As Nuclear steps aside, Renewable Energy steps up to power Europe

As Nuclear steps aside, Renewable Energy steps up to power Europe | 16/08/14
by John Brian Shannon John Brian Shannon

Nuclear reactors are starting to shut down in Europe

It began in earnest in the wake of the Fukushima disaster when Germany inspected its problem-plagued nuclear power plants and decided to take 9 of its nuclear power plants offline in 2011 and the rest offline by 2022.

There is plenty of public support in the country for Germany’s planned nuclear closures, even with the additional fee added to each German electricity bill to pay for nuclear power plant decommissioning, which completes in 2045.

Switzerland likewise has decided to get out of the nuclear power business beginning in 2015 and decommission their nuclear power plants by 2045.

Other European nations are also looking at retiring their nuclear power plants. But the news today is about the UK, Belgium, Germany and Spain.

Heysham_Nuclear_Power_Station UK operated by EDF
Heysham Nuclear Power Station in the UK which is operated by EDF of France. Image courtesy: CleanTechnica.com

In the UK, four (French-operated) EDF reactors built in 1983 have been shut down after one of them was found to have a crack in its centre spine. (EDF stands for Electricity de France which is a French utility responsible for managing many nuclear reactors)

At first only the affected unit was taken offline (in June) but upon further inspection it was determined that the other three were at risk to fail in the coming months. Whether or not these four reactors can be repaired economically — all were scheduled to be decommissioned before 2020.

The shortfall in electrical generation due to these unscheduled nuclear power plant shutdowns has been met by 5 GW of new wind power generation, which has seamlessly stepped in to fill demand.

Additional to that, 5 GW of solar power has been added to the UK grid within the past 5 years. And that’s in cloudy olde England, mates!

In Belgium, 3 out of 5 of their nuclear power plants are offline until December 31, 2014 due to maintenance, sabotage, or terror attacks — depending who you talk to.

Belgium’s Doel 4 reactor experienced a deliberate malfunction last week and workers in the country’s n-plants are henceforth directed to move around inside the plants in pairs.

Also, their Tihange 2 reactor won’t be ready to resume power production until March, 2021. See this continuously-updated list of nuclear power plant shutdowns in Belgium.

Further, the utility has advised citizens that hour-long blackouts will commence in October due to a combination of unexpected n-plant shutdowns and higher demand at that time of year.

Belgian energy company Electrabel said its Doel 4 nuclear reactor would stay offline at least until the end of this year after major damage to its turbine, with the cause confirmed as sabotage.

Doel 4 is the youngest of four reactors at the Doel nuclear plant, 20 km north of Antwerp, Belgium’s second-biggest city.

The country has three more reactors in Tihange, 25 km southwest of the city of Liege.

Doel 1 and 2, which came on line in 1975, are set to close in 2015. Tihange 1, which also started operation in 1975 and was designed to last 30 years, got a 10-year extension till 2015.

The two closed reactors Doel 3 and Tihange 2 were connected to the grid in 1982 and 1983. Doel 4 and Tihange 3, which came on line in 1985, were operating normally until the closure of Doel 4 last week.

The shutdown of Doel 4’s nearly 1 gigawatt (GW) of electricity generating capacity as well as closures of two other reactors (Doel 3 and Tihange 2) for months because of cracks in steel reactor casings adds up to just over 3 GW of Belgian nuclear capacity that is offline, more than half of the total.

In Britain, EDF Energy, owned by France’s EDF, took three of its nuclear reactors offline for inspection on Monday after finding a defect in a reactor of a similar design. – Reuters

In Germany, the nuclear power generation capacity missing since 2011 has been met by a combination of solar, wind, bio, natural gas, and unfortunately some coal. But that sounds worse than it is.

According to the Fraunhofer Institute, renewable energy produced about 81 TWh, or 31% of the nation’s electricity during the first half of 2014. Solar production is up 28%, wind 19% and biomass 7% over last year.

