The Integrated Resource Plan 2010 (IRP2010) consultation process has begun. It should provide the ideal vehicle for the convergence of low-carbon energy policy with climate issues and the development of new industrial opportunities in the cleantech sector.
IRP2010 will allow for conceptual convergence to be accompanied with an implementation mechanism.
Currently, climate policy, energy mix decisions and industrial policy exist as different terrains of policy engagement without a proper vehicle or platform to connect the dots between them.
Despite this, the process of consultation around IRP2010 has left very few people happy, except those who already have their insiders keeping track of the process. The process itself is not really a consultative one.
Those who run the process measure success in terms of how well they have managed to outwit opponents – not in terms of how they can find ways to identify fatal flaws or enrich insight into the work being done.
To be candid, it is a cynical game of public relations, with no intent to hear, consider or review alternatives.
If the country has no desire to lift the renewables target from the pithy 4%, then we should say so openly. In real terms, the target is less than 1% because 40% of the 10 000 GWh is from nonelectric sources. Besides, the original amount of grid- connected electricity is now down to 850 MW – half the initially anticipated amount.
There are no real targets to speak of in IRP2010 as there is no a genuine attempt to deal with questions about renewables. There is no imagination.
The arguments that are going to be advanced against renewables are that they are too expensive and “cause our grid to go insane”. Well, it all depends on how one looks at it. The current IRP2010 approach to the energy mix technologies is to take a least-cost approach – meaning we should go for lower upfront capital costs and worry later about the movement of fuel costs in the future.
Innovative financial options to lower the generation costs for renewables and support a long-term feed-in tariff do exist.
Besides, the least-cost approach has a certain blind spot for externality costs, particularly those associated with the fuel itself. Coal, for instance, needs new mines, new railroads, and both the mining process and electricity generation consume vast quantities of water. When coal is burnt, it emits carbon dioxide and other greenhouse gases.
These all have a cost and should be part of the cost modelling if we are to compare apples with apples.
The least-cost approach is the conventional model. A better model is to account for future risk and adjust for this risk by having a mix of technologies as a basket of solutions rather than depend on one or two options as part of the energy mix.
What one is interested in is not the short-term scenario but the long-term scenario of how the energy mix options, as a portfolio of solutions, provide the tools to manage future costs of electricity generation in a flexible and sustainable manner.
There are at least three immediate and compelling benefits from renewables. The first is quite obvious: even though we have high upfront capital cost, fuel costs are zero.
In a portfolio approach to managing future fuel cost volatility, renewables like wind and solar can be a life saver if fossil-based fuels suddenly see a spike in price, as they have done in the past.
With feed-in tariffs, you can at least peg the capital costs, while coal and nuclear have proved, recurrently, to have cost overruns.
Secondly, in the immediate future, we desperately need new power on the grid to ensure that we have no more blackouts. Wind energy can cover some ground, as it is quicker to install than coal and nuclear power. We don’t have to wait ten years before such power comes on line.
At least, according to market players, 3 000 MW can easily close the gap and support the reserve margin without technical consequences for the grid because this power is not centralised but dispersed over many areas. If anything, renewables are likely to strengthen grid capacity rather than weaken it.
Thirdly, for renewables to have an industrial impact, they have to have a certain economy of scale. Fifteen per cent grid- integrated renewables by 2020 can create significant localisation benefits for wind and concentrating solar power (CSP). CSP has better prospects as localisation can be much higher than for wind technologies.
A 15% target as a minimum to kick off the industrialisation of renewables can spawn new energy in our dwindling prospects in manufacturing.
We do not have to wait 10 to 15 years before the coal-nuclear industry complex kicks off and brings industrial benefits at who-knows-what cost to the economy.