![\"Chief](\"https:\/\/www.solarquotes.com.au\/blog\/wp-content\/uploads\/2020\/02\/finkel-hydrogen.jpg\")
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On Wednesday last week Australia’s Chief Scientist, Alan Finkel<\/a>, gave a talk on Australia’s energy future at the National Press Club.\u00a0 While there’s no doubt Australia’s Chief Scientist is a smart cookie, I think a couple of predictions he made are fairly obviously wrong. They are:<\/p>\n I assume this is because he doesn’t have a good handle on the economics of either.\u00a0 To be fair, he straight out said…<\/p>\n “I’m not an economist.”<\/p><\/blockquote>\n But there’s no need to be an economist to understand if other options cost less and are more energy efficient than expanding natural gas generation or making hydrogen, then those two things aren’t likely to happen.\u00a0 If Finkel is sitting on secret information that will make his pet projects competitive, he needs to explain it to the rest of us because I sure as hell can’t see how they will make or save Australians money.\u00a0 The only way I can see them happening at all is with large government subsidies.<\/p>\n As Australia’s Chief Scientist, Finkel is often exposed to politicians and this is only likely to make his understanding of economics worse.1<\/a><\/sup>\u00a0 Not just because of the usual tropes about politicians not understanding basic economics or being bad with other people’s money, but because the Government is in bed with fossil fuel interests.\u00a0 It’s a disturbing relationship where I can’t tell who is the gimp and who is the master.\u00a0 I suspect they have no clear idea themselves.<\/p>\n When it comes to coal interests, the large stable companies that have done a lot of good work digging nasty minerals out of the ground and sending them overseas are no longer what our Government represents.\u00a0 Rio Tinto dumped coal in 2018<\/a> and BHP has been reducing its exposure for years.\u00a0 Only wild-eyed gamblers like Glencore, who think coal has a future, are left.\u00a0 But even they are getting nervous and are perhaps beginning to realise they may not have a future if they’re right.\u00a0 Despite this, Coalition politicians continue to act as though high paid jobs in the coal industry will always be available to them if they can only succeed in ignoring reality hard enough.<\/p>\n Finkel called natural gas a “transition fuel”.\u00a0 That is, a fuel that will transition us off coal.\u00a0 But that’s not likely to happen.\u00a0 Not even at the current low<\/a> international prices for natural gas.\u00a0 On the other hand, no one actually knows what the words “transition fuel” means because it’s not in the dictionary.\u00a0 It’s just a phrase people use when they don’t know or want to avoid giving useful details.\u00a0 So if by “transition fuel” Finkel means gas might go from providing 10% of our grid electricity as it does today to 13%, then I agree an increase of that size could occur.\u00a0 But that is not the impression he gave.<\/p>\n Many people mistakenly think more solar energy and wind generation means more gas use because they overlook the following:<\/p>\n At the moment solar power is reducing the need to burn gas in the middle of day and this will continue as its capacity increases.\u00a0 Solar also results in less hydroelectric generation being required in the day, which saves water that can later be used to provide energy in place of natural gas.\u00a0 Wind generation has the same effect as solar energy, but isn’t limited to the daytime.\u00a0 Eventually, it will become common for a combination of solar and wind to meet all demand in the middle of the day.\u00a0 This already often happens in South Australia.\u00a0 Here’s a graph showing the effect of rooftop solar panels plus — to a lesser extent — efficiency improvements, on demand for grid electricity in South Australia in the summer:<\/p>\n While there is considerable variation between years depending on how hot the summer is, the trend for lower grid electricity use during the day thanks to rooftop solar power is clear and, if we look at the results for winter, very obvious:<\/p>\n At the moment, the average demand for grid electricity in the middle of the day is nearly as low as it is at four in the morning.\u00a0 By 2023 rooftop solar alone is expected to meet all demand on some days.\u00a0 It is already common for solar energy plus wind generation to produce enough power to meet all demand in the state.2<\/a><\/sup>\u00a0 If solar and wind power are sufficient to meet demand there is no need to burn gas at these times or use hydroelectricity.<\/p>\n If we replaced a currently operating coal power station with solar and wind while using gas generation to firm the power supplied so it would always be available when wanted, then there would be times when wind and solar would not be able to meet demand — such as hot summer evenings or cold and cloudy winter mornings.