Meanwhile, with the exception of nuclear energy, all conventional sources are producing less. The output from gas powered plants was half of what it had been in 2010 and brown coal powered plants are producing at a similar level to 2010-2012. – CleanTechnica.com

Let’s see what our friends at the Fraunhofer Institute have to say in their comparison of the first half of 2013 vs. the first half of 2014.

German electricity production H1 2013 - H1 2014
Fraunhofer Institute compares energy production between the first half of 2013 and the first half of 2014.

Although unspoken by power company executives operating in Germany, Spain, and some other European countries, the panic felt by traditional power generators is due to the massive changes in ‘their’ market since 2009.

Things move slowly in the utility industry — ten years is seen as a mere eyeblink in time, as the industry changes very little decade over decade. Recent changes must be mind-blowing for European power company executives.

European-union-renewables-chart
European Union renewables by Eurostat — Renewable energy statistics. Licensed under Public domain via Wikimedia Commons This map displays 2012 results with a total of 20-30% renewable energy for 2012, but in 2013 renewable energy in Portugal registered 58.3% overall. By 2014, Portugal expects that 70% of its energy will come from renewable energy.

It occurs to me that the end of the conventional energy stranglehold on Europe parallels the ending of Star Wars VI.

Help me take this mask off

It’s a mask to hide behind when conventional power producers don’t want the facts aired.

Fossil and nuclear don’t want their Subsidies or Externalities advertised. Global fossil fuel and nuclear subsides topped $600 billion dollars in 2014, while the externality cost of fossil and nuclear may be as high as $2 trillion dollars annually. That’s a lot of hiding, right there.

Fossil fuel and nuclear power power producers don’t want the subsidies they’re paid to be publicly advertised — and they don’t want the renewable energy industry to have subsidies at all

Externalities are simply another form of subsidy to the fossil fuel and nuclear power industries which often take the form of massive public healthcare spending or massive environmental spending to mitigate the gigatonnes of toxic airborne emissions, or to monitor or repair environmental catastrophes such as oil spills.

Spain has ended it’s Feed-in-Tariff subsidy scheme for renewable energy, while keeping conventional power producer subsidies in place.

Not only that, suddenly homeowners aren’t allowed to collect power from the Sun or harvest power from the wind unless it is for their own use. Electricity cannot be collected by Spanish residents and then sold to the grid for example, nor to anyone else.

Spain’s government has taken it yet another step in a bid to keep the conventional energy companies from drowning in their tears. After a meteoric rise in wind and solar capacity, Spain has now taxed renewable energy power producers retroactively to 2012 and ruled that renewable energy will be capped to a 7.5% maximum profit. Renewable energy returns over the 7.5% threshold becomes instant tax revenue for the government. (Quite unlike conventional energy producers in the country which can make any amount of profit they want and continue to keep their subsidies)

While all of this has been going on, Spain and Portugal have quietly lowered their combined CO2 output by 21.3% since 2012 (equal to 61.4 million fewer tonnes of CO2) thanks to renewable energy.

But you’ll die

Not only has European renewable energy now stepped up to fill the multiple voids due to nuclear power plant maintenance and sabotage shutdowns, it has scooped incredible market share from conventional power producers.

In January 2014, 91% of the monthly needed Portuguese electricity consumption was generated by renewable sources, although the real figure stands at 78%, as 14% was exported. – Wikipedia

Unwittingly, the German and Spanish power companies have provided the highest possible compliment to the renewable energy industry, which, if publicized would read something like this;

We can’t compete with renewable energy that has equal amounts of subsidy. Therefore, remove the renewable energy subsidy while we keep ‘our’ traditional subsidies, until we can reorient our business model – otherwise, we perish!

Nothing can stop that now

Ending the European renewable energy Feed-in-Tariff schemes will only temporarily slow solar and wind installations as both have reached price-parity in recent months — and that, against still-subsidized conventional power generators!

Even bigger changes are coming to the European electricity grid over the next few years. Nothing can stop that now.

