a useful introduction to machine learning. It’s an important area to follow given that the pace of change is quick and the implications and applications are large, across multiple sectors including energy. Machine learning, is as the name implies, about computers that learn for themselves, rather than needing explicit programming. It has become increasingly important as the amount of data to be processed grows, that hardware is able to manipulate that data, and at increasing speeds . This combined with algorithms allow leaps in our ability to track, manage and enable change within a system. Several examples of the role of machine learning within electricity are provided within a second blog by the same author. Its importance can be expected t to grow, particularly as big IT players like Intel, IBM and platform providers like Google and Amazon move into the energy sector.
Design Principles for the Power Markets
Michael Liebreich set out his personal views on future power markets last week, with some good insights on how systems are changing and how markets need to change – based on 6 principles. 1) There is a need for multiple power markets which can see with real transparency price discovery for power and dispatch, based on shifting towards “Firm Spread” where the true value of dispatchability at key locations in that particular market is clear. 2) Shifting to a demand-led system which focussed more on retailer’s knowledge of demand, not generators, transmission or distribution operators (or regulators or policy makers). 3) Moving to a point where fossil fuel generators are actively pushed out of the market, to avoid renewables stalling. 4) The physical transmission and distribution grids have to be paid for and made investable. 5) Increase interconnector capacity, but also ensure that there is a framework to verify its source. 6) Recognise that that all of this will require a fully digital system – it will be based on the creation, aggregation