Going about cost-effectiveness in energy

While some major companies in Australia are investing on renewable energy generation and storage to keep production competitive, there are some solutions for all companies in managing their energy costs. Tara Hamid reports.

A recent report by the Climate Council, “Fully Charged: renewables and storage powering Australia,” found that Australia may be “on the cusp of an energy storage boom,” as the cost of energy storage solutions is falling rapidly.

The report, published in February, describes how the cost of energy storage technologies
is falling fast and becoming competitive with peaking gas plants, particularly in light of the domestic gas prices tripling over the past five years.

Batteries, solar-thermal and pumped hydro technologies are more fexible and can respond faster to changes in supply and demand than traditional coal and gas plants, and therefore can enhance the reliability of Australia’s grid.

The cost of lithium-ion batteries has fallen by 80 per cent between 2010 and 2018 and may halve again by 2025. In the early 1990s, lithium-ion batteries were as high as $10,000/kWh, falling to $1,000/kWh in 2010 and then to just $400/kWh in 2015. By 2017, costs had fallen even further to $209/kWh.

Lithium-ion batteries are not the only battery technology falling in cost. Advanced lead acid batteries and flow batteries are also experiencing rapid cost reductions.

Australian energy storage company Redflow will soon be introducing its new zinc-bromine flow battery product – ZBM2 for telecom, commercial and industrial and grid-scale applications at the Australian Energy Storage Conference and Exhibition in Adelaide (May 23-24). The flow battery technology has already proved to deliver savings in residential applications.

Meanwhile, some major Australian companies are already investing heavily in renewable energy. The biggest such investment is currently being carried out in South Australia by steel tycoon, Sanjeev Gupta, whose company GFG Alliance acquired Arrium steelworks last year and announced plans to make Whyalla Steelworks in South Australia profitable with the help of renewable energy generation and storage.

Gupta’s company later purchased a majority stake in ZEN Energy through his family-owned company, the SIMEC Group and rebranded the joint venture SIMEC Zen Energy. In March this year,

SIMEC Zen Energy announced plans to begin construction on a 120MW/140MWh solar-pumped hydro battery storage facility – the world’s largest battery – to support its 80MW solar farm, being built at Whyalla Steelworks.

While the first solar farm to be developed by GFG Alliance will only supply power to the local steel works, the company has already projected plans for another 200MW solar farm, which will be connected to the grid and supported by pumped hydro storage facilities.

Creating competitiveness with renewables
The project is particularly significant as it could set an example for other steel manufacturers in Australia, a sector highly affected by the rise in energy prices.

When the Australian Consumer and Competition Commission (ACCC) released its preliminary report into Australia’s electricity network in October last year, it noted that the high energy prices were hampering international competitiveness for large manufacturers such as Bluescope Steel.

BlueScope had forecasted in 2016 that its energy prices would more than double in just two years, from $59 million in 2015-16 to $145 million in 2018-19.

While other projects might not have made such big headlines, or involved such huge investments as GFG Alliance’s $700 million solar-hydro battery, many smaller companies and organisations have begun taking control of their energy costs by generating their own renewable energy.

The Department of Environment and Energy provided Manufacturers’ Monthly with a list of recent examples of businesses that have deployed their own installations.

These include Sydney Markets Limited, which opened a solar installation comprising 8,594 panels with a capacity over 3MW to provide around 11 per cent of their annual energy consumption, and Sun Metals Corporation, having announced plans to commission a 124MW solar facility which will provide for one third of the power needs of its zinc refinery near Townsville, Queensland.

SunWiz, an Australian solar consultancy, estimates that 46,000 businesses have now installed a total of 1GW of photovoltaic systems (also known as PV or solar power system) across Australia. This is equivalent to 30 per cent of the
total volume of PV installed in the country.

Solar PV is currently the most popular source of renewable energy for Australian business, according to the Australian Renewable Energy Agency’s (ARENA’s) report, “The business of renewables,” with over 70 per cent of users having it in their energy mix. Wind energy is the next most common, followed by biomass/biogas.

Surveying more than 90 of Australia’s largest public and private companies, ARENA found that that just under half (46 per cent) of big businesses in Australia currently use renewable energy, but the usage is low – with renewables making up less that 10 per cent of the energy mix for the majority of these users.

Power Purchase Agreements

Despite ARENA’s warning that a significant proportion of Australian corporates are missing an opportunity to capitalise on the considerable medium to long-term benefits from renewable energy, many businesses are still hesitant to adopt on-site power generation.

For these businesses, Power Purchase Agreements (PPAs) offer a suitable solution to increase their use of renewable energy and enjoy the cost benefits.

“The two most effective ways for businesses to increase their use of renewable energy are either by owning and building a wind and solar farm themselves or signing a power purchase agreement with a renewable energy developer, who will construct a renewable energy project in return for the business contracting to buy the electricity,” a spokesperson from the Climate Council told Manufacturers’ Monthly.

As part of a PPA, businesses sign a contract to buy electricity at a certain price from a particular renewable energy project for a set period of time. Typically, under power purchase agreements, the electricity from contracted renewable energy providers is not directly used by the manufacturers but provided to the grid on their behalf.

Some recent examples of such companies, according to a Department of Environment and Energy’s spokesperson, include Carlton and United Breweries, that signed a 12-year PPA with German renewable energy developer and wholesaler BayWa to provide 74,000MWh of renewable energy annually from its solar farm in Mildura, Victoria; a consortium of businesses including Telstra, ANZ, Coca-Cola Amatil and the University of Melbourne entering into a PPA covering the 226MW first stage of the Murra Warra wind farm near Horsham, Victoria; and Adelaide Brighton signing a PPA with Infigen Energy for the supply of electricity from its 182MW Lake Bonney wind farm to the Birkenhead and Angaston cement manufacturing plants and Klein Point Quarry on the Yorke Peninsula in South Australia.

