Getting the Power To Market

Clearly, an energy generation and transmission nexus in the middle of the country will involve a near total reorientation of the energy industry. But what better time than now to do this than when the entire energy industry needs a facelift, both on the generation and transmission side?

Eastern Australia's electricity grid is a one-way street. This creates huge inefficiencies in electricity costs. The aging system was built to carry coastally-generated coal-fired power from Queensland to New South Wales, from the Snowy to Melbourne and from Victoria to South Australia.

This arrangement may have made sense when coal was the main fuel, no one cared about the environment and cheap coastal real estate was readily available. But these days coal isn’t the only fuel, people care about the environment and coastal real estate is expensive. Times have changed.

Lack of national transmission market and pricing costs the nation $1.4-2.6 billion a year, enough to pay back construction of a HVDC power line in one year
Each year, Australians pay more for electricity than they need to due to an inefficient
electricity grid
Click to Enlarge
Source: ‘Black Hole’ in the NEM Passes $10Billion,' Electricity Users Association of Australia, 2006
Click Image to Enlarge
Click Image to Enlarge

The existing grid is old. It needs modernisation. The opportunity should now be taken to connect the northwestern end of the eastern electricity grid to the eastern cities in order to carry renewable energy. In addition to bringing huge, clean new energy supplies to market, such an upgrade will have a huge impact on electricity trading. A better transmission would flatten eastern energy prices by reducing technical and administrative bottlenecks that now cost consumers up to $1.7 billion per year, and to date have imposed deadweight costs of $12 billion and counting on the Australian economy. This is not a technology issue. This is an economic reform issue. It doesn't end there. A reliable and up to date transmission system is vital to the efficient functioning of the Information Economy. In the United States, the Electric Power Research Institute, an industry trade group, estimates that poor grid reliability imposes deadweight losses of roughly 1% of GDP on the country. And it's important to point out that these are different, and additional, losses to those imposed by price separation, which is marketplace idiosyncracy peculiar to Australia. Given that Australia's GDP hovers around A$800 billion, that's A$8 billion on top of the $1.7 billion a year caused by price separation -- making the total deadweight losses to the Australian economy of a second rate electricity system around A$10 billion a year.

How can this be fixed? By upgrading the eastern transmission system and connecting South Australia and Queensland. Australia already enjoys two world firsts in high capacity cables in trans-Bass Strait undersea Basslink cable and the MurrayLink cable between Victoria and South Australia, the world's longest underground power line. Using a rough estimate of $1 million per kilometer (actual costs could be as low as $600,000 per kilometer) a 1,000-kilometer high-capacity direct current buried power line similar to Murray link stretching the 1,000 kilometers from Olympic Dam to the Southeastern Queensland grid would cost about $1 billion. A 500-kilometer line from Olympic Dam to Broken Hill would cost about $500 million. Given that "price separation" (ie prices in different state markets that vary by more than 20%) impose $1.5 billion of deadweight losses on the national economy annually, eliminating these losses by unifying the grid would pay for itself in one year. A very good deal, indeed.

Since taking office, the Rudd government in Australia has announced plans to build a $4.7 billion national broadband network in an effort to modernise the nation's communications system. An interconnected eastern electricity grid similarly would modernise the nation's electricity system at less than one-fifth the cost of a national broadband network. Both will enhance economic growth. Both are good investments. Both will pay themselves back quickly and generate immense economic gains for the nation.

The 180-kilometer Murraylink is the world's longest underground power link
The cable and its trench are no more than a few meters wide
Once laid, the cable is visually unobtrusive and hard to sabotage
Source: ABB Group

DC power lines also exist in Brazil to carry hydro power from Itaipu to Sao Paolo, in the Philippines to carry Leyte’s geothermal power to Manila and in India to carry coal-fired power from Uttar Pradesh to New Delhi. China plans to build a DC power line to bring Three Gorges Dam hydropower to coastal cities. In the United States, DC power lines may soon carry Wyoming wind power to Phoenix and Las Vegas. In Europe, DC power lines may be built to bring Saharan solar energy to northern Europe. And industry groups even claim that high capacity direct current power lines have become cheap enough they could span the world like the Internet, becoming a force for world peace by spreading adequate energy supplies for all rather than sparking wars out of concerns about disruption.

For its part, European researchers have estimated that high capacity power cables strung between North Africa and Europe would add only about A2c/kwh to the cost of electricity. That's less than the still hypothetical cost of carbon capture and storage.

 

Large scale solar electricity generated in North Africa could be
brought to Europe for as little as A2c/kwh.
Source: Trans-Mediterranean Renewable Energy Cooperation
What's particularly intriguing about this idea is that the same route, laid with power lines, can be used to transport hydrogen and potentially backhaul carbon for carbon capture and store, but we're getting ahead of ourselves. Please read on.

 

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