Unpublished article about power generation

I wrote this for Online Opinion sometime ago, but it wasn't published.

Sylvia.

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The Naturist Lifestyle Party (NSW) has a conservationist bent; if one desires occasionally to commune with nature, it helps if there's some of it left to commune with. As one of the founding members, I've been trying to formulate a party policy on sustainable development, and in particular, power generation. Already I've been receiving flack for not being green enough. Haven't I heard about solar cells and wind farm generators?

Well, oddly, yes I have, but another founding principle of the party is that government should be based on facts and rational debate. Applying that principle, and yet arriving at a policy that looks remotely friendly towards nature is proving remarkably difficult. In this article I have concentrated on wind power, but there are similar issues with other sustainable means of generating power.

Let's use wind farms. Seems like a nice idea. Generate power from the wind, which is free, and the process produces none of that horrible greenhouse gas carbon dioxide. Problem solved. Well, only until we start to look at some numbers. A nice brand-new wind farm was recently opened at Canunda in South Australia. This state of the art system has a capacity of 46MW, and cost $92 million. Actually, the capacity figure is a bit misleading, because that is really its maximum generating capacity when there is enough wind. Its average capacity will be somewhat less. The ratio between the average capacity and the maximum capacity is called the capacity factor. The American Wind Energy buttociation (who presumably support the idea) says that common capacity factors lie between 25% and 40%. If we're generous, then that means that $92 million has bought an average capacity of 20MW. If the finance was obtained at 5%, the repayments over 25 years would be the equivalent of about $740 per hour. But each hour, on average, the farm only delivers 20MWh, so the repayments amount to $37 per MWh. There are also some operating costs - the wind may be free, but running the generator causes wear and tear that needs to be addressed, and people cost money to employ. Again, the American Wind Energy buttociation indicates that this costs about 1 Aussie cent per kWh, which is $10 per MWh. That's a total of $47 per MWh, even before any consideration is made for the cost of the land the farm stands on, costs of connecting to the electricity grid, and so on.

So just to break even over 25 years (and a longer period makes little difference) on the cost of building it, a setup like Canunda needs to sell the electricity for at least $47 per MWh. This would be a tough ask in New South Wales where the price paid to generators on the wholesale market rarely gets that high.

Still, I can be accused of being negative. I'm told that with economies of scale and improved technology, the costs will come down. Frankly, I'm sceptical. The costs have come down already, but it would be a mistake to buttume that they will continue to do so at anything like the same rate. These are huge production standard machines being built in significant numbers (Canunda has 23 identical generators each of 2MW capacity). They are not small scale one-off research devices. We've had the economies of scale already, and the technological improvements will be incremental.

As if that were not enough, wind farms are subject to the vagaries of the weather. If the wind is not blowing, or it is blowing too strongly, then wind farms do not produce power. This is clearly an issue, because we only build generators when we need the power they will produce. Building generators that may not generate is problematic. So for each wind farm, there has to be generating capacity elsewhere in the system that can provide power when the wind farm cannot. Since weather patterns can be the size of the state we need to allow for the possibility that all the wind farms in the state are out of action at the same time. If we were starting from scratch, we'd attribute the cost of the alternative capacity to the wind farm, because they will not run concurrently.

This highlights an issue with the currently existing wind farms, which is that they impose an external cost on other power suppliers, who are used as an unpaid backup for when the wind is not blowing. If that external cost is charged back (as it should be) to the wind farm then even on an optimistic basis, the true price of wind-power starts to look more like $60 per MWh.

Now, I do not want to leave the impression that I am opposed to wind power. These generators are things of technical and indeed aesthetic beauty, and are a credit to their designers and builders. Had I been involved, I would have felt proud, as I could never have felt about a coal powered generator. Nevertheless, they are not the silver bullet for our environmental woes, because they are an expensive way of generating electricity.

Some conversation minded residential consumers are willing to pay the increased price. AGL have contracted to purchase the entire output of Canunda for sale to their customers under the AGL Green Energy scheme. The premium customers pay there is 5.5 cents per kWh, which accords pretty well with the cost estimates I've given above. Indeed, I rather suspect it's a 'nice little earner' for AGL. On this basis, such wind farm schemes make commercial sense, though the external cost impact on other suppliers will need to be addressed before too many such systems are implemented.

Unfortunately, even if the conservation minded residential consumer is willing to pay the increased price, there are some industries that simply cannot afford to. One notable example is aluminium smelting. This is an energy intensive process; a modern plant requires about 14MWh of energy for each tonne of aluminium produced. With aluminium selling on the world market at $2800, an electricity price hike of around $40 per MWh would increase the smelting cost by 20% of the selling price. There is no way that the industry could so much as break even selling into the world market on that basis.

The Kyoto protocol introduces CO2 limits and the concept of carbon trading. One might have hoped that this would result in the external costs of fossil fuel power generation to be properly accounted for. Coal fired power stations produce about 1 tonne of CO2 for each MWh. Carbon trading so far has been at a price of about $1.50 per tonne. This is far short of the level required to make wind farms economically viable.

So where does all this leave the issue of policy, which is where I came in?

The standard political course would be to ignore the facts, and tell people what they want to hear. I cannot bring myself to do that. The harsh truth seems to be that a unilateral push in the direction of sustainable power generation would be economic dissolution while the rest of the world largely continues with the old ways. It would destroy some of our industries while having a minimal effect on CO2 emissions. In respect of areas like aluminium smelting, this would be especially true, because the metal would be produced elsewhere in the world instead, with its usual greenhouse consequences.

The time will come when the world adopts sustainable power generations methods, regardless of the cost, simply because the current approaches are by definition not sustainable. When that time comes, Australia can be at the forefront of the moves to greener technology. Sadly, that time is not yet with us.

In the mean time, all I can reasonably propose is that the state provide funding for research into other sustainable energy sources that could be used on a large scale, such as wave power and support advances in solar power generation that might bring its cost down. If these seem rather less than the dynamism that could be expected from a conservation oriented party, I'd have to agree.