The generating potentials of all RES-E types in Australia, apart from ocean (because of its technological infancy), using the references in this section, is summarised in Table 2.13. The generating potentials of the first three categories
hydro, wind and biomass is 310 TWh/yr, equal to 126% of Australia’s 2007-08 electricity generation of 247 TWh/yr but only 85% of the 366 TWh/yr ABARE (2010a: 34) predicts will be generated in the country by 2029-30. Hydro, wind and biomass therefore cannot be relied upon to generate all of Australia’s electricity in the long term. This is particularly the case given that marginal generating costs will rise as each of them nears the limits of their generating potentials.
The significantly larger generating potentials of solar and hot rock geothermal explain why Figures 2.10 and 2.11, above, predict that solar and/or hot rock
geothermal will need to be relied upon to generate a large proportion of Australia’s electricity if deep cuts in electricity generation are one day to be sought through radical RES-E expansion. Although both solar and hot rock geothermal could generate much larger volumes of electricity before they start to experience rising marginal costs, it has to be remembered that hot rock geothermal is only at demonstration stage and probably cannot be relied upon, for a few years yet, to generate significant
amounts of electricity. As discussed in s5.6, both solar and hot rock geothermal are subject to potentially major transmission constraints.
Table 2.13: Australia’s annual RES-E generating potential
RES-E type Potential assumptions Annual generation
potential: TWh/yr
Hydro (1) Assume minor enhancement by small hydro
18 Wind (2) Assume small technological
improvement
200 Biomass (3) Assume significant use of
agricultural residues is used
92 Solar (4) Assume 1% of energy falling on all
of Australia’s land surface is used
16,170 Hot rock geothermal (5) Assume 1% of national resource is
used
8,212,495
Total 8,228,975
The hierarchy of Australia’s RES-E generating potential is very different to that of the European Union, shown in Table 2.14. In the European Union, the high-cost RES-E types of solar PV and geothermal have relatively low generating potentials, whereas the low-cost RES-E types of biomass, hydro and wind have the highest
generating potentials. If most electricity is to one day be generated from RES-E, as part of a global GHG emission reduction effort, this means there is a stronger case for higher levels of support being extended to high-cost types of RES-E in Australia than in the European Union.
Table 2.14: The European Union’s annual RES-E generating potential
Source: Renewenergy 2009.
2.4 Conclusion
This chapter has presented the first comprehensive case for Australia’s GHG reduction policy to be focused on radical RES-E expansion through RES-E support, in addition to any support likely to be provided by an ETS in the country. A particular feature of this case is a detailed justification for supporting solar and geothermal power more significantly than the other types of RES-E. As detailed in s2.1, there have been assessments in Australia of its RES-E resources, and there have been discussions about the country’s RES-E support policy and its proposed ETS as well as its general GHG policy, but there has not been any integrated discussion about all
RES-E type EU 27 generating potential: TWh/yr Solar PV 154 Geothermal 667 Biomass 764 Hydro 908 Wind 1,517 Total RES-E 5,738
RES-E technology, its RES-E resources, its proposed ETS, and its RES-E support mechanism need to work together and this chapter has discussed, for the first time, how this could happen.
For various historic reasons – including its abundance of relatively inexpensive coal and its exhaustion of major hydro generation potential – Australia has a high level of electricity generation GHG emissions, which has been a major contributor to its high per capita level of GHG emission (as argued in ss2.2.3). Radical RES-E expansion could significantly reduce its GHG emissions. Indeed, several major
scenarios project that RES-E will be needed to make major reductions in the country’s electricity generation GHG emissions (as shown in ss2.2.5). Radical RES-E expansion enabled by major RES-E support can bring forward RES-E generation cost reductions while avoiding potential long-term increases in some RES-E marginal generating costs (as shown in theoretical form in ss2.3.4). Fortunately, unlike many countries around the world, Australia has significant amounts of RES-E generating potential, particularly of hot rock geothermal and solar (as demonstrated in ss2.3.5 and ss2.3.6). This generating potential is far in excess of the country’s current levels of electricity generation. RES-E supportmechanisms will need to be used to support the country’s RES-E because of the generating cost disadvantage that RES-E currently has
compared to fossil-fuel generated electricity. In Australia in particular, RES-E support needs to give stronger support to immature RES-E, notably solar and hot rock
geothermal. This is because those two types of RES-E have significantly greater generating potentials than other types of RES-E in the country but are currently less mature, and have higher generating costs, than the other types (as argued in ss2.3.5 and ss2.3.6). Differentiated RES-E support is therefore essential if deep GHG emission cuts are to be achieved in Australia.