Tell your sister; You were right about me

Conventional power producers in Europe provided secure and reliable power for decades, it was what has powered the European postwar success story — but having the electricity grid all to themselves for decades meant that Europe’s utilities became set in their ways and although powerful, were not able to adapt quickly enough to a new kind of energy with zero toxicity and lower per unit cost.

Renewable energy, at first unguided and inexperienced, quickly found a role for itself and is now able to stand on its own feet without subsidies. Quite unlike conventional power generators.

Considering the sheer scale of the energy changes underway in Europe, conventional energy has been superceded by a superior kind of energy and with surprisingly little drama.

Related Articles

US Consumer Support for Renewables – Highest Level Since 2010

by Silvio Marcacci.

Consumer approval of clean energy 2013 chart via Navigant Research
Consumer approval of clean energy 2013 chart via Navigant Research

Consumer attitudes toward clean energy technologies in America rebounded strongly in 2013 to reach their highest levels since 2010, countering several years of declines in favorability ratings between 2009-2012.

This good news comes from Navigant Research’s 2013 Energy and Environment Consumer Survey, and indicates clean tech may finally be established as a preferred option for consumers despite high-profile conservative attacks.

Overall support for clean energy swung from 2012’s low of 44% to a 51% average favorability in 2013. In fact, out of ten technologies ranging from clean energy to clean transportation to energy efficiency, only one – nuclear power – declined in popularity over the past year.

Consumer support for clean energy 2009-2013 chart via Navigant Research
Consumer support for clean energy 2009-2013 chart via Navigant Research

This Just In – Renewables Rule

Navigant’s survey is the latest in an annual series dating back to 2009, and surveyed over 1,000 people in representative samples across the U.S. during the fourth quarter of 2013. Respondents were asked to share their feelings about each technology and their replies were then compared to previous years to show trends.

Without a doubt, this year’s headline simply reads: renewables rule, especially solar. 79% of respondents favored solar energy, a 10% surge compared to 2012 and just under the all-time high of 81% in 2009. Solar energy also had the lowest unfavorable rating at 6% and the highest “very favorable” rating at 50% – not a surprise if you consider 2013’s record-setting pace for new US solar installations.

Wind energy ranked second overall out of all surveyed technologies, coming in just behind solar in overall favorability (72%), “very favorable” (42%), and unfavorable (7%), despite the controversy over renewing the Production Tax Credit. When combined, these two renewable energy technologies appear to have cemented themselves among Americans. “Consumers consider these renewable energies to be important pieces in the power generation portfolio of the future,” says the survey’s white paper.

Clean Transportation Pulls Ahead

But positive attitudes toward clean energy aren’t just limited to our power sockets – they also extend to our highways and byways. Clean transportation options pulled ahead of the pack in 2013, led by hybrid and electric vehicles.

Hybrid vehicles ranked third in overall favorability with 67% of consumers supporting them, up an incredible 13% from 2012, and third lowest with just an 8% unfavorable response rate. Interestingly, the bulk of unfavorable responses for hybrids came from those with a high school degree or lower education.

While electric vehicles came in just behind hybrids at 61% favorability, they jumped 12% from just a 49% approval rate in just one year, hinting the increasing number of EVs on US roads could be making them more attractive to drivers.

Lack Of Understanding = Lack Of Support

Ironically, the same trend of consumers equating more solar panels and more EVs on the road to higher approval ratings may be the reason smart grid and green building concepts continued to rank poorly.

The concept of a smart grid was viewed favorably by just 37% of respondents, but unfavorably by just 6% of consumers – the same negative rank as solar energy. 57% of consumers said they either didn’t have an opinion or were neutral on smart grid technology, meaning the potential for support exists but educational efforts are lagging by utilities.

Smart meters in particular also showed the same trend as smart grid in general, with 43% viewing them favorable and 10% viewing them unfavorable but 47% saying they were neutral or unfamiliar with the technology.

