What are the consequences of the power sector’s emission reduction pathway and the need for long duration energy storage

Unprecedented disruption ?

The electricity generation sector, which accounts for one-third of total global emissions, is undergoing unprecedented disruption – and it is just beginning. Driven by systemic factors summarised in figure one above, this article will unpack these trends and lay the foundation for the need for long duration energy storage to help ameliorate the impact of some of these.

The decarbonisation of power systems by 2040 is essential to a reach 1.5 degrees celsius pathway and net-zero greenhouse gas (GHG) emissions by 2050. The good news is that 123 countries, representing 80% of global GDP have pledged to do just that as part of the 2015 Paris Climate Accord. To achieve this, More Economically Developed Countries (MEDC) need to realise this a lot sooner than 2050 given their share of GHGs. Figure two below, illustrates the sheer magnitude of the task ahead. Based on our global historical emissions trajectory and current decarbonisation efforts, the hard truth is that we are nowhere near on track with current efforts woefully insufficient to achieve these lofty goals. A far more ambitious and immediate set of actions is required if we have any chance of limiting the power sector’s impact on GHG emissions.

Figure 2: Power sector emission reduction pathways

Now, wherever you happen to sit on the spectrum of human vs. natural-induced climate change, most would agree that the rate and magnitude of change now occurring is of great concern. According to a recent Yale Univeristy school of the environment study, climate-related disasters jumped 83% in just the past two decades alone with a doubling of floods, 40% increase in severe storms and not to mention major increases in droughts, wildfires and heatwaves. As stewards of this amazing planet, we have a moral and social obligation, wherever possible, to pursue alternate technologies that have a postive impact - particularly where there are technically feasible and commercially viable alternatives now available.

A net-zero power sector by 2050 predominantly powered by renewable energy is possible, but a lot more needs to be built…and fast.?It must be more dependable, efficient, and affordable while meeting the need of an estimated two billion extra people and a global economy more than twice its current size. With residential expenditures on electricity per household also rising, electricity will account for a quarter of all energy demand by 2050 – compared with 18% now. Some researchers go further projecting power consumption to double over this timeframe as energy demand electrifies, wealth increases, and green hydrogen generation picks up.?

The challenge for MEDC, like Australia, becomes even greater when one overlays the significant decline in dispatchable, carbon intensive baseload generation – necessary to meet emission reduction targets. The black line in figure three below for example, highlights the Australian Energy Market Operator’s (AEMO) projected decline in coal-fired power as part of the country’s Integrated System Plan (ISP).

Figure 3: Unprecedented change ahead to reach ‘net-zero’ by 2050

Note: in order to illustrate relative movements, the chart above shows the proportionate change over time in carbon intensive capacity on the LH, ‘Y-axis’ (coal and gas) and proportionate change in renewable capacity on the RH,‘Y-axis’ (incl. storage).??

The ISP includes four future scenarios for the Australian National Electricity Market (NEM), with a “Step Change” scenario considered the most likely by energy market experts to play out on the pathway to net-zero by 2050. This decarbonisation effort may need to happen even quicker than the planned mid 2040’s. Australia’s recent market disruptions were declared as “unprecedented” with wholesale electricity and gas prices tripling, outages at coal-fired power plant and soaring global fossil fuel costs. So much so that AEMO triggered the application of administered price caps, and the first suspension of trading in Australia’s main grid since its creation in 1998. One executive was quoted as saying, “What’s clear is the urgent need to build-out renewable energy with diversified firming generation, like batteries, hydro and gas, and transmission investment to provide homes and businesses with low-cost, reliable energy.”

A recent landmark study led by experts at the University of Melbourne, The Unversity of Queensland and Princeton University, highlighted the staggering scale of Australia’s decarbonisation pathway. The study suggested that meeting the 43% reduction in emissions by 2030 and ‘net-zero’ by 2050 – targets recently legislated – will require additional transmission equal to almost five of our national electricity markets. And to deliver on Australia’s much hyped vision of a ‘net-zero’ carbon economy AND a major global player in energy exports will necessitate wind and solar energy capacity equivalent to forty times that of our current national electricity market.