Chapter 3: The Experience of the Renewable
Portfolio Standard in the USA and Western Europe
Chapter 3 contents
Chapter 3: The Experience of the Renewable Portfolio Standard in the USA and Western Europe...60 3.1 Introduction...62 3.2 The different types of RES-E support policy and the evolution of the RPS
mechanism ...63
3.2.1 The different types of RES-E support mechanism... 63 3.2.2 Origins of the RPS... 65 3.2.3 The use of RPS mechanisms around the world... 66
3.3 Experience of the RPS in the USA...67
3.3.1 The generation performance of the RPS mechanism in the USA ... 67 3.3.2 The influence of the US government Production Tax Credit... 70 3.3.3 The price performance of the RPS mechanism in the USA... 71 3.3.4 The influence of RES-E contracts in US RPS states... 73 3.3.5 The unique design features of different US state RPS mechanisms ... 74 3.3.6 General conclusions about the effectiveness of the RPS mechanism in the USA ... 79
3.4 Experience of the RPS in the United Kingdom ...79
3.4.1 United Kingdom evolution of the RPS ... 79 3.4.2 The generation performance of the RPS in the United Kingdom ... 80 3.4.3 The price performance of the UK RPS ... 85 3.4.4 The unique design features of the UK RPS... 87 3.4.5 General conclusions about the effectiveness of the UK RPS mechanism ... 89
3.5 Experience of the RPS in Sweden, Italy and Belgium ...90
3.5.1 The generation performance of the RPS mechanism in Sweden, Italy and Belgium ... 90 3.5.2 The price performance and the unique design features of the RPS in Sweden, Italy and Belgium
... 95 3.5.3 General conclusions about the effectiveness of the RPS in Sweden, Italy and Belgium... 97
3.6 Conclusions about the use of the RPS mechanism in Western Europe and the USA...97
Parts of chapters 3 (mainly ss3.3.5, ss3.4.2, ss3.5.1) have been accepted for publication: Buckman, G., 2011, ‘The Effectiveness of Renewable Portfolio Standard banding and carve-outs in supporting high-cost types of renewable electricity’, Energy Policy, (forthcoming).
3.1 Introduction
Having discussed the physical and policy context of RES-E support in the previous chapter, this chapter discusses the on-the-ground use of the Renewable Portfolio Standard (RPS) mechanism in various Western European countries and the USA. The two regions were chosen because they have the best data availability of all regions that use the RPS throughout the world. The discussion includes commentary of key RPS features including generation, subsidy price, unique design features and historic evolution. The term ‘generation performance’, used throughout the chapter, is the output of different RES-E types achieved by the mechanism in each jurisdiction; the ‘price performance’ term is the total amount of the subsidy used to generate the output. Generation and price are symbiotic and strongly influence each other. They are the major benchmarks by which RES-E support mechanisms are often judged.
Reviews of overseas RPS and FIT (Feed-in Tariff) use are a central part of this thesis. They inform chapters 6 and 7 and are a contribution in their own right. Such reviews have been done before but they have been narrow in their coverage. Van der Linden et al (2005), for instance, only covered the UK, Sweden and the USA, while Wiser and Barbose (2008), and Wiser et al (2007a), only covered RPS use in the USA. The coverage in this chapter is therefore broader in geographical terms, and more up to date, than previously published reviews.
Section 3.2 discusses the different types of RES-E support, as well as the origin of the RPS mechanism; s3.3 discusses RPS use in the USA; s3.4 covers the
mechanism’s use in the UK; s3.5 discusses its use in Sweden, Italy and Belgium; and s3.6 draws conclusions from the preceding five sections.