\u00a0 A lot of gas would be burned at these times but the increased solar and wind capacity would also reduce gas and hydroelectricity use during the day and at other times, such as early in the morning, and this will help to offset high gas consumption periods.<\/p>\n Gas generation is expensive compared to solar and wind, even at its current low price.\u00a0 The higher electricity prices it causes will help limit its use, as electricity consumption is shifted to periods with high renewable output and low prices.\u00a0 At the moment only commercial users pay electricity rates based on wholesale electricity prices, but this option is becoming available to households.<\/p>\n Solar also reduces domestic gas consumption. \u00a0Increasingly when rooftop solar power is installed households disconnect their gas, as it becomes cheaper for them to use electricity for hot water and home heating.<\/p>\n So while increased solar and wind capacity may result in more gas generating capacity being built<\/a>, it won’t necessarily lead to a large increase in gas consumption.<\/strong><\/p>\n If gas was the only option for firming solar and wind we would end up using more of it — just not as much as Finkel and others seem to think.\u00a0 But gas has competition from other sources of dispatchable3<\/a><\/sup> power that will further limit its use.\u00a0 Two important ones currently competing with gas are pumped hydro4<\/a><\/sup> and battery storage.<\/p>\n Neither pumped hydro or batteries create energy.\u00a0 They only store it for later use and lose some in the process.5<\/a><\/sup>\u00a0 This is an important difference from gas generation, but gas generation and energy storage can play well together.\u00a0 We know days in advance if the output of solar and wind will be low and can use hydroelectricity and our more efficient gas power stations to charge batteries and pumped hydro well in advance.\u00a0 This can continue to be done when demand for grid electricity is low, such as late at night and in the middle of the day.6<\/a><\/sup><\/p>\n The economics of pumped hydro and gas generation aren’t easily comparable as the pumped hydro costs a lot to build but is cheap to run, while gas capacity is cheaper to build but costs more to run.\u00a0 Since Eastern Australia built natural gas export facilities at Gladstone, natural gas prices have there have risen to international levels.\u00a0 This increase has helped make new pumped hydro and battery storage competitive with new gas generation.<\/p>\n Increasing solar and wind capacity create periods of low or even negative electricity prices, which help the economics of pumped hydro and batteries by allowing them to “charge up” at low cost or even at a profit.\u00a0 Gas generation can’t benefit from negative prices.<\/p>\n Under the right circumstances batteries are competitive with gas generation for firming solar and wind generation.\u00a0 For a long time I’ve been saying home batteries don’t pay for themselves but this is about to change.\u00a0 At the moment large electric car manufacturers are buying battery cells for around $150 per kilowatt-hour which means fully installed and integrated home energy storage at $500 per kilowatt-hour is already baked into the technology cake.\u00a0 I won’t make a guess as to when that will happen, as manufacturers have had major problems<\/a> producing reliable home batteries, but no new breakthroughs are required.\u00a0 As further advances are bound to occur, eventually batteries will be even cheaper.<\/p>\n Queensland is building a big battery near Wandoan<\/a> that will be complete in 2021 for $800 per kilowatt-hour.\u00a0 This is more than South Australia paid for their big battery<\/a> two years ago7<\/a><\/sup> but the trend is for batteries to fall in price.\u00a0 The ability of batteries to provide ancillary services that provide stability to the grid and to reduce the need for expensive new transmission capacity make them a better deal than they seem.<\/p>\n A range of Virtual Power Plants<\/a> (VPPs) are now available to rip off the owners of homes and businesses with batteries.\u00a0 The good news is some energy retailers will restrain their rapacious behaviour enough to make batteries pay for many households in the near future.\u00a0 There may even be some that make batteries worthwhile now.\u00a0 This means home and business battery storage could soon take off by providing real financial benefits after years of feeding off the bank balances of enthusiastic early adopters.<\/p>\n If 10% of households install a battery that can store 10 kilowatt-hours of energy and supply 5 kilowatts of power, they could supply more power for two hours than all of Victoria’s coal power stations at maximum output.<\/p>\n Australians buy over one million new vehicles per year, or at least they do according to this fuzzy graph:<\/p>\n If 1% of the cars bought in a year were electric and connected to 3-phase home car chargers they could draw around 250MW of power when solar and wind output exceeds demand, storing clean energy that otherwise would go to waste.