Independent Review into the Future Security of the National Electricity Market Blueprint for the Future, Jun 2017

7.5 Conclusion

With a commitment to the Blueprint and coordination provided by the ESB as recommended in this chapter, Australia will return to having a world-leading electricity system. Australians can and should expect no less. The combination of AEMC, AEMO, AER, CER, ARENA and CEFC gives the NEM a powerful platform across market development, regulation, operations and innovation. Strong governance arrangements will empower these institutions to implement the Blueprint and proactively manage emerging issues in the energy transition.

Chapter 8: BEYOND THE BLUEPRINT

Overview

The other chapters of this report deliver a blueprint for a NEM that provides a secure, reliable and affordable source of electricity, and reduces its emissions over time in line with international commitments.

This chapter will broadly explore some high-potential technologies and projects that could be considered by government and investors, which are beyond the scope of the blueprint, but may have a place in a future NEM. These cover generation, storage and system security technologies, among others.

8.1 A range of possible technological futures

The manner in which technologies develop, and costs change, is likely to evolve over the medium and longer term. There are a range of possible technological futures for the electricity generation mix. No single technology can supply all electrical services, and there are benefits to a diversified generation mix.

The technologies discussed in this section could support emissions reduction as well as security and reliability objectives, but require further innovation and deployment. In some cases they may need to overcome barriers such as lagging standards and regulation to become feasible. It is intended that the future NEM should be conducive to any of these technologies, in line with the principle of technology neutrality. Whether the technologies are commercial or practical remains to be proven by the initiative of governments and investors.

Development of technologies will take time and require strong and ongoing policy support. The Australian Renewable Energy Agency (ARENA) plays an important role in this process by providing grants to accelerate the development of promising technologies towards commercialisation. Private investment in projects may also be supported by other types of government grants, tax concessions, or Clean Energy Finance Corporation (CEFC) debt.

8.2 Generation technologies

This section discusses electricity generation technologies. Technologies that involve a synchronous generator are particularly useful for power system security because they provide physical inertia to help dampen rapid frequency changes, increase fault current to help maintain system strength, and have the ability to supply or absorb reactive power to help control voltage.

Biomass

Biomass is plant and animal derived organic materials, which are grown, collected or harvested for energy.³⁹² Biomass generation is regarded as renewable when the resource consumed in the energy conversion process is replenished by an equivalent amount of biomass.³⁹² Biomass can be used directly to fuel a synchronous generator to provide power that can be dispatched when required, and other services that support power system security.

Electricity generation from biomass is a mature technology.³⁹³ However, unless the biomass is a waste stream, it is unlikely to be economically competitive with other forms of generation. Biomass can also be used as a substitute for coal in coal-fired power stations. Often this is achieved by ‘co-firing’ biomass (typically wood pellets) and coal together, though in the United Kingdom a large power station has converted two 645 MW generation units to run completely on biomass, with a third unit also in the process of being converted.³⁹⁴

In Australia, the most common sources of biomass for electricity generation are bagasse (sugar cane residues) and wood waste. Other sources include food waste, agricultural waste and energy crops.³⁹⁵ ARENA is funding a project to deliver a national database of biomass resources, mapping out their location, volume and availability alongside parameters such as network and transport infrastructure.³⁹⁶ The CEFC sees particular opportunities in energy production, including electricity generation, from urban waste, organic waste from livestock production and food processing facilities, and plantation forest residues.³⁹⁷ Future waste management strategies may provide a further option for sources of biomass for energy generation.

Australia possesses some competitive advantages that support the wider use of biomass, including an environment and climate suitable for growing energy crops, and expertise in relevant sciences and industries.³⁹⁸ A limitation of biomass is that it has a relatively low energy content per unit of volume, meaning that large volumes are needed, and it is typically not economically viable to transport such volumes over long distances.³⁹⁹ It has also been suggested that some aspects of the regulatory framework may present barriers to investment in biomass generation, including the absence of a stand-alone sustainability standard for bioenergy, and ‘overregulation’ by state environmental protection agencies.⁴⁰⁰

High-efficiency, modular systems, such as diesel generators, offer a technology pathway to substantially increase the efficiency of electricity generation from a range of fuels. Current research is developing low cost fuels from coal and biomass that are suitable, with appropriate fuel injection and engine modifications, for use in diesel engines at scales up to approximately 100 MW. For distributed coal and biomass applications, Direct Injection Carbon Engine (DICE) technologies offer reductions in CO₂ emissions of up to 50 per cent over conventional applications through efficiency gains alone.⁴⁰¹

Waste to energy

Biomass works best economically when the feedstock is a waste stream. In response to shrinking landfill resources and increasing disposal costs, waste-to-energy processes for municipal and industrial waste streams are being considered. Municipal and industrial waste streams often have significant organic (renewable) components. Not only does this provide dispatchable generation and low emissions, but it deals with a separate environmental problem – what to do with the waste.

