29-11-2022 14:16

What will it take to push the global energy transition forward?

Professor Tomas Kåberger of Chalmers University of Technology has unique insights into the energy system from academic, industrial and regulatory perspectives. In this interview he discusses the paramount driver for renewable energy: reduced cost.
A winter forest in the Nordics

The professor Tomas Kåberger (TK) shares his unique insights with Nordea’s Viktor Sonebäck (VS) in the latest Nordea On Your Mind. In this interview the duo discusses the pros and cons of different energy sources, such as fossil fuels, nuclear and renewables, and what key factors to consider.

VS: Would you briefly tell us about your academic and industry background, as well as your various current engagements?

TK: I have tried to understand the energy system from many perspectives. My basic training was in physics and thermodynamics. My PhD thesis explored the frontier between thermodynamics and economics, and I have worked a lot with energy and environmental policy for various government committees and commissions. I have worked in environmental citizens' organisations, industry federations, energy companies, investment funds and I was Director General of the Swedish Energy Agency in 2008-11. Having been active mostly in Sweden, I spent ten years as a part-time visiting professor in China, and for more than ten years I have headed an energy institute in Tokyo. And I have had some assignments in the EU and Abu Dhabi over the years.

VS: Considering the future needs of a Nordic electricity system, how would you describe the pros and cons of different energy sources; for example, nuclear, renewables and fossil fuels? What are the key factors to consider? Price? Stability? Safety? Something else?

TK: Talking about "needs" tends to downplay price and costs, which are ultimately decisive for the demand. The dramatic decrease in the cost of solar and wind electricity over the last decade has made these energy sources the lowest-cost option for new power in most parts of the world. This year, renewable electricity generation capacity is set to grow more than the total growth in electricity demand.

But even more important is that good solar and wind sites in the world have since a few years offered electricity cheaper than energy from crude oil. This is a fact that has been obscured by trading unit measures such as USD per barrel of oil and USD per MWh of electricity. This has made it easy to let electricity substitute for oil in the transport sector and in industry. We now even see the opportunity to use cheap renewable electricity to produce hydrogen and other fuels to replace fossil fuels, and even coal in the steel industry.

As price is important for these industries, their behaviour will help balance the electricity system. You do not want to charge batteries or produce hydrogen when electricity is expensive, you only do it in periods of cheap, abundant electricity. This will help system stability and reduce price volatility.

There are some old terms that have lost their relevance. "Base load power" was a 20thcentury term describing power plants with high capital cost and low marginal cost – typically coal-fired plants. Base load plants were built to operate all around the year, covering just about the minimum – base load – of customer demand. Higher demand was met with low-capital cost, high-operating cost plants, typically oil or gas-fired plants. Today, the low-cost renewable plants operate whenever they can with almost zero marginal cost. What used to be "base load plants" are out-competed. We can see it in the Danish system, where large coal-fired plants have been permanently shut, or in Texas where the company Energy Future Holdings, specialising in such plants, has gone bankrupt twice.

Another term that is no longer relevant is "inertia". Heavy machines with synchronous generators used to be stabilising voltage and frequency in the system with the kinetic energy they stored. Today, the lowest-cost stability services are provided by combinations of batteries storing the energy, and power electronics stabilising the grid faster and cheaper than old thermal plants with heavy generators. This was first illustrated by the success of the Tesla-supplied Hornsdale Power Reserve in South Australia, and then by procurement results in other parts of the world as well.

Whenever CO2 emissions cost money, the transition from fossil fuels to renewable energy is accelerated.

In real world experience, nuclear power is – to cite former IEA director Nabuo Tanaka – "ridiculously expensive and utterly uncompetitive". The danger lies in proponents again and again over-selling the technology, creating deficiencies in private and public investment budgets. This is the case for all western and most Asian projects, clearly described in the World Nuclear Industry Status Report 2022, and by the IEA. Approximately one in ten nuclear power construction projects have been abandoned before being completed, including recently the two reactor projects at Summer in South Carolina in the United States. And no one wants to assume economic liability for major nuclear accidents.


Professor Tomas Kåberger of Chalmers University of Technology.
The dramatic decrease in the cost of solar and wind electricity has made these energy sources the lowest-cost option for new power in most parts of the world.

Professor Tomas Kåberger, Chalmers University of Technology

VS: Given your extensive experience within the energy sector, and with your focus on renewable energy, what are your thoughts on how the political discourse regarding energy supply in the Nordics has evolved over time? Do you think the focus will change going forward, and will it polarise or move more towards a consensus view?

TK: From the introduction of a competitive electricity market in the 1990s, a consensus based on economic efficiency evolved. The recent agreements underpinning the new Swedish government may result in a departure from the market-driven economic approach. Immediately stopping wind power development in order to create an opportunity for more expensive nuclear reactors, possibly coming on line in ten – but more likely in 15-25 – years is the possible consequence. But most likely the industrial electricity consumers will be explicit enough in the near future to avoid such a scenario.

VS: Having seen significant and continuous improvements in renewable energy technologies, how competitive would you say these sources are compared to nuclear or fossil alternatives – especially in a Nordic context? Can we expect this trend to continue?

TK: In Europe and America, new nuclear electricity costs many times more than new renewable electricity. The range of costs given in the annual accounts of continuing operating existing reactors in Sweden is where the total cost of new wind and solar is Lazard and BloombergNEF data from other parts of the world have described this situation for years.

The best of the existing reactors may continue to operate in competition, but when they need major re-investments, they may fail. They might also be closed if accident liability rules required more paying capacity in case of large accidents.

VS: As a thought experiment, if you were given absolute authority in designing a perfect energy production mix for the Nordic region, how would that look? What would be needed to achieve this, and what would be the major challenges?

TK: Then I would trust the many investors in the electricity market. I would ensure market actors all understood the important balance responsibility principle in the legislation. We are not in a time for further subsidies. We are in a time when fast transition creates competitiveness and industrial growth.

Finally, I would encourage better use of modern power electronics and batteries by the Swedish grid operator Svenska Kraftnät as a fast way of spending their 'bottleneck funds' to reduce price differences, but also beg other authorities to speed up the permission processes for power lines within Sweden as well as to neighbouring countries.

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