How Energy Efficiency Will Reshape Power Markets

Renew Economy - Giles Parkinson

The fossil fuel industry has been obsessed by its battles with renewable energy – wind and solar in particular – as it struggles to prop up its disintegrating business model.
But in Europe, another more dangerous nemesis is emerging – energy efficiency, an unfashionable yet economically alluring investment that analysts at Citigroup say could reshape power markets for ever, and remove fossil fuels as the primary driver of market prices.
Energy efficiency has long been held by its enthusiasts as the most obvious lever to reduce emissions, and save costs. A megawatt hour of electricity not used is the cheapest form of abatement, they say, and have even coined a term – the “negawatt” – to market the idea.
But try as they might – and despite the almost immediate returns on investment from energy efficiency – the idea never really captured the attention of the public or politicians. And the powerful fossil fuel generators in Australia used their regulatory influence to ensure that any major initiatives were quietly jettisoned.
In Europe, however, the opposite has occurred, and Citigroup says the combination of EU-wide energy efficiency targets, its renewable energy policies and the emergence of ultra efficient appliances and zero carbon homes will have a big impact on power markets.
In effect, the combined impact will be to significantly reduce demand to the point that fossil fuel generators will largely lose their pricing power.
“Say goodbye to power prices fully driven by fuel prices,” the Citigroup analysts write in a new report (and no, we are not allowed to provide a link).
“Renewable output is set to continue growing as demand falls,” the report says. “This will squeeze the market share of conventional power companies, making thermal power, which is today the price setter, a marginal contributor to power price formation.
“Power prices will increasingly be driven by weather patterns (temperatures, rainfall, wind and sunshine), which are in practice not yet forecastable or hedgeable for more than a year. Thermal will be a contributor to price formation when supply/demand is tight. Overall power prices will remain under pressure.”
The Citigroup analysts also suggest the market will also have to “say goodbye to peak demand too,” as the combination of reduced residential demand, lower lighting demand, and an increase focus on demand side response and storage development will likely result in peak demand becoming gradually less pronounced.
This is a radical reshaping of energy markets, but one that Citigroup says is poorly understood.
The analysts say that government agencies, institutions, nationals market operators and corporates are still forming policies and business plans based on assumption that demand will grow (an echo of the bogus demand assumptions that drove the over-investment in Australia networks and fossil fuel generators).
They point out energy efficiency has already reduced demand by 109TWh (terawatt hours) or 3.8 per cent from 2010-15.
“In our view this is only the beginning,” the analysts say, suggesting that LED lighting, A+++ appliances (22% more efficient than currently installed one), housing efficiency, and other technologies could reap an additional 257TWh of energy savings by 2020, cutting total European power demand by another 9.2 per cent.

Just for context, that is more than the total annual demand in Australia. Offset against rising population and economic growth, this will still deliver a 1.1 per cent per annum reduction in power demand between 2015 and 2020.

It  says the gradual substitution of large appliances (fridges, washing machines, dishwashers, dryers) with appliances that today offer some 20-40 per cent higher energy efficiency than existing models should lead to some 87TWh of electricity savings over the next five years. That is equivalent to entire energy consumption of Belgium.
An increase in LED technology penetration levels to 55 per cent could lead to an extra 47TWh of savings. That is equivalent to the entire energy consumption of Portugal.
“Thermal power plants (coal and gas) will be squeezed between growing renewables and a shrinking market and will become marginal on a merchant basis (some of them may find a second life as ancillary service providers to the grid),” the analysts write.
They expect thermal power output to fall from 42 per cent of power production today to 34 per cent by 2020, with non-renewable power capacity to fall by a net 51GW by 2020 and by a net 123GW by 2025.
Thermal load factors will fall as well, from 36 per cent in 2015 to 30 per cent in 2020, meaning that there will be fewer plants and they will be used less.
The correlation between power prices and coal and gas commodity prices will diminish, and instead power prices will be influenced by the weather and availability of renewable resources (hydro, wind and solar).
The analysts also warn that despite the closure of coal and nuclear, gas-fired generation will likely fall 24 per cent over 2015-2020. “This suggests that Europe is not an unlimited sink for excess global LNG,” they write.
And they also caution against the need for capacity payments and other measures to “incentivize security of supply” (new forms of subsidies for fossil fuel plants). “Our analysis suggests (these) might be over-emphasised in light of likely consumption patterns,” they write.

