Part II: From dispatchable to renewable
The challenge in switching to renewables is often seen as just a matter of finding the required political will. But there are technical issues that need to be overcome as well.
In Part I we looked at the rise of steam and the demise of muscle power and slavery and how this struggle compares with the conflict today between renewables and thermal power.
We also looked at just how deep the divisions run, and how they occur in countries from Australia to Germany, the US and Japan.
While it’s possible to see this theater of conflict as a fight between old and new, clean and dirty, sustainable and cheap, such characterizations miss an important dimension.
To understand that dimension, it’s vital to understand the challenges renewables pose, and the importance of dispatchable energy – for the moment, at least.
A coal or nuclear reactor gets fired up and continues to hum along, providing a precise and controllable amount of energy throughout the day.
It provides what is often called baseload generation.
Now add to that arrangement a large renewable energy source, be it solar or wind energy, and you bring a new problem into the equation.
These renewable sources can start and stop without much notice. As a result, demand has to be adjusted accordingly, with power either stored or released as required.
But electrical energy isn’t easy to store and release, and battery storage is historically expensive, so you might choose to crank up or down your levels of thermal sources, i.e. coal or nuclear.
Neither coal nor nuclear power stations perform well when they’re being cranked up or down at short notice. Just like trying to stoke up or cool down a barbeque in a short interval, it wastes a large amount of resources and, therefore, energy.
So to solve this problem you are forced to do one of two things. If there’s a shortfall, you get a fast response “peaking power” plant, which is basically a generator armature driven by a jet engine, and this can kick in with minimal preparation time.
If, however, there’s a surplus, you dispose of the extra energy, often by paying people to use it.
For the shortfall, cranking up a peaking power plant is extremely expensive. It’s one of the reasons countries such as Germany and Australia have such expensive electricity.
For managing a surplus, you’re faced with throwing away energy, and that is neither good value for money, nor is it always easy.
The problem with Germany
It’s worth examining how this stress on the grid system is playing out in one of the most modern and wealthy countries in the world; one that’s worked hard at establishing renewable energy.
In the past, Germany has relied on nuclear power, Russian gas and its own dirty form of coal, called lignite, for power generation. None of these options look good from a sustainability standpoint and German Prime Minister Angela Merkel has made ambitious promises to reduce all three energy forms that comprise this unholy trinity.
But in doing so, she has left the country insecure in its energy provision.
According to a 2019 McKinsey report, Germany had faced three critical situations in June of the same year where demand for power was 6 Gigawatts more than the system was able to produce.
This caused the spot price for electricity to rise to a hefty €37,856 MWh.
McKinsey and the grid operators haven’t yet concluded exactly why this came about, nor what the role of internal markets were in creating this moment, but McKinsey predicted the problem will only get worse as nuclear capacity is retired in 2022.
What is certain, though, is that while Russian gas, lignite and nuclear are bad for sustainability, from a baseload generation point of view, they are a grid operator’s dream.
At the root of this problem is a simple truth: electricity isn’t like a consignment of cocoa beans, and kilowatt-hours can’t be stored in a shed until they are required.
Rather, a more intensive and expensive way of storing those kilowatt hours is required, or else supply and demand needs to be better managed.
Failure to do this results in various ills: frequency stabilization problems, voltage and reactive power issues, transformers and generators blowing fuses, harmonic voltage spikes and reverse flow meltdowns.
These are not trivial issues the grid faces every day when there’s a mismatch between power in and power out. And in a renewables-based grid, both power in and power out can be variable quantities you can’t really control.
Without some new solutions, the very real problems that renewables create for the grid will continue to threaten electrical infrastructure in ways that are expensive to fix.
To put some numbers on this problem, consider the Australian Energy Market Operator (AEMO). In the first quarter of 2020, the South Australian market incurred more than $100 million of extra costs for frequency control and they had to intervene in the market 229 times in this financial year.
That’s compared to just 15 times three years ago.
Frequency control is big business, and is becoming an ever larger proportion of the overall cost of electricity.
The problem of intermittency
So how do you solve the problem of intermittent renewables playing havoc with random power surges that can happen in the few seconds it takes for a cloud to disappear from the sky?
Many on the renewables side believe you can tariff your way out of the problems with the grid. They hope that there’s just one more tariff or incentive package given by the government and the whole thing will magically work.
But that approach is flawed, because for every tariff created, another dysfunction is inserted into the system that then requires further tariffs to iron out.
And you get sucked into a never-ending spiral of tariffs, which sooner or later results in anomalies that are worse than whatever you started with. You might have tariffs aplenty, but your transformers can still blow up due to reverse flows.
In Australia, for example, there’s a feed-in tariff for producing solar. But there’s too much solar around midday, leading to talk of a bonus payment for using the surplus solar power that’s produced from the first tariff.
What industry pays you to make something and then pays you again to consume it?
In many renewable grids this results in a familiar problem, often called the duck curve.
There is too much power around when solar output is high, and not enough as the sun goes down and when people come back from work and start switching on appliances.
It’s called the duck curve simply because the curve that results from this resembles a duck belly and head.
