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carbon trading « Previous | |Next »
May 25, 2007

The Prime Ministerial taskforce on greenhouse emissions will deliver its report next week, against a background of the price of electricity going up ---wholesale electricity users are being quoted price increases of between 30% and 120% when renewing contracts. The reason is that there's not enough water to help generate the electricity from conventional coal-fired power plants. If the existing disconnect between the water supply and demand continues, we have power cuts.

This disconnect is happening in South East Queensland, where two of the largest coal fired power plants are running at 80 per cent capacity at the moment simply because there's no water to cool the plants and generate the steam that is needed to drive the turbines. So the Queensland Government's putting in a $1.7 billion pipeline to take recycled water to the coal fired power plants to keep generating electricity. Isn't that a public subsidy?

It's just the drought the state politicians say. What if it were the effects of global warming as well? What if we are getting a glimpse of our future? If so, shouldn't the money be better spent differently? Some say--the Nationals-- we need to build more dams and build more coal-fired power stations. I reckon its farewell to cheap electricity, no matter what.

The task force is expected to recommend the establishment of an Australian marketplace for trading carbon emissions. Will this start a much needed revolution in Australia's energy sector? Or will it be just a tentative toe in the water?

A carbon trading scheme would work by placing a cap on Australia's total greenhouse emissions, set lower than our current rate of pollution. Just as governments now issue permits for fishing to limit the number of fish pulled out of the water, polluters like power stations would be given permits which would limit how much they're allowed to pollute. The permits could be traded. Those who couldn't cut their emissions enough could buy permits from green power companies.

So there's a certain amount coal fired power stations allowed to pollute and then they have to pay a price. The price is the dollar amount that they pay for each tonne of carbon dioxide they emit into the atmosphere after they have exceeded their cap. That's the point at which your penalties begin. What level should the cap be set and kind of penalties are the issues?

Tim Flannery argues that what is needed is a significant cap on greenhouse gas emissions that will force electricity suppliers to go to renewable energy sources and natural gas in order to source quite a substantial amount of the electricity they sell. A cap that will begin the transition to a carbon-free economy. Consequently, the politics will be around the extent of the cap---whether it is set at $20 per tonne of carbon emissions or $40-$50 per tonne of carbon emissions.

Flannery says the latter figure is what is required:

I think it probably should be around $50 per tonne. Working group three of the intergovernmental panel on climate change did modelling and $50 a tonne gets you significant reductions and that would equate to about a doubling of the wholesale price which would be about maybe 30 per cent of the retail price. So the bill that you and I pay might go up 30 per cent which sounds like a lot but when you think about it if you can't make 30 per cent efficiency gains in your house I don't know, there's something wrong. We all waste a lot of electricity and I think there's no doubt that most of us can make those sorts of cuts.

Will the PM's taskforce recommend that the level of the cap be driven by considerations of reaching the threshold of dangerous climate change? Don't we need to do that to avoid overshooting the threshold and propelling us into a much warmer world? Or will it make major concessions to the energy intensive companies?

| Posted by Gary Sauer-Thompson at 11:59 AM | | Comments (7)
Comments

Comments

My Electricity bill at home is currently around $1500 per annum so 30% is a large increase.
I wonder if we put as much gusto into saving power as we do water. Say if we saved 20% per household. Would this after a period of a year cause the prices for power to rise 20% or so to compensate. Given that the power supply is more economically driven than the water supply (at present)

Les,
Household energy efficiency savings will reduce the amount of energy we use, not the price charged to householders by the energy retailers. It's the wholesale price that is going up big time. We can reduce the increased cost from price increases by making our households more energy efficient. Tim Flannery reckons we could achieve 30% energy efficiency, but not 60%.

My gut feeling is that the 30% price increase in electricity may well happen, even without carbon trading because of the shortage of water. We now have a national electricity grid and generator capacity in Victoria, NSW and Queensland has been gutted.

ActewAGL in Canberra is talking this week about 14% price increases and 2 hour rolling blackouts (turning the power off) next summer due to lack of power if the rains don't come.