Waste can be gasified or combusted directly for electricity generation, although the latter requires strict emissions management (relating to potentially toxic and particulate emissions). Direct production of power using advanced combustion technologies is widely practiced internationally, and increasingly, alternative fuels production and power generation through waste gasification processes are being considered for their viability.

Gas alternatives

As discussed in Chapter 4, gas-fired generation has an important role in contributing to the security and reliability of the NEM and emissions reduction. Over time, as Australia transitions to lower emissions generation, natural gas may be replaced by zero emissions fuels such as hydrogen and biogas. The potential of hydrogen and biogas to be used in place of natural gas in existing electricity infrastructure (combustion gas turbines) is being explored,^{402, 403} and there is recognition of the opportunity for innovation in biogas and hydrogen applications.^{404, 405}

Biogas includes fuels such as biomethane or biopropane, extracted from renewable sources including landfill, wastewater and agricultural waste.

Hydrogen can be produced by two very different means. In the first, hydrogen and oxygen are produced via the electrolysis of water. The only by-product is oxygen. The electrolysis process is powered by electricity that may be from renewable sources (for example, solar or wind generators) or non-renewable sources (for example, coal or gas-fired generators).

In the second, hydrogen is produced from gasification or particle oxidation of hydrocarbon fuels such as methane (natural gas), coal, heavy fuel oils or refinery residues and petroleum coke. The most common process used in Australia is steam reforming of natural gas, in which high-temperature steam reacts with methane in the presence of a catalyst to produce CO₂ and hydrogen. The by-product is CO₂.⁴⁰⁶ For the hydrogen formed from methane or coal to be considered zero or low emissions, the CO₂ by-product would have to be captured and sequestered, but it is currently expensive to do so.

The use of hydrogen instead of batteries for storage of electricity, or to supplement or ultimately replace natural gas for heating, is discussed later in this chapter.

Carbon capture and storage

Carbon capture and storage (CCS) technology can contribute to lower emissions, by reducing CO₂ emissions from coal or gas-fired generators. Fossil fuel generators equipped with CCS are synchronous generators, providing power that can be dispatched when required and other services that support power system security. The Australian Power Generation Technology Report notes that “while CCS technologies are not very mature, coal with CCS is more slightly mature than gas with CCS”.⁴⁰⁷

CCS technology works by capturing CO₂ at a major emission source such as a coal or gas-fired power station and compressing it to a dense supercritical state so that it may be transported (by pipeline) to a site where it can be injected into a deep underground rock formation and permanently stored. Alternatively the CO₂ may be used in such applications as enhanced oil recovery, a longstanding petroleum industry practice.⁴⁰⁸ CCS can reduce emissions from power stations by around 85 per cent.⁴⁰⁹ The process of capturing CO₂ reduces the efficiency of power generation by up to 25 per cent.⁴¹⁰ Transporting and storing the CO₂ involves the development of large-scale infrastructure. CCS technology can be installed with a new power station, or in some cases, retrofitted to an existing power station.

Not all CCS is associated with electricity generation. It could be the solution to eliminating emissions from many industrial processes, such as steel making, cement manufacturing and urea production. In Australia, the world’s largest CO₂ storage project will be commissioned in 2018 as part of the Gorgon LNG project.

