Kangaroo Island, Australia, Would Find It Cheaper To Go 100% Renewables Than Stick With Grid

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Originally published on RenewEconomy.

Kangaroo Island, the iconic tourist attraction off the South Australian coast near Adelaide, would likely find it cheaper to go 100 per cent renewable, with its own resources, rather than stay connected to the main grid, according to a detailed study led by the Institute of Sustainable Futures.

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The study, released on Thursday, shows that the direct and indirect costs of going it alone with the island’s wind, solar and biomass resources, along with battery storage, would be about the same as the cost of upgrading the link to the mainland and paying for fuel.

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But while that may be good news for the island, it is likely that the main electricity provider, SA Power Networks, will go for the main grid option, unless enough community support can be gathered to force its hand.

The report into the situation in Kangaroo Island highlights a fascinating but important conundrum facing many communities, and many power providers: should millions be spent upgrading or replacing ageing poles and wires, or in this case submarine cables? Or should they be spent in new technologies that offer independence, greater security of supply, clean energy, and local jobs?

Sounds like a no-brainer, but because of the regulatory structure governing the country’s network providers, it is not.

In Western Australia, the grid operator Western Power is facing similar issues. It knows that it would be cheaper to cut the links to some remote and regional centres and set up local renewables-based micro grids. But the regulator won’t allow it.

In South Australia, it’s not entirely clear that SAPN is as excited about the idea of cutting the link to Kangaroo Island, and to some extent it is a test of its willingness to change. It was, however, SAPN that asked if there were any alternatives to simply laying a new cable.

It has to be said that some in the local community are also cautious. But the mayor, Peter Clements, is interested, and wants to test the community response.

“Kangaroo Island has a wealth of wind, solar and biomass resources,” he says. “Developing a mini-grid to take advantage of these natural assets and produce reliable, affordable power is a win-win for the island’s residents and businesses.”

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A meeting will be held next week (September 22), where the findings of the report will be presented. The response will be crucial for what avenues are then pursued.

Chris Dunstan, one of the lead authors, says that Kangaroo Island is a proxy for similar decisions that are likely to be made in Australia, and it has international importance.

The scale of the project is significantly bigger than other high renewables projects undertaken on King Island or Lord Howe Island, and it would be one of the first places in the world where such a large community eventually is removed from the grid.

Dunstan and his team at the ISF in Sydney modelled 10 local electricity supply scenarios as alternative sources of power for Kangaroo Island.

“Replacing the 15km undersea cable is estimated to cost $77 million over a 25-year period, which includes $36 million for the cable and $37 million for the imported power,” Dunstan says.

“The most cost-effective alternative is a local supply of wind, solar photovoltaics and diesel generation, complemented by battery storage and demand management. This wind-solar-diesel hybrid solution could supply Kangaroo Island with 86 per cent renewable energy for only $10 million more than a new cable option.

“For a further $13 million, 100 per cent renewable power could be provided by upgrading diesel generation to cutting-edge biomass technology fuelled by unharvested local plantation forest.

“Both renewable energy supply options could actually cost Kangaroo Islanders less than the new cable over a 25-year period when indirect costs like savings in local network charges are included.”

(As an example, the central “balanced” renewables scenario includes an extra 6MW of solar power for the island, 8MW of wind, 5MW of biomass, and around 8MW of diesel, although this would be used sparingly and only produce around 62MWh a year, compared to 41,000MWh from the wind, solar and biomass resources).

Dunstan says it would make sense to use the current cable as long as it lasts. That would mean less diesel use and even offer the opportunity to export excess wind or solar power.

The problem with the whole proposal lies around the regulatory regime, which influences the investment decisions that networks make. While indirect costs are paid by Kangaroo Island customers, they are not required to be taken into account by SAPN in the key regulatory test on whether it can make such investments, known as RiT-D.

That means SAPN will likely have a greater financial incentive to lay a new cable and keep the island connected to the grid. And it may be that SAPN thinks that will be the simplest thing to do, rather than get involved in local grids and generation.

It’s because of that, Dunstan says, that the project will not go ahead unless there is significant support from the Kangaroo Island community, and unless a significant third party, such as the South Australian government, the Australian Energy Regulator and/or ARENA, steps in to reduce the barriers to SAPN adopting a more innovative non-network solution.

“Addressing such barriers in the context of Kangaroo Island would provide a powerful precedent for supporting local electricity solutions throughout Australia,” Dunstan says.

 The report found a bunch of other benefits from using a local and renewable energy supply. These included reduced emissions, more local jobs, better energy security (reduced exposure to a single point of network failure) and enhancing Kangaroo Island’s clean and green brand.

It could also provide a high profile and innovative large-scale Australian case study for high penetration renewable energy systems and smart mini-grid control.

“Adopting a local renewable power supply strategy in a popular, iconic location like Kangaroo Island is likely to attract much international attention,” the report says. “It is likely to be recognised as a leading demonstration project with potential to catalyse other major investment activity in this area.”

But the biggest challenge may not be technical – because the report says that solar and battery storage could be implemented soon enough, with wind and biomass within a few years (it would require more detailed planning and approvals).

The biggest impediments are about the regulatory, governance and business model issues. The current measure of network spending only looks at poles and wires, and seldom looks at non-network options.

“Such local alternatives are usually only developed by non-network option proponents at their own cost and risk. To provide a more balanced approach, detailed analysis of non-network alternatives, such as those described in this study, should be the rule rather than the exception,” the report says.

And, it notes, if a local electricity supply option were to be adopted, and subsequently the existing cable from the mainland were to fail, then arrangements would need to be in place to ensure that the local electricity suppliers were not able to abuse their monopoly power to raise electricity prices unreasonably.

Reprinted with permission.


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Giles Parkinson

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.

Giles Parkinson has 596 posts and counting. See all posts by Giles Parkinson