1. Semester 1, 2018 Week 3, Tuesday 13 March 2018 Professor John Andrews
Master of Engineering (Sustainable Energy) Sustainable Energy Systems and Design MIET2129
Semester 1, 2018
Week 3, Tuesday 13 March 2018
Professor John Andrews
Sustainable Energy Systems and Design MIET2129 RMIT University

2. Sustainable Energy Systems and Design MIET2129 RMIT University
This week’s session
Triple bottom line evaluation - example
Levelised cost of energy (LCOE)
Electricity supply scenarios to meet Australian greenhouse targets – evaluation
The Australian Government’s Energy Guarantee
Incorporating uncertainty into economic and technological analyses
Your project topics
Sustainable Energy Systems and Design MIET2129 RMIT University

3. TBL evaluation: example
From slide 26, week 2 presentation
Sustainable Energy Systems and Design MIET2129 RMIT University

4. Levelised Cost of Electricity (LCOE)
The constant unit price of electricity the generator must charge to gain its set rate of return over lifetime of project ($/MWh or c/kWh)
Illustrate with spreadsheet
Also equal to:
[Annual capital charge (at specified discount rate) + annual recurrent cost (constant)] / … …annual electricity supplied
Real discount rate: 5% or other
Sustainable Energy Systems and Design MIET2129 RMIT University

5. Sustainable Energy Systems and Design MIET2129 RMIT University
CSIRO (2017)
Sustainable Energy Systems and Design MIET2129 RMIT University

6. Aims of roadmap
To help inform the Australian Government’s 2017 climate policy review by providing an independent science-based analysis of technology options in the energy sector that can help Australia meet its 2030 emission reduction target (Paris Agreement, 2015)
To address the energy ‘trilemma’: security, affordability and environmental sustainability:
these become the main criteria for the evaluation

7. LCOE: CSIRO Low emissions technology report, 2017 (App B)
1 $/MWh = 0.1 c/kWh
CCS adds $/MWh = 4.5 – 5 c/kWh
Sustainable Energy Systems and Design MIET2129 RMIT University

8. LCOE: CSIRO Low emissions technology report, 2017 (App B) -2
Sustainable Energy Systems and Design MIET2129 RMIT University

9. LCOE: CSIRO Low emissions technology report, 2017 (App B) -2
Sustainable Energy Systems and Design MIET2129 RMIT University

10. Sustainable Energy Systems and Design MIET2129 RMIT University
Electricity supply scenarios to meet Australian greenhouse targets – evaluation
Sustainable Energy Systems and Design MIET2129 RMIT University

11. Australia’s Paris emission target (Nov 2016)
26-28% reduction in GH emissions by 2030 compared to 2005 levels
Strengthen abatement to limit increase in global mean surface temperature to less than 2 C above pre-industrial levels, with efforts to keep to 1.5 C
Recognises world will need to achieve zero net emissions in second half of this century
Sustainable Energy Systems and Design MIET2129 RMIT University

12. Pathways examined

13. Sustainable Energy Systems and Design MIET2129 RMIT University
Findings
Transition to low-emissions economy often framed in terms of costs, but will also create demand for new products and services in Australia and for export
Sustainable Energy Systems and Design MIET2129 RMIT University

14. Sustainable Energy Systems and Design MIET2129 RMIT University

15. Sustainable Energy Systems and Design MIET2129 RMIT University

16. Sustainable Energy Systems and Design MIET2129 RMIT University

17. Sustainable Energy Systems and Design MIET2129 RMIT University

18. Sustainable Energy Systems and Design MIET2129 RMIT University

19. Schedule for consultation and decision
Sustainable Energy Systems and Design MIET2129 RMIT University

20. Aims of Energy Guarantee
To bring together climate and energy policy
To ensure the electricity sector meets its share of Australia’s international obligation to reduce greenhouse emissions
To support the reliability of our electricity system while achieving GH targets
To bring down electricity prices.
Sustainable Energy Systems and Design MIET2129 RMIT University

21. Emissions requirement
Must meet Electricity sector’s share (~one third) of reducing Australia’s emissions by per cent on 2005 levels by Six steps: 1. Forecast total electricity demand (e.g a particular year, AEMO forecast) 2. Establish allowed emissions in meeting this demand consistent with meeting the targetted reduction in total GH emissions. 3. Divide allowed emissions by total electricity suppplied (each per year) to get a target emissions intensity for that year.
Sustainable Energy Systems and Design MIET2129 RMIT University

