Finkel report destroys baseload coal power economics

Demand enough renewables and you might as well ban coal

There’s a lesson Australia needs to learn from South Australia. When intermittent renewables reach a certain percentage of daily average supply they make baseload power unfeasible. The situation develops into an impossible dead end that can only be solved with container-ships of cash.

The intermittent supply of wind and solar is the immoveable problem. It eats into the daily chart of the cheapest stable electricity supply — which is coal fired. Coal can’t be ramped in and out in minutes. It is a creature that runs best non-stop, efficiently, smoothly, at a high capacity factor (meaning it works best when it is producing around 90% of it’s design limit continuously).

Tom Quirk points out that sometime after these intermittent renewables hit 30% of the average daily supply, as they have in South Australia — locally sourced coal power becomes uneconomic. There are times during the daily cycle when renewables are providing almost all the demand. There is little demand left for the massive coal turbines to supply, so they spin on pointlessly, but costs remain, and profits are zero.

In SA, the owner of the last coal fired station was still willing to pour in money, but even large cash injections didn’t change the daily bad news cycle, and the coal station was closed.

If the electricity markets were left to run free, and compete purely on price, coal would provide the baseload (unless we had nukes) and obviously, electricity would be cheaper. But no amount of word mangling can dress up the situation. The insistence on having a large slab of intermittent power forces coal out of the system, and that forces prices up.

— Jo

The Levellers

Guest post by Tom Quirk

The claim that there is an opportunity for coal burning power stations depends on the extent of renewable energy sources.

The Blueprint target of 42% renewables destroys the opportunity to build baseload coal burning power stations independent of the choice of technologies.

This is because the Blueprint analysis uses the levelised cost of electricity (LCOE). LCOE is the net present value of the unit-cost of electricity over the lifetime of a generating plant using a particular technology. It is often taken as a proxy for the average price that the plant must receive in a market to break even over its lifetime.

A key factor in calculating the levelised costs is the utilisation of the plant expressed as the capacity factor. Levelised costs are referred to in the Blueprint. In particular an appendix shows a comparison of levelised costs for a wind farm and an ultra-super-critical coal burning plant having similar levelised costs. This is misleading,

There is a good illustration of the difficulty of levelised cost comparisons from the Energy Information Agency (EIA) in the United State[1] where assumptions are made about plant utilisation expressed as the capacity factor. These are based on regional analysis. This is shown below in Table 1, extracted from the EIA report on levelised cost of electricity (LCOE) for new generation resources for 2022.The comparison with Australian states shows very different values for capacity factors and the comparison shows the importance of analyzing the particular electricity system and not a regional average.

Table 1. Estimated and measured Capacity Factors

*Energy Information Agency (United States)

The difference in the capacity factors for coal fired plant is that demand in Victoria was 85% coal fired supply but only 2.5% wind while for South Australia coal supplied 17.1%, wind 26.6% and solar PV 3.8% of demand.

So the claim that there is an opportunity for coal burning power stations depends on the extent of renewable energy sources in the region being examined. It is clear that there is no opportunity for base load power in South Australia. A 33% capacity factor for 1203 MW of wind farms in 2012 gives variations from 0 to 1200 MW. But with average demand of 1493 MW and demand variations during the day from 1000 MW to 1800 MW wind farms can drive out baseload supply.

The Blueprint target of 42% renewables therefore destroys the opportunity to build baseload coal burning power stations independent of the choice of technologies.