Deployment globally is important for the efficiency improvements derived from ‘learning-by-doing’.⁴¹¹ Existing large-scale CCS projects at the Boundary Dam power station in Canada and the Petra Nova power station in the United States have contributed valuable knowledge and experience on the deployment of CCS technology in the power sector.⁴¹² Both projects were retrofits to existing power stations.⁴¹³ A project where CCS technology is intimately integrated into a new-build natural gas generator is under development in the United States.⁴¹⁴ The 25 MW demonstration plant is scheduled to be commissioned by the end of 2017.⁴¹⁵

It may be possible to retrofit some, but not all, of Australia’s existing coal-fired power stations with CCS technology. Retrofitting CCS technology to existing brown coal-fired plants can involve some significant challenges, including limited space, process heat and cooling water availability, and limitations of the existing steam turbines.⁴¹⁶

CCS fitted to new build coal-fired generators would be expected to use high efficiency, low emissions (HELE) technologies such as supercritical coal, ultra-supercritical coal or integrated gasification combined cycle (IGCC). The world’s first large-scale IGCC generator with CCS has been built in Kemper County, Mississippi (though is not yet fully operational).^{417, 418} Cost projections for the project increased three-fold from original estimates.⁴¹⁹

CCS technology is currently not covered by ARENA funding, however, it is anticipated to be eligible in the future for CEFC funding. In May 2017, the Australian Government announced it would remove a legislative prohibition on CEFC to allow loans for CCS projects.⁴²⁰ In its submission to the Review the CEFC notes that CCS “is likely to be needed as part of the global mix of technologies to meet long-term emissions reduction goals, but is unlikely to play a significant role in reducing Australia’s electricity sector emissions in time to meet our 2030 Paris Agreement commitments”.⁴²¹ In the absence of government measures to encourage CCS uptake, this is likely to be the case.

Hydroelectricity

Australia has large, established hydroelectric (hydro) schemes, particularly in Tasmania, New South Wales and Victoria. Hydro generators are synchronous generators, providing power that can be dispatched when required and other services that support power system security. Large-scale hydro can have a significant local environmental impact due to the need to modify natural water courses. As a result, there is limited potential for new large-scale hydro in Australia.

However, many of Australia’s hydro generators are more than 40 years old⁴²² and can be modernised to increase their efficiency and capacity. There may be opportunities to increase their generation capacity through refurbishment and turbine upgrades. The Snowy Mountains Scheme has already been upgraded to a capacity of 4,100 MW, from its original capacity of 3,756 MW.⁴²³ Some potential refurbishments and upgrades to Tasmania’s hydro schemes are currently being investigated.⁴²⁴

Additionally, there is potential for new, small-scale hydro generation. Small-scale hydro generators can be added to existing structures such as small dams, weirs, water or sewage treatment plants or water supply pipelines.⁴²⁵
To date the total contribution in Australia from small-scale hydro generation is not significant.

The use of pumped hydro for energy storage is discussed later in this chapter.

Nuclear

For many countries, nuclear power provides a secure, affordable and zero emissions electricity
supply.^{426, 427} In Australia, the establishment of nuclear power would require broad community consultation and the development of a social and legal licence. There is a strong awareness of the potential hazards associated with nuclear power plant operation, including the potential for the release of radioactive materials. Any development will require a significant amount of time to overcome social, legal, economic and technical barriers.⁴²⁸

Nuclear generators are synchronous generators, providing services that support power system security. Different nuclear power technologies allow application at different scales. Large, traditional nuclear power plants are limited to large-scale applications, which the Australian Nuclear Science and Technology Organisation notes makes it “difficult to envisage [traditional nuclear power plants] being established on the NEM given current grid structure”. ⁴²⁹

Small modular reactors (SMRs) are a more flexible technology, with faster construction and delivery times.^{430, 431} SMRs have a smaller generating capacity (up to 300 MW), and are designed to allow for modular construction.⁴³² SMRs are also expected to have a strong safety case based on their smaller size and factory construction. The reactors are capable of providing dispatchable and synchronous electricity, benefiting system security.^{433 434} Projects underway internationally include in the United States, where the design of modules with the capacity to provide 50 MW of electricity each are undergoing licence review.⁴³⁵ The first SMR plant under this project is expected to be commissioned in the mid-2020s. The UK Government has launched a competitive program to identify the best value SMR.⁴³⁶ In China, work is underway to launch a demonstration SMR project of 125 MW.^{437, 438}

Further nuclear power research and development is occurring in ‘Generation IV’ and fusion technologies. Research and development of Generation IV technologies aims to use fuel more efficiently, reduce waste production, be economically competitive, and meet stringent standards of safety. Research and development of fusion and Generation IV technologies are being progressed in internationally collaborative work that includes Australia.⁴³⁹ Fusion technology could offer electricity without high-level radioactive waste; however current progress in research and development suggests the technology is unlikely to be commercialised for a number of decades.^{440, 441}