New Generation Electricity Generation

Charlie Nelson
director foreseechange
January 2002

 

Five energy retailers in Victoria, Australia, sought approval for price rises averaging 17% (The Age November 5 2001).  The (privatised) retailers claimed that higher prices were needed because generation capacity (also privatised) had not expanded to cover increased demand for power.  The government decided to cap price rises at 4.7%, eroding the profitability of retailers.  To add to the woes of electricity consumers, The Age reported that generator breakdowns have occurred and this could cause power blackouts from mid-January if there are high temperatures (The Age January 2 2002).

One proposed answer to the shortfall in peak supply is Basslink, which is designed to link Tasmania to the national electricity market.  At a cost of $500 million, this would send hydro generated electricity to Victoria via an underwater cable (the capacity would be 480 megawatts on a continuous basis and 600 megawatts peak and the link would be in place in late 2003).

This plan has been objected to by various interest groups, on several grounds: 

  1. Residents in Gippsland Victoria (where the cable comes ashore) object to electricity pylons that would carry the current above ground for 63km to the Loy Yang switchyard.  Underground cable is too expensive.
  2. Environmentalists in Tasmania have argued that the water surges required to supply peak demand would destroy the riverbank downstream of the dam.
  3. As the cable is monopolar, which means that current returns to Tasmania through open water, the fishing industry is concerned about damage to fish stocks.  It is claimed by Basslink that a bipolar cable would cost an extra $100 million and this would make the project uneconomic.
  4. Operators of the nearby gasfields are concerned that a monopolar cable would cause massive corrosion to underwater steel structures worth more than $13 billion.
  5. Gippsland water are concerned about corrosion of their $60 million saline waste outfall pipeline, which takes salt water produced by Latrobe Valley power stations to the ocean.

But Basslink may prove to be a white elephant anyway.

Infrastructure investments such as this have to operate for many years before becoming economical.  Over the next few years, however, we may witness a revolution in the generation of electricity and this could render Basslink uneconomic.

The July 2001 issue of Wired magazine featured the cover headline “Positive Energy.  Dear Mr. President: There is a future for smart power.”  This story refers more to the energy crisis in California USA than Australia but is just as relevant.  The articles in Wired assert that in the future, power will no longer flow in one direction only.  There will be embedded generation capability based on solar cells, wind farms, and fuel cells.  Such a network will generate less greenhouse gasses, have less outage time and provide better quality electricity (more stable voltage).  The US Electric Power Research Institute (EPRI) believes that “the smarter energy network of the future will incorporate a diversified pool of resources located closer to the consumer, pumping out low or zero emissions power in backyards, driveways, downscaled local power stations, and even in automobiles, while giving electricity users the option to become energy vendors.”

Imagine that excess energy generated this way was stored in batteries and connected into the grid at peak times under remote control of electricity distributors.  This would stop prices rising steeply at peak hours as currently happens.

It sounds great, but when?  After all, both Australia and America need extra power now.

To date, the cost of alternative energy generation has been much higher than fossil fuel generation – but that is changing quickly as we progress along the learning curve and with economies of scale.  According to Red Herring magazine (December 18 2001) wind turbines now generate electricity at about 5 to 7 cents per kilowatt-hour (kWh) compared with 25 to 30 cents per kWh in the 1970’s.  This is getting competitive with fossil fuel costs of 4 to 6 cents per kWh.  But that is the average - spot (or peak) prices for electricity rose as high as 51 cents per kWh last summer in California.  Photovoltaic (solar cells) energy is very competitive during peak consumption times when traditional electricity supplies are limited and prices soar.

There is no reason why solar and wind could not generate at least 25% of energy within five years if the appropriate decisions were made.  By that time, fuel cell technology may have developed sufficiently to add considerably more greenhouse-friendly decentralized electricity generation capacity.

Australia, with its abundant solar energy has the potential to boost export earnings by becoming a world leader in solar technology.

Farmers could diversify their income sources by selling wind energy to electricity distributors.  The Futurist magazine of Nov-Dec 2000, claimed that farmers could earn $2,000 a year from one turbine on a quarter acre of land compared with $100 worth of corn on the same plot.

A further benefit of decentralized generation is that it reduces the market power of generating companies and also lessens the likelihood that industrial disputes could disrupt power supplies.

Futhermore, the Victorian Government is showing us how to survive on the generating capacity we do have.  Victorian Government departments will have to cut their electricity consumption by 15 per cent and boost their use of renewable energy in a program aimed at fighting global warming and creating regional jobs (The Age, November 14 2001).  The initiatives are expected to save $11 million and 100,000 tonnes of gas emissions a year.  This initiative was announced as part of the Sustainable Energy Authority’s campaign to cut electricity consumption this summer.  The campaign will promote such practices as insulating homes, buying energy smart appliances, turning off lights in empty rooms, and taking advantage of government rebates to switch to solar hot water.

Rather than spend $500 million on Basslink, better to spend on a combination of: 

This would ensure that demand does not exceed supply in an environmentally sound way and avoids all the objections to Basslink.  Of course, there is room for private enterprise in this venture.  Running electricity generators and managing demand is not core business for households, farms, or firms.  There is a need for finance and for construction and management of the new generation electricity generation.  There is great potential for the visionary electricity company.

This scenario, should it come to pass, represents an extreme case of privatisation of essential services.

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