The controversy over fracking may give the impression that the battle for Britain’s energy future is between gas and renewables. In fact, the two energy sources are entirely compatible.
Until we get cheap electricity storage, the growth of renewable power depends on gas plant to provide the necessary back-up for when the wind doesn’t blow and the sun doesn’t shine. Furthermore, most of the gas we use in this country fuels the production of heat, not electricity – thus we won’t see renewable power replace gas until we electrify all of our cooking, heating and hot water systems, not to mention various high temperature industrial processes.
So ignore the extremists on either side, gas and renewables are – for the foreseeable future – allies with a common enemy, which is coal.
Gas-fired and coal-fired power stations are direct competitors in the wholesale electricity market, but a key difference between them is their interaction with renewables. Gas plant is a lot more flexible than coal plant, i.e. better able to vary its output. Thus when wind or solar power floods on to the grid, gas can adapt accordingly, while coal is inconvenienced.
The Guardian provides a fascinating case study in a report by Giles Parkinson:
“Last week, for the first time in memory, the wholesale price of electricity in Queensland fell into negative territory – in the middle of the day.
“For several days the price, normally around $40-$50 a megawatt hour, hovered in and around zero. Prices were deflated throughout the week, largely because of the influence of one of the newest, biggest power stations in the state – rooftop solar.”
The idea of a negative price for anything might seem bizarre, but think about it like the price of scrap metal: when demand is high, a merchant might pay you for, say, an old car; if demand is low, you might have to pay him to take it off your hands.
It’s much the same principle in the electricity market:
“Negative pricing moves, as they are known, are not uncommon. But they are only supposed to happen at night, when most of the population is mostly asleep, demand is down, and operators of coal fired generators are reluctant to switch off. So they pay others to pick up their output.”
In the kind of places where air conditioning is a major driver of electricity demand, the peak period tends be in the hottest part of the day – which is when the power producers make most of their money. However, the rapid spread of solar power has badly disrupted the old business model:
“The impact has been so profound, and wholesale prices pushed down so low, that few coal generators in Australia made a profit last year. Hardly any are making a profit this year. State-owned generators like Stanwell are specifically blaming rooftop solar.”
Tony Abbott may be trying to abolish Australia’s carbon tax, but even that won’t save coal power. In fact, even if the cost of producing electricity from coal was somehow lowered to zero, there’s still the price of getting from the power stations to people’s houses:
“Just the network charges and the retailer charges alone add up to more than 19c/kWh, according to estimates by the Australian energy market commissioner. According to industry estimates, solar ranges from 12c/kWh to 18c/kWh, depending on solar resources of the area, those costs are forecast to come down even further, to around 10c/kWh and lower.”
Of course, in respect to solar power, sunny Australia has a head start on the cloudy old mother country. The broader context, though, is a trend towards cheaper renewable energy just about everywhere in the world.
Yes, renewables have been helped along by government support – but then so were the centralised energy grids on which coal-fired power depends.