Why invest in the national grid?

In most Australian States the cost of electricity has been rising dramatically and continuously, not because of the carbon tax but, ostensibly, to fund maintenance and upgrade of the national grid. The condition of the grid has apparently been allowed to deteriorate over recent decades and is now in desperate need of renovation, allegedly costing billions of dollars over the next 5 years.

Is it necessary to maintain a national grid in Australia? Or are we investing huge sums in an asset that is likely to and should be replaced by a series of super-efficient regional and micro grids? These will become necessary as technologies evolve to generate renewable energy supported by improved and cheaper electricity storage.

Ongoing global warming is causing an increase in severe weather events. In some cases this will affect the ability of coal fired power stations to operate by reducing availability of water for cooling. It also poses a direct threat to grid security. That threat comes in the form of high temperatures, increased risk of bush fires and high wind events. Any of these can damage grid towers and wires, necessitating repeated costly repairs.

This duel threat is stimulating consideration of the alternatives to coal fired power stations and the need for extensive interconnected smaller transmission networks. Government recognises the need to reduce use of fossil fuels by 80% by the year 2050, a target likely to be adopted by most industrialised countries by 2020, in order to avoid dangerous global warming and climate change.

The world is now at the start of a transition from fossil fuel to use of renewable sources to cope with ever expanding energy needs. Those needs will be increasingly met from solar, geothermal, wind and tidal sources. All lend themselves to distribution of electricity via regional or local grids. The big difference is that, with the possible exception of geothermal, all can generate electricity cost-effectively in close proximity to consumers and be scaled to meet changing demand.

Two arguments are made in favor of retaining a national grid: If local generating capacity fails due to break-down, lack of wind, or sudden demand for increased supply, how will energy be provided? At present this is achieved via the national grid, drawing on limited storage of electricity in the grid itself and surplus capacity being generated elsewhere. Second, a national grid facilitates competition between generators supposedly ensuring that the cheapest generating capacity is used. Without a national grid competition is limited or made impossible.

These arguments have some validity where, at present, relatively large fossil fuelled power stations are, out of necessity, located near their fuel source (coal mines) and supply a number of distant regions with electricity. Greater demand in one of those regions can be met by surplus capacity of a more distant power station feeding energy into a national grid connected to areas where demand is highest.

Australia, among many other countries, is moving towards electricity generation from renewable sources. This is a growing trend essential to meeting the national target of producing 20% of national energy demand from renewable sources by 2020. This development will increasingly rely on the use of wind and solar power stations that do not have to be built near a coal mine or a reliable water supply for cooling. Renewable power stations required to meet regional demand can be built in or near major population centres. They can feed directly into an efficient regional or local grid, avoiding the present need for inefficient long distance transmission.

Solar power stations are of two kinds: Small generators providing the power needs of a single household or building – eg. roof mounted photovoltaic cell (PVC) displays, whether located in a rural or urban area, making those premises increasingly energy self-sufficient. In Australia, over 1 million households now have PVC roof-mounted displays and the number is expected to rapidly increase as the cost of storing electricity for use after sunset drops, storage capacity increases and reliance on back-up from the national grid diminishes.

Large wind and solar-thermal or PVC generators feeding into a local grid can already supply the energy required by a full range of urban users, other than major industries with high energy needs. The latter could own and operate their own power stations fuelled by renewable sources or rely on supply from the local grid powered 24/7 by geothermal or solar-thermal.

The generating capacity, technology used and location of larger power stations will be determined by the market rather than fuel sources. Power stations and local grids able to generate and distribute electricity at the cheapest price will compete and the most efficient will prosper and supply market demand. Regional and local grids will have the capacity to detect and extract electricity from consumers with a surplus and deliver it to those with unmet demand.

The advent of power stations fuelled from renewable sources makes it possible for their location to be in close proximity to the consumer, obviating the need for a national grid and reducing the size of regional grids. Capital investment required for building power stations fuelled from renewable sources will be (in many cases already is) lower than for coal fired generation, making power station ownership and operation possible by individuals, (households) and communities (local government) as well as public or privately owned companies investing in the latest large-scale technology.

Regulation limiting larger power station ownership can ensure sufficient competition among generators and prevent their ability to charge monopoly prices.

Solar, wind and battery technology is continually improving the way in which electricity is generated and stored. The cost and efficiency with which PVC's convert sunlight to electricity is increasing. Advances in material science are being made, aimed at enabling their wider use, such as spray-on PVC's covering an entire roof area. Work is also being undertaken to increase the efficiency of wind-turbines, improving their operation in light and higher wind conditions and increasing their output.

Advances in technology improving our ability to store electricity are being rapidly made with the result that storage capacity is increasing and the cost of storage is falling. Examples of this are seen in scalable flow batteries and other emerging technologies, already able to store sufficient PVC generated energy to meet 24 hour domestic needs and larger business demand after sunset. Domestic premises will increasingly become self-sufficient and go off-grid. They are already doing so and will be followed by commercial premises, social establishments (hospitals, schools etc) and larger consumers.

As these developments continue and improved technological advances are made, the utility and need for a national grid will diminish to the point where it becomes anachronistic. Growing reliance is likely to be placed on local or regional grids over the next 5-10 years, making the national grid increasingly redundant. We should face the reality that the ambition of households and businesses is already to 'get off the grid' in order to escape the ever increasing price of electricity distributed by it.

There is a view that by increasing the price of electricity, consumers will find ways of using less of it, so that power stations need generate less and so reduce the amount of coal they burn and CO₂ they emit. This is only true if there is no cheaper alternative to generating electricity by burning fossil fuels and in Australia that is no longer the case.

By using improved renewable energy technology, imposing a price on carbon emissions and increasing the price of electricity generated from coal to fund grid renewal, the cost of renewable energy becomes relatively (and in absolute terms) cheaper. In short, raising the cost of electricity to invest in the national grid is pricing retail electricity produced from coal out of the market. It is making electricity generated from renewable sources more profitable and cheaper for the consumer.

Evidence of this is provided by the fact that Australia has a proposed program for construction of 6 coal fired power stations. Five of these are very unlikely to reach, let alone go beyond the planning stage. One is at the planning stage but may not proceed in the light of growing evidence that its output could be met from solar-thermal and, if built, is likely to have a commercial life of less than 20 years. Among the reasons for this is likely international demand for reduction of CO₂ emissions, now at a dangerous level of 400 parts per million and rising.

Given these considerations, just how prudent is it to invest billions on maintenance or extension of a clunky national grid, a carry-over from last century destined to become increasingly unnecessary for electricity distribution?

Perhaps the answer to that question is provided by the fact that the only way this investment can be funded is by levying consumers with a higher price for electricity. No bank, no commercial lender and certainly no individuals are likely to invest their funds in a project with such a doubtful future.

We should be investing in the future by funding research and application of technology which will improve local grid efficiency, improve the ability to store electricity and the efficiency with which solar power stations generate it.

Ad-interim we should invest no more than is necessary to keep the national grid operational and plan for its dismantling as use of renewable energy grows and dependence on coal fired power stations diminishes. Otherwise, are we not in danger of ending up with a very expensive blanched pachyderm?