Consumer awareness of LEED certification chart via Navigant Research
Consumer awareness of LEED certification chart via Navigant Research

This trend was most apparent, however, when it came to LEED certification. A massive 72% of all respondents said they were either unfamiliar (41%) or had no opinion (32%) of green building. While this is somewhat surprising considering green buildings could be half of all US construction by 2016, the potential is still bright considering those who knew about LEED supported it at a 4-to-1 ratio.

Seeing Is Believing For Clean Energy

Navigant’s annual survey generates multiple possibilities in the evolution of consumer support for clean energy technologies, but the underlying story is clear: When people learn about clean tech by seeing it in their everyday lives, they support it in large numbers.

That’s a powerful message to throw back at fossil fuel proponents or poorly informed media reports that argue support for clean energy is a mistake, and is a good omen for our potential to decarbonize and build a sustainable future.

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This article, US Consumer Support For Clean Energy At Highest Level Since 2010, is syndicated from Clean Technica and is posted here with permission.

About the Author

Silvio MarcacciSilvio Marcacci Silvio is Principal at Marcacci Communications, a full-service clean energy and climate-focused public relations company based in Washington, D.C.

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The Top 10 Energy Stories of 2013

1. Subsidy Wars: Fossil Fuels vs. Renewable Energy

Some are saying it’s time to change the game on subsidies and climate — and that the obscene subsidies paid to the fossil fuel industry must end.

Many in the renewable energy sector would be happy with a level playing field — where renewable energy would receive the same amount of subsidy dollars per kilowatt hour as fossil fuel or nuclear power have felt they were entitled to for decades. Source: IEA. 2013 – Redrawing the energy climate map

2. Fossil Fuels get a $550 Billion Dollar Christmas Present

Fossil fuels have dominated the global energy market and even the global economy for a long time. You would think that such mature industries wouldn’t need government subsidies — their annual revenue and profits are mind-boggling. However, with money comes power. And that money-power has a stranglehold on governments of the world such that it convinces governments to give them even more money in subsidies.

Another recent study comes to the conclusion that the total annual subsidies fossil fuel companies get from governments (in just the developed world) comes to about half a trillion dollars. This follows a 2010 study from the International Energy Agency that found fossil fuel industries got $550 billion in annual subsidies.

3. Unlike Fossil Fuels, Renewable Energy subsidies expire Jan 1, 2014

The end of 2013, just like the end of 2012, 2008, 2005, 2003 and many years prior, brings with it the expiration of the Production Tax Credit for Renewable Energy (PTC).

Thanks to a long history of federal support, the incumbent fossil fuel sectors enjoy solid business certainty provided by permanent, embedded federal tax breaks.

Renewable energy, however, being the new kid on the block, does not have this luxury.

4. Utilities Face a ‘Perfect Storm’ From Falling Renewables Costs

A new report from leading utilities analysts at investment bank UBS suggests that energy utilities in Europe, North America and Australia are facing a ‘perfect storm’ from the falling cost of renewables, energy efficiency and falling demand, and may not be able to sustain their business models.

The report is entitled; Can utilities survive in their current form? – and is the latest in a series of assessments, reviews and analysis that point to the severe disruption to the centralized generation model, and the demand and supply dynamics that have governed the industry for the past few decades. To briefly summarise the UBS response to its own question, the answer is No.

UBS says the biggest impact on the current utility model will occur in developed markets, where renewables in general and distributed solar in particular will take more of an already depleted “demand pie.”

5. Obama Pushes the Big ‘Green’ Button

Part of President Obama’s executive order of December 5th 2013,  included directing the federal government to triple its use of renewable energy by 2020. Obama instructed agencies to incorporate “Green Button” data further into their energy management practices.

First unveiled in 2012, the Green Button Initiative is literally a green button on a energy utility’s website that allows consumers to download their energy consumption data in a format that’s easy to understand.

