How can changes in Australia’s electricity network advance our technology sector?

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I’ve got some questions…

We’re reaching a tipping point on the energy grid. The flow of cheap green energy from wind and solar farms is being restricted; in some cases, solar farms are paying for the privilege of generating energy in the middle of the day.

Could an energy company install specialised computers next to a wind or solar farm and use green energy to mine cryptocurrency? Would that reasonably underpin the business case for more renewables? And could it help the grid?

It looks like we’re reaching a tipping point.

In mid-November 2019, a key moment brought Australia’s energy future into even sharper focus. According to the respected website RenewEconomy, Australia’s energy demands were (albeit briefly) met by more than 50% renewable energy. Given this significant event, it’s worth stopping to take stock of how the energy grid of the near future might work and interact with an ever increasing range of business models such as energy trading, and technologies such as cloud computing and cryptocurrencies — two technologies that have recently received significant publicity around their energy usage.

We’re seeing some amazing, and frankly crazy scenarios play out in the Australian energy market where large ‘solar farm’ generators are being switched off on bright sunny days. Rather than ‘shut off’ generators and essentially diminish or lose the value of this generated or potential energy, why isn’t a country that used to view itself as innovative, considering a range of ‘left field’ options beyond the well-known approaches such as pumped hydro? We should be looking at how the energy demands of new and emerging industries such as cloud computing, data farms and cryptocurrencies could be met. A ‘co-location’ approach of facilities could be deployed in order to support active management of electrical generators during times of high demand or oversupply and could be used to mitigate network constraint issues.

So why are some solar farms taken off-line on sunny days?

In the first half of 2019, a number of large industrial solar farms were connected to the Queensland electricity grid. As basic economics dictates, an increase in availability generally lessens the prices. Long story short — on certain days in August 2019, Queensland was producing more energy, from all sources, than it could use, or export for use, to NSW and the rest of the national grid. As a result, the 30-minute spot prices for power became “negative.” Electricity generators were effectively paying their customers to ‘buy’ power at those points in time. The financial implications hit different generator types differently. Coal generators keep producing because the changes were too abrupt to power down. Some solar farms could just switch off, particularly if they were being actively managed; whilst other generators, both solar and coal, have ‘hedged’ supply contracts which might limit their upside profit during high demand periods but minimise their exposure to negative spot price periods. As a result, they continue to run even when by some measures, they’re losing money on the power they supply the grid at those points in time! In Victoria, a slightly different scenario is at play, as new technologies such as solar farming have out-paced grid planning and capability. As a result, this has meant that some solar farms are being asked to limit their exports to the grid at 50% of their generation capacity. This has occurred because the network close to these farms (often in remote locations) can’t always handle the load of this generated power, and it seems unlikely these network constraints are going to be removed in the short to medium term.

There’s better alternatives than taking these solar farms offline.

Mining for cryptocurrencies like Bitcoin is often criticised for being power. Although the technical description of crypto mining is beyond the scope of this article, cryptocurrencies do consume an outsized amount of energy when measured against their current usage amongst the population. In China, Russia and numerous countries in South America, there’s examples of crypto mining businesses locating themselves in close proximity to dams which contain hydroelectricity generators. Many of these dams have the potential to generate more energy than they can sell, particularly in wet or monsoon seasons, so rather than waste this energy, it’s sold cheaply to crypto mining businesses. All around the world we see instances where the electricity grid is used flexibly to minimise energy waste and maximise potential energy usage. Although the levels of legislation and oversight need to be noted in these exemplar countries, there’s a number of possibilities in Australia for electricity generators to attract co-located operations such as crypto and cloud based businesses.

What issues might there be?

The easy criticism is that the use of fossil fuels to mine cryptocurrencies, which many people still associate with black market transactions, is wasteful at best and aide’s questionable transactions (or worse). This is a reason to educate, rather than to stop exploring interesting applications of new technologies. There might also be ways to structure such co-located operations for a range of improved civic outcomes such as employment and asset renewal. Would this outweigh the aspects of continuing to burn fossil fuels? Moving the focus from coal fired to renewable generation, and the same possibilities exist. Instead of ‘turning off’ generation at solar farms when prices become ‘negative’ or constrained, why isn’t this potential generation used, especially given the source material (i.e. the sun) is essentially free and capturing this potential energy instead of turning off the generation would lower the overall cost per kilowatt of installed solar infrastructure? These kinds of solutions would be flexible and could be actively managed and could be easily shut off when the grid faced periods of peak demand.

We need to explore new and innovative options

Why haven’t such approaches been tried in Australia, a country with an abundance of and increasing potential for energy generation, yet one which is navigating through a transition period between multiple generation technologies? Whilst this intersection of fossil fuel, renewable energy and technologies does pose some interesting questions, surely the feasibility of value adding to energy currently going un-generated or undervalued needs further investigation.

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