California Sets the Stage for Solar
Solar Power Generation 2012 continues with a talk from Timothy Alan Simon, Commissioner of the California Public Utilities Commission (CPUC). Here are some of the highlights:
Utility & consumer views: What is acceptable to pay for power in a realistic US electricity market?
California has a strong economic impact on the rest of the country, especially when it comes to setting renewable portfolio standards. That's why it's often referred to as “the largest rodent in the fight for renewable cheese in the west,” says Simon. “That's the kind of impact we have.”
Despite the topic at hand, Simon says that he is not at liberty to say what the appropriate price is to pay for renewable energy with the state of the market being in such a flux.
Most ambitious state
The California renewable energy portfolio standard was established in 2002, but it accelerated in 2006 and has since expanded to the current interpretation of achieving 33 percent, increasing the state's renewable energy goals statutorily. Currently, California is at about 17 percent with hopes of reaching 25 percent by 2016 and 33 percent 2020. So, “achieving 50 percent in the near future is no longer an outlandish objective,” says Simon.
California's RPS goals are of the most ambitious in the country, considering the load factor of the state. The CPUC and California Energy Commission are responsible for implementing that program, keeping in mind the what ratepayers can afford and what the economy can handle.
At what cost to ratepayers?
For a while, legislation had been driving the market more than actual demand and the RPS process has created a challenge for the commission. By the time projects arrive in front of the commission, it's likely that there has already been a dramatic change in the marketplace. And even if there are lower bids to choose from, the commission has a responsibility to choose the projects that offer the most long term viability.
“It's not uncommon to vote for higher priced projects, because there's a belief that there is a greater viability to them,” explains Simon. "But we will often gets tons of criticism from ratepayers for not keeping costs as low as possible."
Looking to Italy as a model for a successful distributed renewable generation system, Simon notes that they also have the highest prices for electricity in the E.U. “That concerns me in terms of the impact it could have on ratepayers in California as well as on the state's overall economy,” says Simon.
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Competition: the good and the bad
The 2011 RPS solicitation process came to a close in August, and was by far the most robust RPS process seen in California. Over 1,100 unique renewable energy projects were submitted, representing 283,000 GW hours a year of forecasted generation and 91,000 MW of forecasted capacity. The total forecasted annual generation from all the unique bids represented over 4.5 times the total demand for the entire RPS program in California needed to achieve a 33 percent renewable energy standard by 2020. “In other words, we're oversubscribed,” says Simon.
Since 2009, RPS bids are up by 250 percent and the number of sellers are up by 150 percent. Over half of the projects submitted were for solar PV, 25 percent for wind, 7 percent for biomass, 5 percent for geothermal, 4 percent for solar thermal and 3 percent for small hydro projects.
All that competition is good news for ratepayers, although a huge part of the cause has been driven by lower prices of solar PV, which have negative global implications. Some suggest turning a blind eye to those implications in order to achieve lower carbon emissions goals.
“That's short sighted,” says Simon. “The technology should be able to compete on a levelized playing field in terms of whatever subsidies are required to launch any new technologies, but when those subsidies result in job losses, then we need to balance those equities to find out how we can better stimulate job growth.”
Regardless, it will be up to the CPUC to maintain prices and choose the most viable projects—a difficult task at hand.
Natural gas: “the kissing cousin of renewables”
A huge factor in achieving aggressive renewable energy goals, while staying in line with global competition, will be exploiting the vast resource of shale gas in the US.
“President Obama's references to shale and the need to develop policies to enable leverage of this enormous game-changing energy resource are monumental,” says Simon. “In light of the strong push for more renewables, natural gas—which falls below our low carbon fuel standard in California—is going to play a critical role.”
Until the market plays out and battery storage reaches utility-scale or solar technologies, “natural gas will act as a kissing cousin of renewables,” says Simon. As many states switch from coal to natural gas as part of their greenhouse gas reduction policies, it is a growing concern if California will be able to keep up with its ambitious renewable goals without exploring shale as aggressively.
The CPUC says they are working diligently to cease the opportunity of renewable energy effectively, but Simon suggest that in order to achieve that, “we're going to have to put more pressure on streamlining the permitting process... to continue to advance this robust market.”
More discussion on the challenges the market faces as Energy Digital continues to cover the event this week...
Industry movement with heat decarbonisation
It is estimated that the heat network market requires approximately £30 billion of investment by 2050 to meet the UK Government’s net zero targets, and the decarbonisation of heat has been highlighted as a particular challenge.
The Climate Change Committee’s Sixth Carbon Budget states the UK should target 20% of UK heat demand through low-carbon heat networks by 2050 - but as with most discussions surrounding mass decarbonisation, even reaching that target won't be an easy task. In the UK approximately 40% of energy consumption and 20% of GHG emissions are due to the heating and hot water supply for buildings.
The International Energy Agency (IEA) estimate that globally, around half of all energy consumption is used for providing heat, mainly for homes and industry.
Source: Heat Trust
This week saw some positive movement, however, with gas distribution company SGN and UK renewable energy solutions provider Vital Energi announcing a 50:50 joint venture, which will create an Energy Services Company (ESCO) representing utility infrastructure and heat network providers.
This includes delivery of heat to developments planned by SGN’s property arm, SGN Place, and the local vicinities where there is a demand for low-carbon heat.