6. Obama: Federal Government Has 7 Years to Triple Renewable Energy Use

On Thursday, the administration released an executive order directing the federal government to triple its use of renewable energy by 2020, which would bring the government’s renewable energy usage to 20 percent. The order will apply to all federal agencies, including the military.

The Associated Press, which obtained a copy of the executive order before it was published, noted that the federal government itself occupies approximately 500,000 buildings and operates 600,000 vehicles, and purchases more than $500 billion per year in goods and services. The order does not disclose the cost of the transition, but says the goal will be reached “to the extent economically feasible and technically practicable.”

7. Nissan Leaf Fleets Can Power Offices and Homes

You may have heard of the vehicle-to-grid (V2G) concept in which electric vehicles can supply their battery power to electricity grids during peak hours and other electricity shortages. Nissan recently decided to apply a somewhat similar concept to the Nissan Advanced Technology Center in Atsugi City, Japan. The company calls it “Vehicle-to-Building.” During peak hours, when electricity prices are highest, the vehicles supply their battery power to the building, enabling them to avoid this peak charge.

8. 13 Brilliant Energy Breakthroughs of 2013

While the news about climate change seems to get worse every day, the rapidly improving technology, declining costs, and increasing accessibility of clean energy are the true bright spots in the march towards a zero-carbon future. 2013 had more clean energy milestones than we could fit on one page, but here are thirteen of the key breakthroughs that happened this year.

9. U.S. Deficit Could Be Cut by 1 Trillion Using Carbon Tax

A carbon tax of $25 per ton of emissions would cut the deficit by $1 trillion over a decade, according to the Congressional Budget Office (CBO).

The finding was part of a report CBO just put out detailing 103 different ways — in terms of both cutting spending and raising revenue — the U.S. government could reduce its deficit. At a total haul of $1.06 trillion by 2021, the carbon tax was far and away the biggest deficit reducer of any option listed.

It’s a policy that enjoys widespread support amongst politicians, industry spokespersons, economists, and polling of the general public.

10. 100% Renewable Energy Powers All These Places All The Time

A handy selection of jurisdictions where renewable energy has taken over completely.

Iceland. (Yes, all of it) runs on clean, renewable energy.

Iceland: A 100% renewables example in the modern era

Iceland

Tokelau. A South Pacific Island. Runs on 100% Solar Power. Used to burn shiploads of expensive diesel and kerosene to create electrical power.

An Island (Tokelau) Powered 100% By Solar Energy

An Island (Tokelau) Powered 100% By Solar Energy →

Samsø. An Island in Denmark. Citizen cooperative formed to power the entire Island. Sells excess electricity to mainland Denmark. Cooperative makes a tidy profit.

Introducing Samsø, A 100% Wind-Powered Island

blog_2013_10_23-1
Güssing. Formerly near-bankrupt town in Austria now runs on solar and locally-sourced biofuels. They sell their surplus electricity to neighbouring towns. Oh, and they export solar panels and biofuel by the truckload. And town coffers are filling with clean gold.

Güssing, Austria Powered Entirely By Renewable Energy

blog_2013_10_08-1

The renewable energy stories will get even better in 2014, as renewable energy ‘comes into its own’ around the world.

Happy 2014 and thanks for reading JBS News!

TEPCO President: Fukushima Was “A Warning To The World”

Originally published on Planetsave by Sandy Dechert

TEPCO workers are using a 91-ton cask to transport nuclear fuel from the damaged secondary containment pool at Reactor Unit 4. (Photo: TEPCO.)
TEPCO workers lower the 91-ton shielded transfer cask in preparation for relocating unused nuclear fuel. Photo courtesy of TEPCO

Today, officials at Tokyo Electric Power Company could breathe a sigh of relief.

Using remote-controlled cranes, workers at Fukushima Daiichi cleared some of the dangerously radioactive uranium fuel rod racks from the upper-story cooling pond of damaged Reactor Unit 4.

You can see TEPCO’s video of parts of the operation here.