Renewable energy’s Achilles’ heel

Staying with the Australian story and figure 3 above, given the extraordinary amount of planned renewable energy (RE) capacity growth at +400% by 2050 (represented by the light green line), one might be led to believe that this alone then is the answer to our energy woes. I mean, globally, between now and 2050, wind and solar are expected to grow four to five times faster than every other power source and is projected to become cheaper than existing fossil plants within the next decade, if not sooner. By their very nature, renewables can’t consistently produce energy and are therefore, intermittent. Intermittency, in turn, contributes to variability in prices which contributes to limiting the growth of renewable energy. As a result, additional renewables necessitate additional “firming” in the form of storage – and in the case of Australia, a ~1,700% increase in storage is projected by AEMO to be required by 2050. Most of this storage is anticipated to be funded by households – but more on that later. ?

More RE penetration combined with less dispatchable, baseload power, presents three additional challenges, namely:

1. balancing supply and demand;
2. changing voltage and frequency flow patterns; and
3. a decrease in system stability because of grid overloading.

In Australia and other markets like California and the UK, over and undersupply of energy has already caused significant issues, resulting in the need to shift consumer demand, known as, demand-side response (DSR) and supply control mechanisms such as “feed-in management". The temporary shutdown of large?renewable generation fleets or “curtailment” is now also a regular occurance. Incidents of negative pricing, albeit mainly an Australian phenomenon for now, have been increasing by 150% YoY for the past five, putting further pressure on required asset returns. It is noteworthy that, as Europe enters its 2023 summer, negative pricing events are also becoming a regular feature. As the number of countries with medium-to-high shares of RE rises, volatility, grid instability and energy security, are fast becoming prominent global issues. In fact, many believe growing beyond a 25% share of renewable energy is technically unfeasible without increased grid flexibility.

Our reliance on renewables is projected to increase threefold, reaching 90% of total global generation by 2050. To ensure sufficient power, excessive amounts of renewable energy sources are also required, leading to an inevitable increase in generation “spillage” or “curtailment” of over-supply – represented by the red line in figure 3 above, in the case of Australia. To allow greater renewable penetrations, a certain level of curtailment will always be necessary as it helps to keep the energy system in balance while safeguarding security and reliability. Growth in renewables in Australia for example, will lead to the need to curtail a projected 21% of all energy dispatched to the grid by 2050 – amounting to 80 TWh. To put that into perspective, that’s roughly a third of Australia’s total annual electricity generation today. On the other hand, one can argue that this is a vast amount of wasted, potentially useful green energy that could be used for other purposes. For example, long-term storage or the generation of green hydrogen (or derivatives such as ammonia) – assuming there are new markets in the future for the offtake of any excess energy over and above those already considered by AEMO.

Another 'fly in the ointment' is the increasing incidence of extreme weather events which leads to even more outages, rolling blackouts and market volatility. Per the Yale school of the environment study cited above, this is now becoming a significant feature not just in Australia but in markets throughout the world.?

Why not just add more batteries?

So why not just increase the number and size of batteries? Storing excess power from the summer months and saving it for extreme weather events, or for when solar irradiation or wind power is insufficient, results in the system costs becoming dominated by batteries. AEMO’s storage growth projections, for example, bank on the fact that most of the battery capacity (76% of the projected 60 GW of total storage by 2050) will come from the anticipated growth of mainly household batteries. Compared to today, Australia has <1 GW of either distributed or coordinated distributed energy resources storage. And despite a recent upturn, have fallen way behind forecast adoption levels. 3m Aussie households already have rooftop solar – however less than 180k have batteries installed (~6% rooftop solar penetration), mainly due to large upfront cost. And beyond Australia, according to the clean air task force, a Massachusetts Institute of Technology research group, estimated that California alone would require ~36 TWh of existing energy storage technology at 100% renewable usage - equivalent to ~60 days of energy storage. Even at a generously low future adjusted price of $100 USD per kWh would equate to $3.6T USD – or more than about three times the GDP of California.

Energy storage technologies, in the form of Li-ION, flow, Sodium Sulphur, Advanced Lead Acid batteries, flywheels, etc., have an important role to play, in areas such as daily energy arbitrage, providing instantaneous energy and power system stability through frequency control. However, the problem with ramping up traditional energy storage beyond a few hours is that these technologies, particularly Li-ION, were never designed, nor are they technically well suited, to longer duration energy storage.?