\u00a0 If 1% of vehicles in Australia were electric and connected to similar chargers they could draw 2.5 gigawatts of power.<\/p>\n At the moment electric cars only take power from the grid. But the technology already exists for them to put that power back into the grid. If the car manufacturers and local networks would allow so called ‘vehicle to grid’ (V2G) operation, then 1% of cars could provide close to the 2.88 gigawatt maximum output of Australia’s largest coal power station<\/a>.<\/p>\n As we are going to end up with far more than 1% of cars running off electricity and can expect them to spend most of their time when not in use connected to a charger, electric vehicles have plenty of potential to assist with the integration of variable solar and wind energy.8<\/a><\/sup><\/p>\n Perhaps home and business batteries and electric cars won’t take off the way I expect, but they still have a huge potential to disrupt growth in natural gas generation that Finkel seems to be ignoring.<\/p>\n The Gencost report is a collaboration between the CSIRO and AEMO that looks at future electricity supply scenarios. \u00a0The latest one is the GenCost 2019-20: Preliminary Results For Stakeholder Review Draft Report. Of the three scenarios considered, one shows the amount of electricity generated from natural gas rising from its current 10% to 13% by 2030, with all other scenarios showing gas providing a smaller portion of generation, whether the time period is 2030 or 2050.\u00a0 One scenario has the portion of electricity supplied by natural gas falling to 6.5% by 2050:<\/p>\n High VRE stands for High Variable Renewable Energy. That is, lots of solar and wind capacity.<\/p><\/div>\n I don’t think any of the scenarios above represent what is likely to happen, but I’m not going into that when they are supporting my point.<\/p>\n Once<\/a> or twice<\/a> or maybe three times<\/a> in the past I’ve mentioned hydrogen is a more expensive way to store energy.\u00a0 When it comes to road transport, electric vehicles are currently a lot cheaper and I don’t see hydrogen having a realistic chance of catching up.\u00a0 Another major problem is hydrogen vehicles have less than half the energy efficiency of EVs.\u00a0 This means hydrogen won’t be used for road transport in any significant way and the vast amounts Finkel suggests the world will need simply won’t be required.<\/p>\n If electric vehicles beat hydrogen ones on price and efficiency, then why does Finkel think we can export vast amounts of hydrogen to power cars in other countries?\u00a0 So far, the only evidence I’ve seen him present boils down to Japan saying…<\/p>\n “We are going to use so much hydrogen.\u00a0 Totes for realz, guys.9<\/a><\/sup>“<\/p><\/blockquote>\n This is not going to happen.\u00a0 While the Japanese Government’s statements aren’t true, I can’t quite say they are lying because betraying the trust of the electorate is often considered the polite thing to do over there.\u00a0 But I will say Australians who believe Japan is going to act against its own interests are fools.<\/p>\n Japanese hype about a hydrogen future and their current funding of hydrogen research are motivated by internal politics and contain exactly as much truth as Coalition’s statements that Australia will build new coal power stations.\u00a0 If we don’t believe what Australian politicians tell us, why on earth would we believe Japanese ones?10<\/a><\/sup><\/p>\n Instead of becoming a nation of hydrogen car drivers, here’s what will actually happen in Japan.\u00a0 This year, Toyota will begin selling electric vehicles.\u00a0 At first, in their test market of China, but once they’re confident they’ve got it right they will be sold worldwide.\u00a0 As Japanese electric car sales pick up, all the talk about hydrogen vehicles in Japan will magically disappear.\u00a0 This is because, when it comes to cars, the Japanese Government is basically Toyota via other means.11<\/a><\/sup><\/p>\n Hydrogen can have other uses besides road transport, so the $20 billion or so Japan has spent on hydrogen research so far may not go to waste.\u00a0 After spending so much you may think Japan would find it impossible to give up on hydrogen vehicles, but Japan appears to have given up on building new nuclear capacity while still spending around $3 billion a year on nuclear research.\u00a0 Clearly the level of spending doesn’t necessarily reflect the amount of use they expect to get out of something in the future.12<\/a><\/sup><\/p>\n Because hydrogen may find uses in industry, aviation, and other areas it is possible Australia will end up exporting some, but it still remains to be seen if there will be any overseas demand for Australian hydrogen at all.