Links

• AGL offering free solar system, or battery storage, to wind farm neighbours
• Blockchain network disruption coming, and Australia among pioneers
• Nearly 50 poor nations commit to 100% renewables by 2050
• Victoria town calls for partners for 100% renewable energy plan
• Why the future belongs to decentralised renewables

2050 Climate Targets: Nations Are Playing The Long Game In Fighting Global Warming

The Conversation - John Thwaites | Scott Ferraro

Electric cars are one of the keys to long-term decarbonisation. EPA/MOHAMED MESSARA

While much of the media focus at this month’s climate meeting in Marrakech (COP22) was on US President-elect Donald Trump, there were signs that several countries have begun the long-term planning needed to avoid dangerous climate change.
During the conference, four countries – Germany, Canada, Mexico and the United States – presented their 2050 climate plans. Under Article 4 of the Paris Climate Change Agreement, all countries are asked to prepare mid-century, long-term strategies to bring greenhouse gas emissions down to low levels.
A common theme from COP22 was the emphasis on long-term strategies to help guide short-term actions. When launching the 2050 Pathways Platform, Laurence Tubiana, the outgoing French high-level climate champion, stated that if you don’t have a plan for the long term, you can’t know what a good decision is today.

Climate change in 2050
The German Climate Action Plan 2050, approved by the German cabinet this month, foreshadows a reduction in greenhouse gases of up to 95% below 1990 levels by 2050. It covers energy, buildings, transport, industry, agriculture and land use, and sets specific milestones and targets for each sector.
As part of its plan, the German government will set up a commission to work with industry and trade unions on the energy transition to 2050. The commission will consider economic development, structural change and social compatibility to accompany climate action. Australia could also consider such an approach to achieve a just transition to a net zero carbon economy.
The United States Mid-Century Strategy sets out several different pathways by which the United States can cut emissions by at least 80% below 2005 levels by 2050 while maintaining a thriving economy. The pathways portray a transformation to a low-carbon energy system using solar, wind, nuclear, hydro and carbon capture.
Under the plan, nearly all fossil fuel plants without carbon capture are to be phased out by 2050. The plan also shows that the land sector in the United States could sequester 23-45% of economy-wide emissions in 2050 by expanding forests and increasing the carbon stored in croplands and grasslands.
Canada’s long-term plan aims to reduce emissions by 80% or more below 2005 levels by 2050. Mexico will reduce its emissions by 50% from 2000 levels. Both plans outline detailed pathways for achieving these emissions reductions.
To support countries, states, cities and businesses to prepare long-term low-emission plans, the 2050 pathways platform initiative was launched at Marrakech. Already 22 countries have started to formulate 2050 plans, including China and India, as have many states, cities and businesses.

New policies and technology
Developing a long-term plan helps identify the policy measures and technological advancements that are needed now. To this end, Marrakech also hosted the first Low-Emission Solutions Conference associated with a climate congress. The conference brought together technical experts, scientists, academics, business and politicians to brainstorm and exchange information about the technological and policy pathways needed to reach net zero carbon emissions.
The Sustainable Development Solutions Network director, Professor Jeff Sachs, told the conference that we need more than political will to make this transition.
We need to mobilise scientists, engineers and experts to identify what the new energy and economic system will look like and to devise pathways to a net zero carbon economy. This will help businesses to identify risks and opportunities and help governments not to waste money on technologies that are not compatible with the long-term goal.

The four pillars of decarbonisation
The conference highlighted the four basic elements of deep decarbonisation. These also underpin the Australian Deep Decarbonisation Pathway Plan developed by ClimateWorks and ANU.
First, there needs to be ambitious energy efficiency across the economy. This includes “smart grid” technologies, green buildings and greater fuel economy in vehicles.
Second, we need zero-carbon electricity supplied by renewables or a mix of renewables, nuclear and carbon capture and storage. The contributions of each of these to the energy mix will depend on country circumstances and on whether carbon capture can be made commercial.
Third, we need a shift to electrification using zero-carbon electricity. This means using electricity to power vehicles and switching from gas to electricity in homes.
Finally, non-energy emissions are reduced by storing more carbon in forests and land as well as reducing methane, nitrous oxide and fluorinated gases from agriculture, waste and industry.
The Australian government has committed to review its climate policies next year and to consider a long-term emissions reduction target. This is an opportunity for Australia to use these four elements of deep decarbonisation and join other countries in preparing a 2050 deep decarbonisation plan.
Already, South Australia, Victoria, NSW and the ACT have pledged a target of zero net emissions by 2050, with South Australia and the ACT signing the UN’s Under 2MOU (a memorandum between states and regions to keep global warming below 2℃). A number of states, including Queensland, have also set ambitious renewable energy targets.
2050 may seem a long way off in the short time frame that dominates so much of modern politics. By 2050 Donald Trump will be 104 and presumably will exert limited influence over global politics.
However, it is worth noting that the children entering our schools next February will still be in their thirties in 2050. They will have a real interest in ensuring that we start planning for their future and taking action now.

