Three Steps to Net Zero and Their Challenges

With the exception of disruptions caused by storms, the National Electricity Market (NEM) in Australia has seen a 28% decrease in glasshouse gas emissions since 2016. Additionally, consumer costs have been declining.

One can reasonably come to the conclusion that the great energy transition is well underway. The changeover is feasible, but a close analysis points to certain causes for caution, if not anxiety.

In order to make the energy transition, an electricity system that is more than a century old and a gas infrastructure that is twice as old must be transformed. A net-zero energy system will be achieved in less than 30 years thanks to the revolution, which is motivated by the urgent need to combat climate change. Replacing coal and gas generation with renewable energy sources, and electrifying the majority of our road transportation and gas sectors, is the apparent and sound solution.

Life might have been easier if the technology used to implement this change had features similar to those supporting the current system. The prevalent low-emission technologies are, in actuality, distributed rather than centralised, intermittent rather than demand-based, and somewhat cost-free. This is the problem.

A successful transition involves three stages, each of which presents unique difficulties. The first step was to create a solid foundation of low-emission technology capable of mass producing inexpensive low-emission electricity. The issue at hand has been resolved. The solution is solar photovoltaic energy and wind power in a nation with enough of both. Government regulations and technological advancements have progressed to the point that they now account for around 25% of our power. Good news thus far.

The second phase has begun. In order to close the majority of the supply fueled by coal and gas while maintaining a dependable and affordable supply, we must scale up and connect solar and wind power on a national level.

It is possible to build a dependable system at a reasonable cost that uses between 80% and 90% solar and wind energy, no coal, and a little bit of gas. But in order to do that, we must overcome three pressing issues.

Energy storage and fast-start (“dispatchable”) capacity that is available on demand are necessary components of a reliable solar and wind power system. The National Energy Guarantee strategy was designed by the Turnbull administration in 2017 to provide low emissions and dependability at a reasonable price. Although suppliers and consumers generally supported it, it was abandoned in 2018 as a result of Coalition internal politics.

Since then, state governments have continued to support development in the supply of renewable energy, costs have usually fallen, and closures of coal-fired power plants have been accelerated. Governments and the business community, however, have been unable to reach a consensus on market reforms to provide and pay for dispatchable capacity. While waiting, some governments have made the unilateral decision to act, partially out of exasperation. If it keeps happening, the outcome will be more expense and uncertainty.

Building a transmission grid that can connect widely dispersed solar and wind power sources, as well as energy storage, and transmit electricity as needed to control weather-driven variability is the second issue. State-level efforts to establish and connect renewable energy zones have made some headway, and interconnections are being established, such as EnergyConnect between NSW and South Australia. But the path hasn’t been easy.

Reforming the market to give generators the assurance that they may develop and connect to the grid with a favourable financial return is one barrier. Furthermore, there is no consensus on how significant interstate connections, which are crucial to a grid with a high renewables content, will be paid for.

The third pressing issue has been brought on by Australian families’ remarkable rate of rooftop solar adoption, which has led to the world’s highest percentage of homes with solar panels. Our laws and system management skills have not evolved at the same rate as large-scale wind and solar generation.

On rare days, rooftop solar production results in historically low or even negative grid demand. New management techniques are necessary, but we also need tariff structures that incentivize the storage of this electricity during periods of surplus supply so that it may be utilised at other times. We must act now to prevent this issue from getting worse by electrifying the gas network and plugging in thousands of electric automobiles.

The Energy National Cabinet Reform Committee (the national council of energy ministers) expects final recommendations this year on these three crucial topics, which have been on the Energy Security Board’s agenda for several years. Although there has been substantial industry dialogue and ideas have been identified, none have yet received support. We cannot trust time.

The final stage of Australia’s energy transition, a net-zero electricity grid, is the third phase. According to the most recent data, it will be most effective to achieve net-zero emissions in the NEM if a small and decreasing amount of emissions are offset.

Achieving completely zero emissions appears to be more expensive than the alternative. It would be too difficult to balance the system during the infrequent, prolonged periods of high demand, low wind, and cloudy sky if the share of renewable energy increased from 90% to 100%.

The most affordable “backstop” option appears to be gas generation with offsets; it will play a significant but limited role as the NEM faces a gas-supported transition rather than a gas-led revival. However, this position comes with its own set of difficulties, including difficult logistics and economics to provide a network of underutilised gas power plants, potential high offset prices in the future, and expensive carbon capture and storage unless the storage is close to the gas generators.

Alternative zero-emissions technologies face enormous technological, financial, and/or political obstacles. Examples include hydrogen-fired generation, connecting a renewable-electricity grid with a renewable-hydrogen grid, or one of the developing nuclear technologies like tiny modular reactors.

Additionally, a combination of these technologies will be required to replace gas as a source of high-temperature heat and a chemical feedstock.

The third and final phase may not begin for 20 years, or the necessity of combating climate change may require a far quicker transformation. Regardless, even with the federal government committing $18 billion to low-emission technologies over the following ten years, the optimal solution won’t appear out of thin air.

The Energy Security Board, in collaboration with the Low Emissions Technology Advisory Council, should be tasked with finding a solution to this issue and providing recommendations on how to allocate funding. To accommodate the technological advancements that would most effectively reduce the last gap to a true zero-emissions future for the NEM, emissions-reduction legislation and the energy market structure will still be required.

In conclusion, the federal energy minister must quickly lead both short-term market changes and long-term technology development while collaborating with their state and territory counterparts.

Failure will result in slower, more disorganised investments and policies, higher costs, and the possibility of shortages. Australia will become a global leader in the energy transition if efforts are successful. It’s a reward worth the fight.