Technicians loaded unused fuel assemblies underwater from the unit’s secondary containment into a specially designed steel-walled canister (see photo), which looks like a huge home hot water heater and must be decontaminated every time it is transferred from radioactive water to air. At 1:2

0 this afternoon (Tokyo time), the operators began the process of moving the cask onto the truck that would carry it to a safer storage location at ground level nearby. TEPCO has reported that the transfer has gone smoothly so far. After the fresh fuel rods are removed, the company will tackle the problem of moving the reactor’s spent fuel, which is hotter and more dangerous than fresh fuel.

“TEPCO has worked out individual scenarios to deal with stoppages of pool cooling, water leaks from the pools, a massive earthquake, a fire, and an accident involving the trailer, but not for dealing with a situation in which two or more incidents occur simultaneously. Therefore it must proceed in an extremely careful[ly] manner,” the Japan Times reported earlier today.

TEPCO president acknowledges miscalculations

The president of the utility, Naomi Hirose, told The Guardian this week that:

“What happened at Fukushima was, yes, a warning to the world.” Hirose stated that “We made a lot of excuses to ourselves” and unwarranted assumptions that others had discussed adequate “counter-measures” for large tsunamis.

“We tried to persuade people that nuclear power is 100% safe….But we have to explain, no matter how small a possibility, what if this [safety] barrier is broken? We have to prepare a plan if something happens.… It is easy to say this is almost perfect so we don’t have to worry about it. But we have to keep thinking: what if.…”

International oversight visit

Adequacy of international consultation has been an issue since the incident occurred. Concerns have increased since the revelation of TEPCO’s apparent bravado and inattention early in the process. Although TEPCO has performed nuclear fuel transfers before without incident, this is the first time the company has had to deal with a reactor damaged by earthquake, flooding, and explosions.

Apprehension will be mitigated somewhat when 19 experts from the International Atomic Energy Agency visit the site from November 25 to December 4 to assess the success of this week’s mission and the current state of TEPCO’s efforts to prevent contaminated water from leaking out of multiple storage tanks. The Japanese government requested the visit. Hahn Pil-soo, the IAEA’s director of radiation, transport, and waste safety, will be on the team.

IAEA, the world’s clearinghouse and watchdog for nuclear operations, formed in 1957 as energy firms began installing nuclear plants across the world on a wide scale. Vienna is the agency’s headquarters. IAEA’s goal is to promote safe, secure and peaceful nuclear technologies.

Next step in decommissioning

Japan News describes the second phase of the reactor decommissioning process, which will begin when the Unit 4 work has finished, possibly as early as 2015. The company then needs to tackle the problem of recovering spent fuel from Reactor Units 1-3.

These reactors were online at the time of the magnitude 9 Great East Japan subsea earthquake, tsunami, and explosions that killed more than 18,000 people in March 2011. They present unique challenges because at least some of their fuel melted down, the molten fuel’s location below the reactors is presently unknown, and its chemical composition is likely more toxic because it contains more plutonium and unstable isotopes. The tricky core meltdown work will probably start around 2020.

In a word of caution to the developers of eight proposed British nuclear generating stations and of similar facilities across the globe, TEPCO president Hirose offered the following advice:

“Try to examine all the possibilities, no matter how small they are, and don’t think any single counter-measure is foolproof. Think about all different kinds of small counter-measures, not just one big solution. There’s not one single answer.”

Hirose now feels that Japan will achieve its best electric power results through energy diversification, using oil, gas, and renewables as well as nuclear generation. Before the disaster at Fukushima, Japan had planned to expand nuclear power to supply half the nation’s energy needs.

TEPCO’s official position, stated on its website, is that “Nuclear power generation has excellent long-term prospects for the stable procurement of nuclear fuel and for effectively countering global warming problems.”

Forty percent of the company’s revenues have historically come from nuclear power generation

Presently, all 50 of Japan’s nuclear plants (17 of which are owned by TEPCO) have been shut down. Fukushima Daiichi Units 1-4 are unusable, and the company has just bowed to a government request that the other two reactors (5 and 6) on the site be mothballed.

