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http://www.manilastandardtoday.com/insideBusiness.htm?f=2011/september/15/business5.isx&d=2011/september/15

"Santos said based on the merit order of dispatch, renewable energy would be declared must-run units, meaning they will be the first to be dispatched at zero cost because the cost of generating renewable energy is already be included in the feed-in tariff."

"Santos said WESM prices on February 2010 rose to P9.80 per kWh but if the renewable energy projects were available at that time, prices would have gone down to P6.80 per kWh."

http://news.businessweek.com/article.asp?documentKey=1376-LRXKVR6TTDSA01-37MGL9VUN6V4887L1PK7U4HU1P

"Northern Europe's renewable-energy goals call for about 200 gigawatts of solar and wind capacity by 2020, or almost a third of the current installed base, compared with about 70 gigawatts today, according to the Finnish energy consultant Poyry. Even by 2014, gross profit from burning coal in Germany may skid by as much as 41 percent, according to Barclays Plc."

...

"The gross margin at a coal power plant after deducting fuel and emission permit costs, the so-called clean dark spread, may “collapse” to as low at 3.50 euros a megawatt-hour, Barclays analysts including Peter Bisztyga said in a Sept. 1 report. The spread was at 6.15 euros today, Bloomberg data show. 

...

"Subsidized power rates called feed-in tariffs, a proposed carbon floor price in Britain and other measures favoring renewable projects will lead to a shift in the “merit order” of plants across Europe, he said. Power from renewable projects will be the first to be used, followed by gas-fired power plants, which release less carbon-dioxide than coal stations."

"In 2007, the time frame for increasing the share of Victoria electricity consumption from RE sources to 10% was extended from 2010 to 2016 …The extension occurred primarily to alleviate the concerns of brown coal generators that the 10% target would deliver too much RE to quickly which would reduce wholesale electricity prices and adversely affect existing generators” 

Source:  Facilitating Renewable Energy Development – Victorian Auditor-General’s Report (April 2011), p 11

In response to Jame Bramwell:

I was aware of Tonopah. 

I just did a quick search for info on it, and according to a May press release, construction was scheduled for summer 2011 - I note the absence of a press release saying that it had started, despite it now being Autumn in the USA.  They still seem optimistic of a 2013 commissioning.
http://www.tonopahsolar.com/news.html

Note that it is also not in the Mojave desert.

Located here - http://maps.google.com/?q=Tonopah%2c+NV+Mojave

http://www.tonopahsolar.com/project_overview.html

Location:Northwest of Tonopah, NVTechnology:Concentrating Solar Thermal with StorageSize:110 MW

Julian -

A study by the Fraunhofer Institute in Karlsruhe, Germany found that windpower saves German consumers 5bn euros a year. It is estimated to have lowered prices in European countries with high wind generation by between 3 and 23 euros per megawatt hour.

Also Giles wrote about the Merit Order Effect in Action here

-

The International Energy Agency wrote on the price impact earlier this year – and we reported on it – when it cited the case of Ireland, where wind energy is causing wholesale prices to fall by around €74 million; the same as the cost of feed-in tariffs to support the financing of wind power and the associated balancing costs.

Now Windlab Systems, the CSIRO spin-off that has developed the world’s leading wind mapping technology...– has produced a similar assessment of how its proposed 700MW Kennedy wind farm in north Queensland would impact pool prices in the state. But it says the cost benefits could be even greater.

The savings in costs to consumers would be $330 million, nearly three times the cost of the subsidy.

http://www.climatespectator.com.au/commentary/why-wind-cutting-energy-costs

None of the solar thermal plants in, under construction, or planned for the Mojave desert have, or will have, thermal storage :-(

As to Gemasolar having higher overall output?  Yes they can produce more off-peak output due to having (relatively) larger heat tanks, but most of the other plants are also in very dry cloudless regions too?  Despite the effective "longer day", I'd be surprised that they can get 2.5 times as much average output peak operating hours per day?

My understanding is that they get much of the increased storage time by running the salt closer to the max safe temp  (around 580C?).

David, I should point out that despite Gemasolar's lower rated capacity, it will produce more energy per year than the existing 50MW troughs in Spain due to its higher capacity factor.  If you are concerned that solar thermal isn't scaling up, read up on the Bright Source Ivanpah project under construction in the Mojave desert: 392 MW, comprised of three separate power towers. http://ivanpahsolar.com

It is unlikely that Gemasolar meets your definition of 24 hour operation.

Peak molten salt tank capacity cannot be average capacity.

