If Australia is going to meet its targets on reducing emissions from its energy sector and keeping energy prices under control, it’s going to need some revolutionary thinking from somewhere, writes Giles Parkinson.

If Australia is going to meet its targets on reducing emissions from its energy sector and keeping energy prices under control, it’s going to need some revolutionary thinking from somewhere. And it needs to come quick, because the decisions taken over the next couple of years on spending tens of billions of dollar in energy infrastructure is likely to lock Australia into a path from where it will be difficult to reverse. Are the policy makers listening?

A new report by the University of Technology’s Institute of Sustainable Futures released today throws up a serious challenge to the network operators who plan to spend $45 billion on network upgrades in the current five-year period, and will likely do the same in the next.

The report, Think Small: The Australian Decentralised Energy Roadmap, says one third of this expenditure — $15 billion in the current period — could be avoided if Australia adopted decentralised energy technologies, such as efficient use of energy, peak load management and distributed generation, which means generating plants of 30MW or below, such as small wind farms, biomass plants, solar farms, rooftop PV, small hydro, fuel cells, cogeneration and trigeneration. The study, completed in collaboration with the CSIRO and four other universities, says these are the quickest and cheapest options to reducing emissions and meeting peak demand.

The lowest-cost deployment of decentralised energy could achieve more than $2.8 billion in annual savings in consumer energy costs, and cut carbon emissions by 4.5% below business as usual. But it could be more ambitious: the study found that 7000 MW of coal-fired generation capacity could be shut down by 2020 and replaced, primarily, with distributed energy, renewables and some peaking gas plants. Not only would this cut annual energy costs by 5% below business as usual, it would reduce 2020 electricity sector emissions by 35.8 MtCO2e per annum — a 15.8% emissions reduction compared to BAU — and at a net saving to consumers.

Australia, because of its reliance on centralised fossil fuel power, has one of the lowest percentages of distributed energy in the world — at 5.4% of capacity compared to the global average of more than 11% — and its energy efficiency is also poor, growing at 0.2% compared to 1.2-1.4% a year in the best economies. The draft energy white paper released this week draws attention to those issues, but it is still a document that is centred around the build out of large, centralised power stations as the cornerstone of the energy grid.

This graph below is informative, because it lays out the cost of the technologies proposed under the plan.

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Solar PV is rated the most expensive of the technologies, and some may contest the estimated costs. But Chris Dunstan, one of the report’s authors, says whatever its current cost, it is clearly falling rapidly and it will play a critical role — on rooftops, and in industrial areas where it can pretty much match day-time air conditioning loads.

“Solar PV is expensive now, but it is extremely important. If we ignore what is going on with PV prices, and we invest in centralised infrastructure, by the time we get to grid parity with PV, installing PV in the grid will just save us the cost of coal, not the network infrastructure. Which means that PV may not be able to fulfill its potential.”

The report analyses some of the principal roadblocks in the way of distributed energy. These include split incentives, lack of information, cultural barriers (mostly the lack of an environmental objective in the NEM), as well as regulatory barriers, price structures and a “payback gap”. It recommends regulatory reform, the creation of a “distribution fund”, tariffs to support distributed generation, and a “target” of 3000MW of peak demand reduction below business as usual by 2017.

Indeed, the report says it is going to need some radical thinking from policy makers and other decision makers. Mostly, they need to get over the idea that bigger is always better, an idea that has taken hold since the centralised-supply approach based on fossil fuels became dominant during the 20th century.

“We sought to capitalise on economies of scale and move the adverse impacts of centralised energy supply further away from the communities that use that energy,” the report notes. “For decades, this strategy was very successful, raising the living standards of billions and (usually) reducing urban pollution. However, in recent decades, as the economic cost and environmental impact of the centralised strategy has become less acceptable, there has been growing interest in a new paradigm — one which combines the local, low impact principles of the past with the advanced technologies of today.”

Not that anyone is seeking to trash the networks. “We want them to have a conservative nature,” says Dunstan. The evolutionary approach is probably more likely to be successful. But we needs a sustained commitment to reform — but that requires a revolutionary change in the way we think about these issues, and in leadership from policy makers and decision makers.”

*This first appeared on Climate Spectator.