Climate Commission Report Good News for Distributed Energy Sector
The Climate Change Commission has released draft advice to the government calling for "transformational and lasting change across society and the economy".
The report recommended decisive action to limit the amount of greenhouse gases released over the next 15 years in order to meet our 2050 targets but found we can decarbonise the economy while continuing to grow GDP.
The report is good news for the distributed energy sector, with solar, batteries, smart homes, and allowing communities and consumers to participate in the market all mentioned as opportunities to meet our targets.
Reducing transport emissions is a big priority in the report, with a possible ban on fossil fuel vehicle imports by 2035 and incentives for purchasing EVs in the shorter term.
Vehicle travel electrification will increase demand for clean electricity significantly, but the report says the new demand could be met with new wind, solar and geothermal generation.
Overall, the report states that large-scale wind and solar are expected to comprise an increasingly greater proportion of our generation mix towards 2050 to meet increased electricity demand from the electrification of industry and transport and to gradually displace fossil fuel generation assets.
"Considerable and sustained improvements in the price-performance of wind and solar technologies means they are increasingly cost-competitive against new fossil fuel generation. Wind generation is now cheaper than new baseload thermal generation. The annual rate of decline for the cost of utility scale solar PV has been on average 10% over the last five years and is expected continue to decline annually at about 3% out to 2030 as global demand increases and drives incremental technological improvements. Wind turbine costs have declined on a continuous downward trend over the last ten years, falling between 44% and 64% since their peak between 2007-2010.
"Aotearoa benefits from competition in the Australian and Chinese markets resulting in lower total project costs compared to the global average. The considerable cost reductions projected for these technologies mean that solar and wind technologies are expected to play a significant role in displacing fossil fuel generation.
"As the proportion of intermittent generation from wind and solar in the electricity system increases managing the volatility of output and morning and evening peaks will become a more significant challenge. Dispersing wind farms around the country and taking into account potential changes in future prevailing wind patterns can manage some of this. There is a broad range of additional options to address this challenge including utilising demand response technologies, increasing short term storage or using existing hydro generation when possible.
On Demand Management the report further states "better use of demand response, small-scale storage technologies and demand management practices have the potential to shift demand from morning and evening peaks to other times when demand is lower. This could reduce emissions from the electricity system and help to reduce the average cost of electricity. It may also defer costly upgrades to transmission and distribution lines, reducing upwards pressure on delivered electricity prices.
Demand response enables or encourages electricity consumers to reduce their electricity demand for a period of time (often during peaks) in exchange for payment, or to avoid high electricity prices. A common example of a demand response enabled technology is hot water cylinders, though many more common technologies could also utilise demand response such as batteries, EVs, fridges, household appliances and a wide range of industrial technologies. Key enablers of demand response include, but are not limited to, smart metering and access to data, real-time pricing and smart devices. For example, if enabled by retailers, apps connected to smart meter data can allow consumers to monitor and manage their power use to show where energy savings can be made. This increased consumer engagement with the electricity system is a recognised future trend in the electricity system. Adding storage to the electricity system makes renewable generation more useful by providing a back-up for times when the renewable resource is insufficient (daily peaks).
'Transpower estimates that peak demand could increase from 7.3 GW in 2020 to 8.9 GW by 2035 and 10 GW by 2050. 58 Batteries can be large ‘grid-scale’ installations or distributed units in buildings and electric vehicles (EVs). Batteries can help to smooth peaks and troughs in demand. A battery charged over the course of the day using renewable generation can be rapidly discharged to meet a short period of peak demand which would otherwise be provided by a fossil fuelled power station. For example, Transpower estimates that by 2035, about 1.2GW of battery storage capacity could be deployed to support periods of peak demand. Using demand response and storage technologies together can play an important role in system security and reliability by potentially increasing system flexibility. It can also reduce emissions by reducing the need for fossil fuelled peaking generation. Emissions reduction cost of demand response technologies varies by technology, scale and application. Managing peak demand in a renewable electricity system may also require changes in electricity consumer behaviour (demand management). It is important that the electricity market can deliver clear and timely price signals to energy users to encourage changes to electricity demand. For example, as the uptake of electric vehicles increases it will be important that electric vehicle charging does not exacerbate daily morning and evening peaks. Electricity pricing incentives, such as low cost night rates (11pm to 5am), combined with smart charging technology may be an effective way to address this issue.
"Distributed generation will play a role in reducing the amount of electricity that would otherwise have to be transmitted by the grid. This is particularly valuable when it can offset periods of peak demand, and potentially emissions and high electricity prices, and when the grid is limited in some way (for example if a line fails during a storm). The amount of distributed generation in the system is expected to increase as the cost of solar PV and wind generation decreases and more households and communities look for energy sovereignty.
"Community involvement in distributed generation may have social benefits, such as enhanced cohesion, acceptance of development (when there is control over where the generation is located) and self-sufficiency through self-supply. It can also adapt and affect consumer behaviour and energy use. For example, iwi/Māori through local marae schemes and rural communities may actively transition to distributed generation for a variety of reasons, including ownership, cost and resilience (particularly if they are in remote areas) and a desire to reduce their emissions. In Aotearoa, it can be challenging for owners or would-be investors in distributed generation to access the electricity market. Owners of distributed generation can either sell any generation not used on site to a retailer through a contract or sell it into the market and ‘take’ the wholesale price. It can be difficult to secure the long-term contracts. A liquid hedge market would be important in facilitating this".