One attempt at solving this time shift problem is to produce Snowy 2.0, a large water pumping station that consumes the excess electrical power at peak solar output, and releases it to cover the demand in the evening.
Turbines pump water uphill in the afternoon and the same turbines generate power as the water cascades down in the evening.
Its creation is highly controversial, and despite its AUD$11 billion price tag, few can see it delivering the service it has been built for.
Then there’s battery power, à la Tesla Megapack. While this has merits, it currently lacks capacity or the appetite for investment. It’s generally thought that battery capacity will expand to fill the demand created, but not unless there’s an incentive for doing so.
So what to do? Where is this missing piece of the new grid?
Another solution that is both ambitious but also inevitable is what people are terming the Internet of Electricity (IoE).
The new grid and the Internet of Electricity
In this new conception of a grid, every power device – whether it be a huge power plant, a washing machine, an electric car, an air conditioning unit or even the grid itself – gets assigned a set of just five attributes: a device identifier, a geo-positional marker, a blockchain address and a bid and offer price for electric power based on its need state.
On top of this layer is a market that allows for rapid, real-time transactions between ordinary household devices, with payment in digital currency.
In short, this conception of the grid has every device becoming an economic entity, rather like a player on a monopoly board, trying to optimize its use of electricity and profit.
Except, there is no actual monopoly; the paradigm is essentially a distributed, decentralized one.
In this new conception, the management of the grid becomes a neural network, a brain that is finding the solutions to its own problems of supply and demand.
If those devices are constantly sending price signals depending on their need states, it follows that market pricing will sort out supply and demand.
Some of those devices will be batteries and electric vehicles, but many will be washing machines, pool pumps and air conditioners adjusting activity cycles to help make the grid work in a more coordinated way.
Some devices could even be evolutions of an air conditioner mixed with a thermal storage device. Whatever the device type, or whatever it offers or demands, it will have five attributes that allow it to take place in an IoT market.
Each device will be an active asset pursuing its own best interest as well as the best interests of the grid.
It won’t all be about decentralization, though, or certainly not immediately. There will still be a wholesale price given by centralised boards responsible for grid stabilization, but they will have a reduced role.
In some states in Australia up to 50% of electricity is used by the biggest 20 customers, so it won’t be the end of the centralized electricity system, more a hybridization of it.
That said, it’s hard to see how decentralization isn’t inevitable, because it appears to be the only way to resolve the renewable energy dispatchability problem.
In part (iii) we’ll explore how this neural network type solution comes about, and the technology and ideas needed to accomplish this.
But before we do that, it’s worth looking at one study that investigated the very premise of the new grid. That is, can nuanced, highly dynamic pricing affect electrical demands and behavior that make up the grid, and can it do this enough to provide that elusive grid resilience?
Toward grid resilience
Power Ledger, an Australian energy trading company, recently investigated the effects of dynamic pricing during a peer-to-peer energy trading trial involving 48 households in Fremantle, Western Australia, which is a localized energy market.
The trial showed that when faced with making decisions, devices and people fall into patterns, which demonstrated this emergent behavior of optimizing resources.
The very spikes and troughs in the electricity system, rather than being vulnerabilities, become price signals that allow for a new resilience.
Perhaps, most importantly, the study suggests that price signals in these localized markets will lead to organic growth of important grid resources in an optimal way.
These developmental resources favored by new organic electrical economics are likely to be a series of battery units of maybe 10-15 kWh in many households.
What’s certain is that price signals will favor resources that offer the most value, not the best political optics.
It probably won’t be state-driven, high-profile projects like Snowy 2.0.
Maybe it will be electric vehicles in all forms – cars, buses, trackless trams, light rail and trains, as well as e-scooters, e-skate boards and e-bikes and their attendant battery capacity – that will provide new resilience for the grid.
Whenever more power is called for they could make up the shortfall, and when a destination for surplus power is required, they can provide this too.
At current growth rates, 100,000 electric vehicles could deliver 500MW of standby capacity, and this would be available as soon as any electric vehicle is plugged into the network.
Perhaps with the new resilience offered by the IoE, the gap between the real grid value of distributed electrical assets and perceived political optics of them will reduce.
And maybe closing the gap between real value and optics can free energy policy of the conflicts that rumble on without conclusion.
In part (i) we looked at the demise of muscle power and the slave trade and saw how long it took to move to the new energy paradigm of steam. We saw how many technological steps were required to make steam properly dispatchable.
We also saw how bitter and entrenched were the conflicts around these issues, culminating in the American Civil War; and how it was economics as much as morality that played a part in bringing in the steam age to replace the muscle age.
Maybe that’s the lesson for us today.
Perhaps it won’t be the sense of moral outrage from the likes of Swedish teenage climate activist Greta Thunberg that eventually moves us forward.
We will get there only when we can manage renewable energy to the same level of dispatchability and confidence that we enjoyed with fossil and nuclear.
And when that happens, no doubt the conflicts, confusion, and doublespeak will stop, and real success with growing renewables and lowering the emissions footprint will emerge.
In the next part of this multi-part blog, we take a closer look at how the new grid operates and investigate how blockchain technology, dynamic pricing and the IoT knit together to produce the new grid.
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