The fourth edition of the Lloyd's Register Technology Radar, entitled The Tipping Point, considers when renewable energy will overtake fossil fuels as the leading supplier to the market.
The authors of the annual study, the second to focus exclusively on low-carbon energy, surveyed 800 global power generation professionals and experts to hear their insights. The picture they painted is a complex one and not reliant solely on price parity: Experts predict the transition will not be uniform, but dependent on regional idiocrasies and differing ecosystems, with technology and digitization playing a key role. To find out more, Transform spoke to the report authors to discuss their key findings.
According to survey respondents (42 percent), more than price parity between renewables and fossil fuels is needed to shift the energy balance. What else is important?
Norway-based Karl Ove Ingebrigsten, director of low-carbon power generation at Lloyd's Register: We are on one globe, but it looks really different. China, for example, will most likely reach grid parity for solar first, but elsewhere there is an extreme drop in the cost of floating and bottom-fixed offshore wind, and so that renewable energy source is now growing in Europe and elsewhere.
One similarity is we see no renewable projects with no subsidies at all. However, we also find that some countries look at the cost of installation, but other places include the cost of connection as well. It's not apples and apples.
From a high level, I think most countries are in favor [of the transition] and will enforce a reduction of cost, which will increase investment. There is already much more capital going into renewable energy than fossil fuel power generation.
Australia-based Paul Stangroom, head of renewables for Asia-Pac at Lloyd's Register: Price parity is one thing, but from an investor perspective, political certainty is paramount, as well as forward-looking price and revenue curves. It's important to understand the economics of full operational capability, and how the market is going to look in five to 10 years' time. We are seeing that transition in Australia, with some big retailers planning coal closures, but [they are] being pushed to reconsider doing this, due to a fear around the instability of renewables in the country—whether that fear is well-founded or not.
The report finds that most (71 percent) believe technology will do more to improve the economic case for renewables than policy; do you have some examples?
UK-based Rebecca Sykes, technology innovation leader at Lloyd's Register: Yes, for example, in offshore wind the technology improvements are to operate wind farms more efficiently, moving towards better reliability of materials and components and more accurate predictions of when offshore wind farms are accessible.
Those technologies are about bringing down the cost of operations. There has been a learning curve for offshore wind, as most [turbines] were taken from onshore design and adapted for offshore. But over the last three to four years, these issues were designed out of the newer models, particularly around leading blade edge erosion turbines and the reliability of power converters.
For PV, also, there is research into new material development, but also the reliability of power conversion equipment, which I believe is going to help bring the cost down.
As the report notes, energy storage is vital but development has been slow; what can we expect in the future?
Rebecca Sykes: Battery energy storage is still in development, but growth in the electric-vehicle market is helping to drive costs down. Battery technology is getting attention and we see more projects that are co-locating it with renewable generating assets.
However, in different countries, there are varying levels of grid development, and the solutions each region may choose to manage intermittency will differ and depend on what their existing generating assets are and how flexible their dispatchability is.
Paul Stangroom: Battery is not going to do enough if the wind drops for four to five hours; it will only cover the first hour. But if you can combine it with pumped hydro and other forms of storage, then the grid can be optimized.
We were involved in the Tesla lithium-ion battery project in Australia. It's an interesting project, but economically does it work on its own? No. But technology always takes time to embed itself and ... developers [need] to understand how to use it and to make revenue from it.
Snowy Hydro 2.0 is being developed in Australia for another 2 GB of hydro storage, and many plants are looking at hydrogen storage. It is certainly a time of transition, as we move from just pure renewables on top of baseload to a more renewable-storage base, with some peaking capability on top. I think that is where the market is going to transition to.
Executives agreed that digitization, in different forms, will drive performance improvement; how is it doing this specifically?
Rebecca Sykes: Digitization is key. Maybe not every utility or commercial generating operator is doing it right now, but we do see organizations like ENEL, where one of its key strategic activities is to digitize its networks and retail. The company sees this as a way to free up additional capital resources to invest in more renewables. Some operators are looking at customer solutions, at smart grid developments, and at automating substations to remotely monitor their operations, which allows investment to flow into other areas.
Offshore wind operators, for example, can operate their assets more efficiently by digitizing the information they use to operate, such as maintenance records used for availability from a fleet perspective. Digitization combined with data science and analysis techniques can be used to look at why some components achieve reliability but others don't. This can help predict their remaining useful life to help operators make more efficient decisions for their entire operations.
Karl Ove Ingebrigsten: As another example, in Norway, the design criteria for the major gridlines is based on a certain temperature. The grid now has added a smart temperature measurement, which means, based on the temperature, the operator can increase the amount of power pushed through the grid system, so it is smarter.
Overall, what should both renewable and conventional asset owners take away from the report's findings?
Paul Stangroom: As an owner of conventional assets, I think, seeing the future change is something to be mindful of. Price parity is being achieved in many different markets, which means the economic decisions that firms operating at the conventional level are making should change. They should note that political and public pressure to be a greener provider is happening. There are projects in the Middle East, Asia, Australia, and Europe; everything is very different in how it works, but nowhere is that transition from conventionals to renewables not occurring.
For renewable asset owners, it is an exciting time; there is progress being made in technology, coupled with lots of opportunity to be a bigger player. No longer are people just looking at 5 percent to 10 percent renewables penetration, but more like 40–50 percent, even 60 percent. I don't think anyone would deny that that is going to continue to increase as the technologies change and as the storage operations improve and political pressure increases. It is a really great opportunity to start looking at where you want to be in the next couple of decades.