Many in Japan, from ordinary people to three high former government officials, believe Japan should abandon nuclear power completely.

Uncertainty about nuclear renewal and the high cost of using carbon-based technology to fill in for the power previously generated by nuclear plants (one third of Japan’s electricity) forced the country this week to renege on an earlier promise and greatly lower its climate change goals.

This article, TEPCO President: Fukushima Was “A Warning To The World”, is syndicated from Clean Technica and is posted here with permission.

Fossil Fuels and Utilities At Risk In New Report — Energy Darwinism At Work

by Giles Parkinson

.

Originally published on RenewEconomy

A major new report from investment banking giant Citi has highlighted the dramatic changes sweeping the world’s energy industry, and is being used as a clarion call to review the estimated $37 trillion that will be invested in energy infrastructure and projects over the coming two decades.

In a study titled “Energy Darwinism – the evolution of the energy industry“ – Citi says the global energy mix is shifting more rapidly than is widely appreciated, and this has major implications for generators, utilities, and consumers, and for exporters of fossil fuels such as Australia.

“Consumers face economically viable choices and alternatives in the coming years which were not foreseen 5 years ago,” the analysts write – pointing mostly to the “alarming” falls in the cost of solar.

It says the pace of change in the last five years has been dramatic and will likely accelerate, not slow. These changes will flow through to suppliers. Conventional fuels and technologies are likely to be substituted, or suffer reduced demand in the best case scenario.

(It should be noted here that the six analysts involved are the managing directors of research in Citi’s mining, oil and gas, utilities, commodities and alternative energy sectors, so they are not just a band of beatific beatniks).

Citi says fossil fuels further up the cost curve are most at risk, and new projects built now will face competition with new technologies within the first quarter of their anticipated 25-year life. “These project entail significantly more risk than is widely recognised,” the analysts write.

“There will always be more subjective choice factors involved such as fuel diversity and energy independence that may offset cold, hard economics, but investors, companies and governments must consider the sea change that we believe is only just beginning. “

It says utilities are most at risk because the “very nature” of their business is likely to change. Utilities in their current form could lose half their addressable market to energy efficiency, solar and storage, and other distributed generation.

“Renewables and decentralised energy are impacting not only how utilities can earn money, but also what they do to earn this money,” Citi says. “There are opportunities for new avenues for investment and growth in terms of smart grid, storage, and downstream services. “The question is whether utilities grasp that opportunity and evolve themselves.”

Perhaps the key graph in the report is this one below. It doesn’t mean much at first glance, but Citi says it is critical for understanding the factors at play.

.citi-darwin

In the first quartile it notes that gas (the light grey line) dominates the first quartile of the integrated cost curve, largely thanks to the advent of shale.  So that is probably true of the US, but not many other places (in Australia, gas is really expensive, or about to be). The key is what happens in the other quartiles.

In the final quartile, it notes that solar is already intersecting with gas, which is why utilities in the US are dumping plans for peaking gas stations in favour of solar (red line). And this also means that solar steal the most valuable part of the electricity generation curve because it produces during the day when prices are highest.

This is already impacting Germany, where gas is expensive and gas-fired generators are going out of business, and it might have cited Australia too, where returns for incumbent fossil fuel generators are falling dramatically and so it their running time. Wind farms such as Collgar in WA are running at higher capacity factors than black coal generators in NSW.

Citi notes that wind (orange line) is already overshadowing coal (black) in the second quartile. But here’s the conclusion that will stun those locked into a conventional view of generation: Citi says that while wind’s intermittency is an issue, with more widespread national adoption it begins to exhibit more baseload characteristics (i.e. it runs more continuously on an aggregated basis). “Hence it becomes a viable option, without the risk of low utilisation rates in developed markets, commodity price risk or associated cost of carbon risks.”