Despite the significant projected decline in future costs, traditional battery technology like Li-ION is poorly suited to the role of storing significant amounts of energy for prolonged periods of time – quickly becoming technically unfeasible and commercially unviable. This is for several reasons, including: the linearity of costs; the need to regularly cycle to avoid degradation; useful lifespan and; comparatively low energy density. Not to mention the adverse environmental impacts. For example, over 97% of Li-ION batteries end up in landfill, releasing contaminants, including toxic heavy metals like cobalt, nickel, manganese, lead and flammable electrolytes into the environment. ?

The need to increasingly rely on yet another fossil fuel…gas-fired ‘peaker plants’

So, because current battery technology cannot technically nor economically meet peak demand for prolonged periods, the plot thickens further. You see, something called ‘peaker plants’ are still needed to provide much needed backup. A ‘peaker plant’ is a gas-fired power plant that can switch on and off quickly and only operates when there is imbalance and stress in the system, bringing much needed stability. Consequently, Australia, like many other nations still need to maintain proportionately high carbon-intensive ‘peaker plants’ to firm capacity at almost 10 GW by 2050. Similarly, according to an Imperial College London report, in one scenario with high renewable penetration, the UK would need as much as 147 GW of gas-fired ‘peaker plants’ by 2050, compared to about 30 GW currently. ?

This reflects the importance of gas as a “bridging fuel” to allow the grid to transition towards more carbon neutral forms in an orderly fashion. So, if we put aside the significant cost of maintaining ageing infrastructure while building new plants, or recent geopolitical events contributing to record high gas pricing, what’s the problem with gas-fired ‘peaker plants?’ Although natural gas emits roughly half of the CO2 than coal, when one factors in, both intended and unintended methane emissions, from leaks over longer time periods, several commentators argue that natural gas has no climate change advantages over coal whatsoever. And it is not just Australia and the U.K. that will be juggling with the need for more ‘gas peakers’ as renewable penetration gathers pace. According to the chairman of one UK ‘peaker plant’, globally, the plants will make up a quarter of traditional gas-power capacity by 2030. Some good news, as suggested by AEMO, is that these plants could in future be run on 'carbon free' fuel, like biomass.

The $62T question

According to a study by Stanford University, published in the Energy & Environmental Science Journal, switching the world to renewable energy would cost $62 trillion USD. Even with a supposed payback period of six years, that’s three times the total economic output of the United States. Assuming for capital and ongoing cost avoidance and deferrals, this author finds such a short payback period hard to believe, especially when considering trade-offs like the significant costs needed to help ensure grid stability and reliability or the fact that this amounts to the biggest reallocation of capital in history. Not to mention the fact that the market, is currently insufficiently incentivised, and therefore failing to construct energy generation, storage and new transmission line infrastructure. For example, ~408MW capacity per month is needed to achieve Australia's AEMO ISP forecasts. And at present, Australia's actual monthly average development is around half this at ~235MW. Continued delays in large-scale energy generation, storage and new network infrastructure upgrades, to the tune of ~A$29bn, will only constrain renewable energy growth which starts to make the decarbonisation goals, needed to achieve ‘net-zero’ by 2050, look more like a “pipe dream”.

To avoid a potential climate catastrophe and further economic upheaval, ‘hope,’ as David Attenborough argued at the recent COP26 - UN Climate Change Conference , is a much better motivator than ‘fear’. We do not need “big-government”, “green washing” or alarmist, “fearmongering”…heaven knows we have had enough of that in recent times. What is needed then is long-term, ‘non-political’ policy settings and the firm belief that human ingenuity working together with an appropriately incentivised private sector, will find solutions to this problem. If, as Einstein apparently once said, “necessity is the mother of all invention.” – then the willpower and resources to develop innovative solutions, firmly grounded in the necessity to change, will create a more sustainable and secure energy future for all.?

As the risk of longer periods of the insufficient baseload power increases with the withdraw of 'carbon intensive' generation, the significant increase in storage will demand storage across a wide range of timeframes from several hours to days, weeks and months. Admittedly, there are unlikely to be any ‘silver bullets’ to help solve this complex systems problem. In the second part of this article, I will explore the emergence of technologies that are fast becoming both technically and commercially ready to help 'bend the arc' of some of these unavoidable consequences to the power sector’s emission reduction pathway.

Copyright ?2022 Jacques Markgraaff, Chief Operating Officer, LAVO

Disclaimer: "the views and opinions expressed are those of the author and do not necessarily reflect the offical policy or position of LAVO."