Links

• Australia can get to zero carbon emissions, and grow the economy
• Direct Action’s here, but how will Australia cut carbon after 2020?
• Keeping our eyes on the ball is the only way to hit our climate target
• Australia can stop greenhouse gas emissions by 2050: here’s how

Enough PR Spin: We Need A Real Plan For The Reef That Includes Ditching Coal

Fairfax - Prof. Will Steffen*

On Friday, federal Environment and Energy Minister Josh Frydenberg and Queensland Environment Minister Stephen Miles will come together for a meeting of the Reef Ministerial Council.
The most important agenda item will be reports to the UNESCO world heritage committee, within the next two weeks, on the state of the reef and how it is acting to protect it. This will include the Northern Reef Response Plan – the official management response to the disastrous coral bleaching event earlier this year.


Video shows mass coral bleaching of Great Barrier Reef
New footage shows the bleak aftermath of the extreme underwater heatwave last summer on the northern region of the Great Barrier Reef, from Researchers at the ARC Centre of Excellence for Coral Reef Studies.

The ducking and weaving of responsibility from all levels of government when it comes to the Great Barrier Reef has been nothing short of acrobatic, so let's be clear that any plan in response to coral bleaching that isn't centred around the rapid phase-out of coal is not a plan – it's PR spin.
The government approach so far has been to highlight the global effort to tackle climate change, without even a smidgen of irony about the fact that Australia has lagged far behind the efforts of other wealthy nations, while at the same time diverting attention from the main game by focusing on its funding of water quality and other Reef initiatives.

Coral bleaching at Lizard Island in the Great Barrier Reef. Photo: Climate Council

The Australian government can no longer get away with attempting to distract the Australian public through the funding of these initiatives while failing to do anything to tackle what's fundamentally driving the bleaching: the burning of coal, oil and gas. It's like having an argument about fixing a broken window while the house is on fire. Fixing the broken window is only worthwhile if you put the fire out.
Climate change has driven extreme ocean temperatures, making the bleaching on the Reef this year at least 175 times more likely.
At present rates of climate change, this level of bleaching could occur every two years by the 2030s.
For the Great Barrier Reef to have a reasonable chance of survival, global temperature rises must be capped at 1.5 degrees, and to have any chance at all, the temperature rise must be limited to no more than 2 degrees.

Before (March 2016, left) and after (May 2016) images of coral bleaching and death at Lizard Island on Australia's Great Barrier Reef.  Photo: XL Catlin Seaview Survey via AP

For just a 50:50 chance of meeting the 2 degree target, the world can burn just 10 per cent of existing coal reserves – and that means existing coal mines or those that are now financially viable and are on the financial markets to be exploited.
To increase the chances of meeting the 2 degree target or to have any chance of meeting the 1.5 degree target, all existing coal reserves must be phased out as soon possible and no new coal mines can be opened. This phase-out must occur very rapidly in order to stay below 1.5 degrees – within the next decade, most likely.
This has obvious implications for Queensland, and Australia more generally. There can be no Carmichael mine, or any other new mine, and no new infrastructure of any kind to exploit coal. And there must be a plan for the rapid phase-out of coal. It's far too late to leave it to the market. Without a rapid phase-out of coal, the Reef doesn't have a future.
As a climate scientist, it makes me frustrated and angry to think that the only thing standing in the way of the survival of this precious natural wonder is political will. It is utterly appalling that the country that has custodianship of the Great Barrier Reef cannot even find the political will to do its fair share to save it.
The vast majority of Australians support reduced reliance on coal and the technological means are there to make a rapid transition away from coal.
Hopefully, Friday marks a turning point in the government's approach to climate change and the havoc it is wreaking on the Reef.
Otherwise, history will judge our leaders harshly indeed for the decisions they fail to make now.

*Professor Will Steffen is a climate scientist and councillor with the Climate Council.

Links

• The Great Barrier Reef: a catastrophe laid bare
• Australia failing to protect Great Barrier Reef from shipping disasters, say lawyers
• Great Barrier Reef authority a 'shell of its former self', says Queensland minister
• UN tries to hide involvement in deleting Australia from its climate report