The objective is to supply new and existing residential, industrial and commercial facilities and development activity is already underway for two projects in Scotland and the South East, with another 20 in the pipeline. SGN is looking to develop alternative heat solutions alongside its core gas distribution business and expand into the growing district heating market, recognising the future of heat is likely to include a mix of technological solutions and energy sources.
Vital Energi is seeking to expand into asset ownership opportunities to complement its core design, build and operations businesses. The complementary skillsets of both organisations will offer a compelling proposition for developers, commercial and industrial users and public sector bodies seeking low-carbon heat solutions.
SGN’s Director of Commercial Services and Investments Marcus Hunt said: “Heat networks are likely to play an increasing role in the delivery of UK heat in the context of net zero. The creation of this joint venture with market-leading Vital Energi enables us to build a presence in this emerging market, delivering new heat infrastructure and supporting decarbonisation.”
Nick Gosling, Chief Strategy Officer at Vital Energi, said: “Combining the resources, expertise and know-how of both organisations will allow us to play a major role in delivering the UK’s transition to low and zero-carbon heat.”
In March, the European Marine Energy Centre (EMEC) starting collaborating with Highlands and Islands Airports Limited (HIAL) to decarbonise heat and power at Kirkwall Airport through green hydrogen technology. 2G Energy was selected to deliver a CHP plant which generates heat and electricity from 100% hydrogen.
Heat decarbonisation options
The Energy & Climate Intelligence Unit (ECIU) highlights the following options for decarbonising heating.
Use renewable electricity to generate heat in the home. As power sector emissions fall, emissions associated with electric heating are decreasing rapidly.
Low carbon gases
Replace natural gas that most homes use for heating with hydrogen, which releases energy but not carbon dioxide, the only waste product is water. Biomethane is also an option as it produces less carbon than natural gas over a full lifecycle.
For hydrogen to work, the pipes in the national gas grid would need to be replaced and home boilers would need to be adapted or changed. This is possible but could incur considerable cost.
Biomethane is chemically identical to methane from natural gas, so is suited to existing infrastructure and appliances. It is unlikely, however, that it can be produced in sufficient quantities to replace fossil gas entirely.
A hybrid system combining both electrification and hydrogen is a third option. Here, heat pumps could be used to meet the majority of heat demand, with a (low carbon) gas boiler taking over in extremely cold weather. Advantages of this approach include helping establish a market for heat pumps while hydrogen is developed to displace natural gas in the hybrid system eventually, and the ability to call on hydrogen when heat demand is at its very highest.
Heat networks connect a central heat source to a number of buildings via a series of underground hot water pipes, and are popular in countries such as Denmark, where heat networks supply 63% of households. The Government expects the heat networks market in the UK to grow quickly to supply up to 20% of heat demand over the next decade or so, investing £320 million into its flagship Heat Networks Investment Project to help get this underway.
Heat networks work particularly well in built-up urban areas or industrial clusters where there is a large and concentrated demand for heat. Over time, it is thought that if the central heat source can be low carbon, then there is the opportunity to ensure that multiple homes and buildings are decarbonised at once.
Biomass can be used to reduce emissions when used instead of more polluting fuels like oil in off gas grid properties. Support for biomass boilers has been available since 2011 via the Renewable Heat Incentive (RHI), but take-up has been low.
Supply constraints also restrict the role that biomass – burning solid material such as wood – can play. In any case, according to the Committee on Climate Change, this resource may be better used in other sectors of the economy such as construction, where it provides carbon storage without the need for CCS and reduces demand for carbon-intensive materials such as steel and cement.
The Energy Transitions Commission (ETC)'s latest report sets out how rapidly increasing demand for bioresources could outstrip sustainable supply, undermining climate mitigation efforts and harming biodiversity, unless alternative zero-carbon options are rapidly scaled-up and use of bioresources carefully prioritised.
"Alternative zero-carbon solutions, such as clean electrification or hydrogen, must be developed rapidly to lessen the need for bio-based solutions," it states.
The overall decarbonisation of industry is another major challenge, especially among four sectors that contribute 45 percent of CO2 emissions: cement, steel, ammonia, and ethylene, according to a McKinsey report.
The process demands reimagining production processes from scratch and redesigning existing sites with costly rebuilds or retrofits. Furthermore, companies that adopt low-carbon production processes will see a short- to mid-term increase in cost, ultimately placing them at an economic disadvantage in a competitive global commodities market.
Ken Hunnisett is Project Director for the Heat Network Investment Project (HNIP)’s delivery partner Triple Point, which is leveraging an additional £1 billion of private and institutional investment to accelerate the design and construction of Heat Networks across the country.
HNIP is providing capital funding to gap fund heat network projects in England and Wales, which has so far delivered (or will deliver) 52,000 homes and 230 non-residential buildings with low carbon heating.
Hunnisett is calling for the urgent need to invest in the development of new heating infrastructure to support the nation’s decarbonisation effort. So far £165m of HNIP funds have prompted £421m CAPEX, providing more green jobs as the UK economy eases from the lows sustained from the pandemic.
Current projects in Somers Town (London), the Manchester Civic Quarter and Leeds reflect how cities could set the standard for future heat projects.