Citi notes that solar is exhibiting “alarming” (for whom!?!?!?)  learning rates of around 30 per cent (that is for every doubling of installed capacity). Wind is evolving at a slower ‘mechanical’ learning rate of 7.4 per cent, and gas is evolving due to the emergence of fracking and the gradual development and improvement of new extraction technologies.

But Citi says that coal is using largely unchanged practices and shows nothing like the same pace of evolution as the other electricity generation fuels or technologies. It notes nuclear has seen its costs rise in developed markets since the 1970’s, largely due to increased safety requirements and smaller build-out.

As Citi notes: “Thus is not a ‘tomorrow’ story. We are already seeing utilities altering investment plans, even in the shale-driven U.S., with examples of utilities switching plans for peak-shaving gas plants, and installing solar farms in their stead,” it says.

“The same is true for other fuels, for example the reluctance on the part of utilities to build new nuclear in the UK, or the avoidance of coal in some markets due to uncertainty over pricing, likely utilisation rates and or pollution.

“Even in China, we believe that coal demand is likely to peak this decade as its generation mix starts to shift,” it says. It notes India’s coal demand will grow much slow than expected, and nuclear – and the capital costs involved – make it unsuitable for markets with such uncertainty.

On solar, Citi says the price fall of solar panels has exceeded all expectations, resulting in cost parity being achieved in certain areas much more quickly. “The key point about the future is that these fast ‘learning rates’ are likely to continue, meaning that the technology just keeps getting cheaper. At the same time, the alternatives of conventional fossil fuels are likely to gradually become more expensive.”

On wind, it says technology is evolving more slowly than solar but it has the advantages of offering more ‘base-load’-like characteristics in running more of the time, and perhaps most importantly is lower cost than solar, allowing the technology to compete against conventional generation at lower wholesale prices.

It says storage is still a nascent industry, but so was solar just 5 to 6 years ago. “The increasing levels of investment and the emergence of subsidy schemes which drive volumes could lead to similarly dramatic reductions in cost as those seen in solar, which would then drive the virtuous circle of improving economics and volume adoption,” it says.

And how fast can evolution take place? Citi provides this graph below to illustrate the point.

.citi-waterfall

Citi says the history of the energy industry tells us that change is never gradual. New technologies are embraced at the expense of incumbents. Today, as conventional fuels become gradually more scarce and expensive and as new technologies improve, the long term transformation becomes ever more inevitable. It says it would be naive to think otherwise.

“If we look at the situation facing European utilities, the future looks particularly challenging, given a potential halving of their addressable market, an ageing fleet, and deeper questions about what a utility will look like in 5, 10 or 20 years’ time,” it writes.

“In transportation, the emergence of electric vehicles, and more importantly the rise of oil to gas switching show that evolution is not restricted to the power generation market.”

“Given the long term nature of upstream fossil fuel and power generation projects, this substitutional process and the relative pace of evolution is vitally important to understand.

“The sums of capital being invested are vast; the International Energy Agency (IEA) forecast that $37 trillion will be invested in primary energy between 2012 and 2035, with $10 trillion of that in power generation alone. Clearly the value at risk from plant or the fuels that supply them becoming uneconomic in certain regions, both in terms of upstream assets and power generation, is enormous.

“Quite simply the sums of money at stake in terms of investment in energy over the coming decades are staggering, and getting a choice of fuel or technology ‘wrong’ could have dramatic consequences for both countries and companies, be they upstream oil & gas companies, utilities, industrial consumers, renewable developers of power generation equipment providers.”

So, could someone please ensure that this report is stuck under the nose of Australia’s energy ministers, be they federal or state, and all the middle aged engineers and fossil-fuel careerists that advise them? And mark it Must Read.

(Author’s disclaimer: I am middle aged).

 

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This article, Fossil Fuels and Utilities At Risk In New Report — Energy Darwinism At Work, is syndicated from Clean Technica and is posted here with permission.

 

About the Author

Giles Parkinson is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia’s energy grid with great interest.

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