The reduced generator capacity refers to both Canberra's coal fired power stations which provide baseload power to the ACT, and Snowy Hydro which provides peak load power boost -- water levels in its storages are at 8%, the lowest since the Snowy Mountains Scheme started in 1973. The equation is simple: if demand exceeds supply then people's power gets cut off. Canberra is starting to think in terms of gas fired power station.

Beattie ought to be putting the money into new natural gas fired power stations for south east Queensland. On a Lateline report it was stated that if the price of carbon is set between $10 and $20 per tonne of CO2 then energy sources like gas powered electricity generators and wind power start to become competitive with coal.

Clive Hamilton, from the Australia Institute said:

Of course the big winner in the short term for many emissions trading system would be natural gas because it's only a little bit more expensive than coal. It's highly flexible, it's quick and easy to install a new gas fired power plant and we've got plenty of the stuff. So the gas industry will be the big winner over the first 5 or 10, perhaps, 15 years.

Beattie has to get over his love for coal .

The worst bit for us is the future double whammy----price increases due to a shortage of water to run the coal-fired power stations and price increases from carbon trading. I don't know if anyone has really thought through the double whammy.

Most still think the rains will come, the rivers will flow, and everything will be hunky dory as it once was. It's fairyland stuff.

I'm now beginning to seriously consider taking Costello's subsidy to put solar power on the apartment in Adelaide, so as to run the airconditioner during the long hot summer months. I'm also moving to increase energy efficiency.

Yes I understand what you are saying. My point was that I thought that if we used 20% less electricity power companies would have 20% less revenue thus causing them after 12 months to increase the cost of power to compensate for monetary losses.
As for the rebate...I wonder if waiting 3 years Solar technology may make it more viable

Les,
yes an 20% increase in energy efficiency means less revenue for power companies, such as AGL.But they charge an extra 30% in price (its what ActewAGl is saying is warranted so they are ahead in revenue. We consumers are going to pay more for electricity no matter what happens.The days of cheap electricity are gone.

Airconditioning is the reason why there is a shortage of power, says ActewAGL. The word from them is that we consumers should shut off our airconditioning over the peak time on hot days over summer.The pollies are saying we should open the window just like the old days.

ActewAGl has attacked solar power. It argues that the industry has shown no innovation over the last decade, is 50% more expensive than coal-fired energy and is long on rhetoric and short on delivery. The latter means that solar panels for homes were costly and ineffective as a one kilowatt panel costing $14,000 (minus the government rebate) would only cover a third of a household's energy needs, whilst the payback is 20 years.

It all comes back to the need for an emmissions trading scheme---the finger can be pointed at the failure of the Howard Government to take this seriously.

I'm not convinced that the expense of individual solar power can be justified on any economic rational.

However, IMHO, solar hot water heating should be compulsory. I switched off the power to my heater on Sept 12th last year and only needed to turn it on again at the beginning of this month. That was 7.5 months of hot water without creating even a nanogram of CO2.

About 15 years ago an elderly neighbour died from the effects of a prolonged heat wave. He had air conditioning but didn't turn it on, presumably because of the cost.

While a 30% +/- increase may not seem that big a deal to many, for those on pensions it could literally be a matter of life and death. Many already have trimmed their consumption to the bone.

Yes, governments could up concessions to the poor, but history shows these rarely keep pace with inflation.

Ian,
the era of cheap electricity is over and so we are going to pay more for it. Demand increases so how do we prevent the blackout scenario? It sure isn't going to come from nuclear power in the short to medium term --a decade or more.

My guess is that the extra capacity is going to come from gas. It will plug the gap between demand and supply whilst renewable and "clean coal" technology is developed.

The core problem is the high demand at peak times in summer from airconditioning and that is only going to increase. Solar power on household rooftops addresses that and in some cases would generate more power than used. But this micro-generation is still too expensive--the cost of a new small car.

Yet there is little in the way of incentives (apart from Costello's subsidy) to households to take this option in the way of feedin tariffs. We are not being rewarded for for producing peak-distributed emission -free energy.

So I am suprised that ActewAGL is so hostile. Solar cell efficiency has increased in the last couple of years and ActewAGL should be moving towards rewarding people for the value of peak electricity in the market from solar photovoltaics

yes you have hit the nail on the head there. Buy a small car with air con and when it gets hot go into the garage and sit in it.