Renewable PPAs are already at the heart of many corporate energy strategies in Europe and North America, with companies like Google, Amazon and Facebook recognising the fact that they offer both long-term price security and are one of the fastest ways to reach sustainability goals. Electricity retailer, Flow Power, offers similar benefits to Australian businesses.

Manufacturers’ Monthly caught up with Matthew van der Linden, managing director of Flow Power, at this year’s National Manufacturing Week, where he explained how renewable corporate PPAs are the key to keeping business power costs down – in some cases helping customers to cut energy costs by up to 45 per cent compared to fixed rates.

“Australian businesses have seen significant power price rises in the last year. This is especially true for manufacturers that rely on large quantities of energy to power their operations. PPAs are the solution. They give businesses the opportunity to lock in low prices for the long term,” van der Linden told Manufacturers’ Monthly.

“There is currently a great disconnect between what goes on in the generation side and what goes on in the supply side. That issue is going to get more complicated as 6,000MW of renewable energy is set to enter the market in the next few years under the Renewable Energy Target (RET). The disruptions in power generation will lead to making the fixed-contract market less feasible.

“Instead of signing variable contracts at two or three year intervals, businesses that sign PPAs agree to purchase power from a renewable source at a wholesale price for up to 10 years. It’s a cost-effective way to secure long- term price security, reliability and support renewable generation.

PPAs can also be integrated with energy management strategies such as demand response to yield even greater savings.

“Manufacturers need to look at how they consume power and determine their energy needs from there. Most manufacturers will undertake the bulk of their energy- intensive activities in the middle of the day – a time when solar power is cheap and in abundance. Whereas wind can provide reliable power throughout the day.

“It also pays to be connected to the signals of the power market. Energy management strategies  such as demand response can help businesses better understand where their costs are coming from and adjust their operations accordingly,” van der Linden said.

Managing demand

Managing the demand side to control energy costs has been repeatedly emphasised by
energy specialists. CSIRO energy research director, Glenn Platt told Manufacturers’ Monthly that the first solution all manufacturers should look for is to reduce their consumption before looking for alternative supply sources.

“If you can use less energy, it’s always a good start. You should also look at what time of the day and how much energy you are using. So the timing of your energy consumption is very important. Because if most of your energy consumption is during the day, then you don’t need batteries. So you could put solar panels on the roof and they make lots of electricity in the middle of the day. Whereas if most of your energy consumption is late in the day, or in the evening, then you may need to install batteries,” Platt said.

“At CSIRO, we work on helping consumers, including manufacturers, reduce their energy consumption. We are working on developing and testing battery systems and deploying those in industries. Battery systems are probably best used only by manufacturers who have high demand charges. This is because in high demand periods, sometimes your energy bill will adjust for the amount of energy used in a very short time, and this is where batteries can have a significant impact on the energy cost,” he said.

Patrick Hartley, research director of the oil, gas and fuels research program at CSIRO, also suggests that manufacturers use demand- response methods to adjust their power utilisation and consumption depending on what is happening in the market.

“This way you basically match your consumption to the best possible prices you can get for the power that you need. It’s kind of a rolling adjustment to that consumption,” Hartley said.

While the solutions discussed all focused on electricity solutions, the same approach can be used to control energy prices for gas, oil and coal intensive industries.

According to the Australian Energy Update 2017, produced by the Department of the Environment and Energy, 41 per cent of energy consumed by the manufacturing sector in the year 2015-16 came from gas, 23 per cent from electricity, and 13 per cent from renewables. Coal and oil each accounted for 12 percent consumption in the sector.

As Luke Menzel, the CEO of the Energy Efficiency Council shared with Manufacturers’ Monthly, “Energy efficiency and productivity is a way of taking back some control, as is getting more out of every unit of energy behind the meter.

“Many businesses have opportunities to use gas more efficiently. In Australia, we
know there is a big gap between average performance and the best performers in terms of energy productivity,” he said.

“Research commissioned for the Federal Department of Industry found that when they ranked the activity of big energy users cutting their energy waste, the top 20 per cent of companies pursued energy- efficiency projects that resulted in four times more energy savings than average.

“Those 20 per cent of companies that were proactive about pursuing energy-efficiency improvements, and have been less exposed to price hikes in gas and electricity markets,” Menzel said.

A report by ClimateWorks in November last year suggested that demand-side improvements, including energy efficiency and switching from gas to alternative low carbon energy sources, is the best solution to the current gas crisis – one that has been largely overlooked to date.

ClimateWorks is an expert, independent adviser acting as a bridge between research and action in renewable solution. The report, titled “Solving the gas crisis,” found that implementing energy-efficiency measures and fuel shifting could reduce demand for gas by 321 petajoules across the country in 2030 – a quarter of the gas use otherwise expected.

Whichever way that manufacturers choose, be it on-site power generation and storage, corporate power purchase agreements, or demand-control methodologies, there are consultants that can assist them in their choice, based on their unique needs.

But, as CSIRO’s Glenn Platt warned, “The choices are complicated and there are many variables to consider. You should look for independent advisors and make sure they are not simply trying to promote their own product.

“Look at where your energy is going, what are your consumption patterns, and then you can make a much more informed decisions regarding what’s the best option for you,” he said.

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