Whilst it is possible to heat the molten salt to the peak temperature and completely fill the "hot" tank, you cannot overheat, nor overfill the tank.  Therefore the average must always be less than the peak.

One must assume that the tanks are dimensioned for peak conditions, ie a perfect day in late June, with the maximum number of daylight hours.

You would probably expect about 60% on average, with less in winter or cloudy days, and more in summer.

To get anything like common 24-hour operation, the tanks would need to be larger.  Note that I'm assuming they have dual tank operation, ie the "cool" molten salt is heated and passed to the "hot" tank during the day, and the reverse at night.

To get 24-hour operation irrespective of most weather events would require tanks with storage times of several days.

I guess that in sustained bad weather, the plant may need to reduce or stop daytime electrical output so as to reserve heat to stop the molten salt "freezing" (at 220C).

In the extreme, it might be possible that the plant may even need to consume electricity to keep its "cold" tank heated?

Gemasolar remains the only plant to have sustained electricity production (albeit at an unspecified, possibly very low level) over a 24 hour period.  I consider this the bare minimum threshold to be considered in this context.  And I understand it to have only 15 hours nominal storage, not 20.

We must differentiate a plain ordinary feed in tarrif from those that is set at a premium price.  Eg a retail parity FIT (eg 22c) vs. the recent NSW premium FIT at 60c - few would suggest the latter was sustainable.  The former is just plain business as usual.  If you're providing a good to someone who willingly takes it, sells it (at a green-power premium price mind you) then you should receive a financial consideration.  That existing grid connected PV/Wind/Hydro systems might not be paid a cent in NSW after 31 Dec 16 for power exported to the grid to me is in breach of ACCC, trade practices and maybe even be unconstitutional! 

It is only over premiumed FITs that need justification and result in subsidies.

Some would argue that a suitable FIT would be the emitter's wholesale price - but this is too low as (i) it costs emmitter nothing (ii) the clean energy generator is carrying all the risk and generation costs, and (iii) in most often the grid operator saves on transmission infrastructure costs etc.

My view of a suitable FIT is along these lines, where both parties are therefore rewarded in proportion to their value-add:  "A clean energy FIT equals the grid operator's retail price applicable for the time of day that it was produced.  And as it is clean, the grid operator can then sell it at a green-power rate". 

No cross-subsidies, no rip-offs, no problem.... what do you think?

This is a very biased article, and the so-called success of the European tarriff system is a time bomb because the cost of guaranteeing purchase is put off to the distant future, where it will become like the Common Agricultural Policy in Europe - a wasteful subsidy regime sucking the European economy dry of any dynamism to get it out of its current black hole.

The utilities are right to complain because it is they who are getting the shaft. Not because of what you call "competition", but a privileged class of generator that they are obliged to buy electricity from for up to 20 years at exorbitant prices compared to the non-PV generators, who have never needed nor got anything near such privileges.

The distribution of such customers/generators (solar panels in country areas) using the grid is such that they were already marginal customers and have little prospect of getting back the extra cost of getting the grid there, and have even less chance as they are generating electricity that is deducting the already negative return on this investment, which is also an obligation by law (to connect country areas to the grid where possible)

Why not subsidise the technologies you want used in your country? Why not create incentives in the direction you want your economy to go?

Maybe the Government should ask for all the money spent on fossil fuel subsidies and building coal fired power stations etc back? That would pay for a fair bit of renewable energy generation.

If you've decided that you have to transform your economy to low or no carbon, then the logical thing to do is to incentivise the technologies that you need in the future, to guarantee that they get cheap enough to replace fossil fuels, and to disincentivise fossil fuel use.

I hope that an energy storage industry also grows out of this. Pumped storage, flywheels, used EV batteries, heat transfer etc. Early on, these could buy electricity at night from baseload coal power stations for next to nothing (or get paid for it?) and then sell it during the day at higher prices. As the fossil fuel power stations become less and less economical and are phased out and replaced with renewables, these storage stations could then store excess daytime solar, or wind energy and sell it when the wind isn't blowing or the sun isn't shining.

That seems very profitable and would be an enabler for renewables too.

By your reference to 20MW, I'm guessing that you may be referring to Gemasolar (20MW, 20 hours nominal storage).

Andasol 1 (Spain) has been operating for several years.  It is a 50MW plant, with 7.5 hours storage.

There are quite a few more in Spain that have been operating for at least one year.  Most are the same
size, 50MW and with 7.5 hours storage.