<\/p>\n Alan Finkel said a number of odd things during his talk, one of which was that we need hydrogen fuel for long-distance truck driving.\u00a0 That’s a strange thing to say because hydrogen doesn’t automatically become more economical just because it’s used in a truck or over long distances.\u00a0 It’s also odd because Finkel has never gotten on his bike and ridden across the Nullarbor Plain.\u00a0 If he had, he’d either:<\/p>\n Elon Musk says his electric Tesla Semi<\/a> has 800 kilometers of range, so even if you halve that to account for Australian fly density and Yankee optimism, it’s still more than enough.\u00a0 With the costs of both solar power and battery storage rapidly falling I find it hard to believe hydrogen will turn out to be the cheaper option for crossing the Nullarbor.<\/p>\n The strangest thing Finkel said in his talk was investing in natural gas, and hydrogen would provide Australia with energy security if battery prices<\/a> went up.\u00a0 This is crazy and not just because the materials in a battery are only part of their total cost while the price of natural gas can bounce around like a kangaroo with a pouch full of helium:13<\/a><\/sup><\/p>\n See how cheap natural gas is now compared to what it used to be?\u00a0 As natural gas is a substitute for hydrogen this makes it much more difficult for hydrogen to be cost effective.\u00a0 (Image: Bluegold Research)<\/p><\/div>\n What is really crazy is Finkel doesn’t appear to realize if the price of batteries goes up, it doesn’t make the batteries you already have more expensive, and they can last a long time before they need replacing.\u00a0 The Wandoan big battery in Queensland is expected to have an operating life of 15 years.\u00a0 But when the price of natural gas goes up, unless you have locked in a low price with a long-term contract or have a really big storage tank, the cost increase can be immediate.<\/p>\n If the price of batteries suddenly soars then that’s the point where it makes sense to decide if it’s a better choice to invest in natural gas generation.\u00a0 But building natural gas capacity before a battery price rise is not going to protect you from that price rise and it’s completely nuts to think it will.<\/p>\n I agree with Alan Finkel that we’d have to be complete nongs not to cut our greenhouse gas emissions. \u00a0I just think he’s just wrong about how it’s going to happen.\u00a0 This is a serious problem: politicians listen to him because of his position and it could result in the misallocation of hundreds of millions of taxpayer’s dollars.<\/p>\n He needs to sit down with an economist or a businessperson who can explain how things work when real money is involved.\u00a0 My dad has a great head for both business and stopping cars from rolling backwards, and I’m sure he’d be willing to provide instruction for a reasonable price.\u00a0 But if Finkel is on a budget, then I’m willing to help out for free.\u00a0 Mind you, the fact I’m not charging anything suggests I’m not as good at business as my father.<\/p>\n","protected":false},"excerpt":{"rendered":" On Wednesday last week Australia’s Chief Scientist, Alan Finkel, gave a talk on Australia’s energy future at the National Press Club.\u00a0 While there’s no doubt Australia’s Chief Scientist is a smart cookie, I think a couple of predictions he made are fairly obviously wrong.<\/p>\n","protected":false},"author":10,"featured_media":37422,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[56],"tags":[],"class_list":["post-37315","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","entry"],"acf":[],"yoast_head":"\n\n
Hanging Around Politicians Probably Doesn’t Help<\/h2>\n
More Gas Capacity But Not Necessarily More Gas Generation<\/h2>\n
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Solar & Wind Encourage & Discourage Gas Use<\/h2>\n
![\"Summer](\"https:\/\/www.solarquotes.com.au\/blog\/wp-content\/uploads\/2020\/02\/summer.gif\")
<\/p>\n![\"Winter](\"https:\/\/www.solarquotes.com.au\/blog\/wp-content\/uploads\/2020\/02\/winter.gif\")
<\/p>\nGas Faces Competition<\/h2>\n
Batteries Are Competitive<\/h2>\n
VPPs Won’t Keep All Your Money<\/h2>\n
Electric Cars — Batteries On Wheels<\/h2>\n
![\"Australian](\"https:\/\/www.solarquotes.com.au\/blog\/wp-content\/uploads\/2020\/02\/carsales.jpg\")
<\/p>\nCSIRO Gencost Report Agrees With Me<\/h2>\n
![\"Projected](\"https:\/\/www.solarquotes.com.au\/blog\/wp-content\/uploads\/2020\/02\/scenars.png\")
Hydrogen Is Expensive<\/h2>\n
Trusting Japan Is Nuts<\/h2>\n
Hydrogen May Have Other Uses<\/h2>\n
Trucks Don’t Need Hydrogen<\/h2>\n
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![\"\"](\"https:\/\/www.solarquotes.com.au\/blog\/wp-content\/uploads\/2020\/02\/nullarbor.jpg\")
<\/p>\nNatural Gas & Hydrogen Aren’t Insurance Against High Battery Prices<\/h2>\n
![\"Regional](\"https:\/\/www.solarquotes.com.au\/blog\/wp-content\/uploads\/2020\/02\/gasprices.jpg\")
Finkel Is Right On Cutting Emissions — He Just Needs Remedial Work<\/h2>\n