22. Emissions requirement - 2
4. Require all retailers to buy their total electricity in the National Electricity Market from a mix of generation technologies that gave an average emissions intensity equal to (or below) the required emission intensity over that year. 5. Each retailer clearly would seek the least cost way of supplying their total electricity at the required emission intensity. 6. Required emission intensity would fall each year in line with the required trajectory of falling total emissions from the electricity sector
Sustainable Energy Systems and Design MIET2129 RMIT University

23. Commonwealth Government role
Set emission reduction target for the NEM,
Set rules for treatment of emissions-intensive trade-exposed activities [exempt from emissions requirement?]
Set eligibility of offsets (purchase of abatement from other sources nationally and internationally .
Sustainable Energy Systems and Design MIET2129 RMIT University

24. Sustainable Energy Systems and Design MIET2129 RMIT University
GH emissions target
Government considering setting this the target as a trajectory of annual average emissions per MWh levels for retailers in the NEM.
Trajectory consistent with the 2030 emissions reduction target for the electricity sector of minus 26 per cent on 2005 levels.
Meeting absolute target depends on total annual electricity consumption. The absolute reduction determines climate change impact
Sustainable Energy Systems and Design MIET2129 RMIT University

25. Reliability requirement
Energy Security Board’s ‘eight high-level steps’:
1. Forecasting by AEMO of the reliability gap [deficiency in dispatchable power, in MW in any NEM region over a forecast period].
2. Updating reliability gap by AEMO [e.g. to reflect retirement of a particular generator].
3. Triggering the requirement: If reliability gap identified, the market expected to invest in new capacity or offer additional existing capacity within a set period in advance of the forecast reliability gap. But if retailers do not invest sufficiently, reliability requirement is ‘triggered’ and retailers must then respond.
Sustainable Energy Systems and Design MIET2129 RMIT University

26. Reliability requirement - 2
4. Qualifying instruments: Retailers incentivised [how?] to make investments or enter into contracts to alleviate the gap. 5. Allocating the requirement: gap (in MW) will be ‘allocated’ proportionatle [somehow?] to each retailer 6. Compliance: The Australian Energy Regulator will assess whether retailers have met their reliability requirement. 7. Procurer of last resort: If retailers do not meet requirement by compliance date, AEMO will procure resources to fill any remaining gap. 8. Penalties: Penalties to retailers that do not meet their reliability requirement.
Sustainable Energy Systems and Design MIET2129 RMIT University

27. Sustainable Energy Systems and Design MIET2129 RMIT University
Difficulties?
As average emission intensity is lowered to meet the national GH reduction target, demand for fossil-fuelled power will decrease, and there will be an oversupply
Fossil-fuel power price lowered, making it more difficult for these generators to remain economically viable?
Demand for zero emission renewable power will increase:
Price increase of RE for retailers and hence consumers
Price increase of RE bought by private households and businesses for direct supply will increase
No incentives for private investment by household, commercial and industrial consumers in zero-emission renewable power and energy efficiency measures that reduce consumption
Sustainable Energy Systems and Design MIET2129 RMIT University

28. Sustainable Energy Systems and Design MIET2129 RMIT University
Difficulties - 2
Required quantity of dispatchable power will keep demand for fossil-fuel power up, but will this be consistent with meeting target average emission intensity?
unless renewables + storage come in
Harder for renewables to compete as price of fossil-fuel power falls
Regulatory complexity (very bureaucratic)
Sustainable Energy Systems and Design MIET2129 RMIT University

29. Sustainable Energy Systems and Design MIET2129 RMIT University
Advantages
No price on carbon as with Emissions Trading (ET), so price of fossil-fuel power kept lower
No complicated, unpredictable ET market for emission certificates
Guarantee, via regulation, of meeting both emission reduction target, and reliability requirement each year, while ET does not address reliability
Sustainable Energy Systems and Design MIET2129 RMIT University

30. Incorporating uncertainty into economic and technological analyses
Sustainable Energy Systems and Design MIET2129 RMIT University

31. Probability distribution for NPV
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32. Monte Carlo method for generating the probability distribution for NPV
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33. Sustainable Energy Systems and Design MIET2129 RMIT University
Project topics
PROJECT TOPICS – post your project brief on Canvas/Assignments by end of week 5, 30/03/18 if you want feedback
Sustainable Energy Systems and Design MIET2129 RMIT University

34. Project topic discussions
Prof. John Andrews
Dr Biddyut Paul