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Presentation by Ivor Frischknecht, CEO ARENA at Brisbane Global Café


Speeches & presentations


13 November 2014



ARENA CEO Ivor Frischknecht’s presentation at Brisbane Global Café, Deep Dive Session: “Evolution v Revolution: Possible Futures of the Electricity System”

< sound of diesel generator >

That is the sound that children and their families in over 50 communities in the Northern Territory, 39 communities in remote Queensland, and many other isolated communities around Australia, have to listen to in order to enjoy the benefits of electricity.

Each year 1.6 million litres of diesel are trucked into the Aboriginal community of Doomadgee, located in the Queensland gulf country, where those children go to school.

Fuel tanks are needed at Doomadgee to store the almost 1 million litres of diesel needed by the community to make it through the wet season, which restricts road access from December to May each year.

Sometimes these tanks leak, sometimes there isn’t enough fuel stored in them to last to the next delivery, and if these tanks run dry that means no electricity.

Fuel tankers deliver the diesel to Australia’s remote communities. Doomadgee has one almost every week.

It costs a lot of money to drive this diesel around and to store it. The Northern Territory Government subsidises remote communities to the tune of over $60 million annually.

And the Queensland Government spends about $100 million each year keeping these isolated systems operating.

It is not just remote communities that put up with fossil fuel as part of their energy system.

Particulate emissions from diesel and coal plants are also well known to cause respiratory illness, not to mention unsightly smog. Australia is not immune from this, as we know from the Morwell coal mine fire that occurred in Victoria earlier this year.

I’m going to show you why fossil fuels will be displaced by renewable energy for power generation over the next few decades.

That displacement will happen whether or not there is a high price on carbon, or because of mandated minimum levels of renewable energy.

It will happen because:

  • renewable energy is cheaper
  • people want a cleaner, quieter and healthier source of energy with the same level of reliability we’ve come to expect.

Yes, the transition will be disruptive, but there are things we can do to make it easier.

What is the cheapest form of electricity generation today? Coal; it is cheaper than all other forms of electricity generation if a plant is fully depreciated.

However, many power plants are approaching the end of their useful lives in Australia, as is the case in the US and much of Europe. That means new ones will need to be built.

Building a new wind farm is cheaper than a coal-fired power station. That is on the basis of kilowatt or megawatt hours produced, so it takes into account that the wind isn’t always blowing.

Not only is solar power coming down fastest in cost, it also has the advantage of being able to be built at almost any scale: on residential rooftops or attached to road signs, or on a huge scale, operating like a large wind farm or coal fired thermal power station.

Renewable energy relies on free resources and is very cheap to run once the solar or wind farm is built. That means its costs are very predictable, especially against gas or diesel, which have a high and unpredictable fuel cost.[1]

Renewables are being installed in remote communities today – often without the need for subsidies.

I’ve already talked about cleaner, quieter and healthier. I won’t belabour those points; they are obvious to most.

What is less obvious is that renewable energy can provide a reliable source of electricity. Electricity systems always need to match demand and supply exactly.

We can’t easily store excess electricity for later use, the way we store grain in a silo. So how does this work when solar energy depends on the sun?

At low levels of renewable energy penetration, which is what we have in most systems in the world today, renewable energy simply acts like a reduction in load. Generators can compensate for load fluctuations and so they can also cope with changes in the generation of solar or wind energy.

With a large system, variable output tends to be evened out. This is especially true for wind: there is rarely a time when the wind is not blowing somewhere.

Often wind and solar are complementary, in the sense that it is windy in the afternoon and evening while it is most sunny in the middle of the day.

Then we need to predict renewable energy output. Australia already has an accurate wind energy forecasting system.

A solar generation forecasting system is currently being implemented with ARENA’s help. This allows other generators, whether fossil fuel or dispatchable renewables, like hydro, biomass or geothermal, to be turned on or off as required.

The use of energy has a huge capacity to adjust to generation. For example, water and sewerage pumping can be turned on and off. Large users, like desalination plants and aluminium smelters can increase or decrease their use based on the availability of energy.

And with the deployment of smart meters, households or small businesses will be able to opt into arrangements with their retailer that give the network the ability to decrease loads.

This would mean turning down air conditioners, or turning off pool pumps or hot water heaters for a few tens of minutes – perhaps an hour. Many of the appliances are already available with the right technology built in.

We now need the regulatory environment to catch up. California is ahead of Australia in this respect, so we can learn from them.

Lastly, at high levels of penetration, and this is one of the important things we are learning from off-grid systems where renewable energy penetration can be very high, a combination of clever control systems and some potentially expensive storage, such as battery, pumped hydro, compressed air, or thermal storage in a solar thermal system can eliminate the need for the last 20-30% of fossil fuel energy, which by this stage would consist of relatively low emissions gas peaking plants.

The recently completed King Island Renewable Energy Project, with support from ARENA, was one of the first systems in the world to supply 100% of electricity to a mini-grid from renewable energy, while demonstrating an improvement in power quality/reliability over the previous diesel.

This is the only piece to the puzzle that is not yet cost effective and could still benefit from technical innovation.

It often costs more when we do it the first few times.

Remote areas that do deploy solar often prefer to keep the diesel generators running on standby, in case something goes wrong with their solar power. This of course reduces the diesel savings. But as they gain experience, they’ll treat solar power like other forms.

Building contractors who bid to construct solar farms need to add big contingency margins to their bids because they don’t know what will go wrong.

Supply chains need to be established.

IXL is an autoparts manufacturing company based in Geelong. In 2017 Australia will cease making cars, but IXL has started making frames for solar panels—on a large scale. There will be 1.35M panels at AGL’s Nyngan solar farm alone. However, they’ve never done this before. They needed to manufacture tooling for their plant. They need to learn how to optimise their manufacturing processes.

ARENA is able to help pay for some of these additional costs.

In some cases, people have come to ARENA asking for a renewable energy grant only to realise during the due diligence process that their project is in fact profitable without a subsidy.

There will be disruption and the losers potentially will include much of the existing generation industry. As is often the case, the losers are a small number of highly impacted, powerful interests, whereas those who stand to benefit are relatively small and weak. That makes change hard. The transition will inevitably be opposed.

We are working with incumbent network participants to help them see the opportunity and are supporting some of their first deployments, particularly in remote locations.

So to conclude…

Renewable energy is cheaper, cleaner, quieter, healthier and just as reliable.

The transition will cost money – which provides the case for public support.

And agencies like ARENA will help make the inevitable change easier for all.

You too can participate in this transition.

  • You can put solar on your roof and save yourself some money.
  • You should help ensure that the regulatory system isn’t biased in favour of the status quo and facilitate international information sharing so that best practices become well known globally.
  • And we should all try to ensure there is policy support for the transition process because that will reduce opposition.

Now listen ……< silence >

That is the sound remote communities are increasingly hearing as they transition to renewable energy.

Thank you.


[1] Capital is currently abundant and in much of the world low risk investments can be done at a very low cost. This is likely to continue long term ie. the high up front capital cost is likely to become a lesser problem over time.