Admittedly these are still of modest size, and they do not prove to me that we have built a serious solar thermal plant.  They do suggest though, that the technology is close.

The only way to make wind and/or solar useful in Europe is to increase the capacity of the grid in Europe, so that such power can be aggregated across an area greater than the size of a high pressure system (several thousand kilometres).  Politically that may be difficult.

Australia, Russia, Brazil, and the USA are fortunate to have extensive solar and wind resources, as well as a land mass that is large enough to do this.

There is no doubt that FITs have been highly effective at encouraging renewable energy deployment at utility scale in many countries, most notably Germany.  But in Australia FITs have earned themselves a bad name because they have not been applied to utility scale renewables; rather, they have been only applied to household-scale toys like solar PV panels.  And that's the nub of the AGL argument against Australia's FITs - they provide a private benefit to those who purchase the solar panels, but their benefits to the rest of us have yet to be demonstrated.  If Australia wanted to see some real turbo-charging of renewables investment then the implementation of FITs at utility scale rather than household scale would drive this.  We have already seen the benefits of large-scale renewables in South Australia (lower wholesale prices; lower greenhouse emissions) but the household solar panel rollout has not delivered anywhere near the same benefits despite enjoying multiple state and federal government subsidies and other support mechanisms for several years now.  

There is a lot to think about regarding your article Matthew.

I was never happy that the electricity grid was sold off.

Whilst Transgrid and others, operate some links and maybe they are at arms length to companies such as AGL (are they?), one wonders how independent they could be?

I would prefer to see the ACCC force retailers and generators (eg AGL) to divest themselves of any grid connections of 66kV or higher.

Even then, would we really want true competition between grid owners?  Would we want two companies fighting over a Sydney - Melbourne link, with all the unnecessary duplication that would entail?

If there is one part of the old state-government owned electricity infrastructure that I wish we had never privatised, it is the distribution network.  Instead I wish that it had been transferred to the Federal Government.

With a grid that is separated from generators and retailers, entry of new renewable generators would not be restricted.

But any grid, needs grid control.  There is a lot more to this, than just balancing overall supply with overall demand.  There is local load management, voltage control, and frequency control.  It concerns me that this has effectively been left to a few dominant players who can always claim that the network needs them to be dominant.

I hope you agree with me that we need a real national grid if we are to make solar and wind effective, irespective of where or who generates such power.

The misconception in the first paragraph tainted the whole of this article.

Matthew: a FiT does not open the market up for "true competition".  It is a subsidy, designed and enforced with one purpose only.

That is, to ensure that an uncompetitive product is forced onto the market.  It works by distorting the market place, not by making the market work better in any way at all.

It is, from start to finish, an added impost forced onto unwilling or unwitting customers by the rule-maker (governments) in a manner which is at best ill-advised and, at worst, fraudulent.

Fraudulent, because the benefits do not justify the cost and the method has been devised in such a way as to avoid placing a price on carbon.  It has nothing to do with carbon emission reduction.  It has everything to do with feeding a particular industry at the expense of its competitors and its customers and making the electricity retailers do the decision-makers' dirty work.

The Henry tax review recommended that REC's, FiT's and other anti-market subsidies and distortions should be removed and replaced by a single carbon price.  Ross Garnault agreed.  They were right.

This article, Australia's current Government and its clueless Opposition are all equally wrong on the subject of carbon reduction.

Again the renewables cart is put before the climate horse.  I'd love to be able to quote Wright thusly "lobby for feed-in tariffs for all commercial technologies and all sizes", but I suspect he doesn't mean 'all' at, er, all.

FiT poster child Germany's scheme is so successful that they're planning 20 GW of new fossil fuel generators, and importing nuclear electricity hand over fist.  Brilliant.  And PVs are going to send coal generators broke by creaming off premium prices?  So where's our electricity coming from for the 80% of the time when it's either cloudy or night?  Solar thermal?  That technology that's only just completed its first 20 MW plant, and hasn't yet been through its first winter?

Don't. Make. Me. Laugh.

Let's judge feed-in tariffs on how well they've displaced CO2 emissions, not how many panels they've subsidised.

On what basis can you say that the $140m feed in costs will reduce the wholesale power price and thereby reduce the costs to zero? Sounds more like wishfull thinking; where's the analysis to back this up? Giving it a fancy label "Merit Order Effect" doesn't make it any more legitimate an argument.

Your Q: Why shouldn’t Australia use this process?

A: it's very costly (on a $/tCO2e basis) greenhouse gas abatement.