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Australia: generating electricity with near-zero emissions? « Previous | |Next »
February 6, 2012

The Grattan Institutes recent report on renewable energy--No easy choices: which way to Australia’s energy future? --- makes a familiar argument about how our energy is produced in a world climate change and the need for an energy transition.

The age of cheap oil and cheap coal is over and economic growth that increases GDP at the expense of our natural capital, is now “uneconomic growth”. The Australian economy is about to go through one of the most dramatic transformations since the industrial revolution. This will be driven by the need to act on climate change, energy security and resource scarcity.

The argument is that Australia must substantially and relatively quickly change the nature of its electricity supply. It must shift to clean-technologies that generate electricity with near-zero emissions, given that the Commonwealth’s goal is to reduce Australia’s greenhouse gas emissions to 80% below 2000 levels by 2050. The study says that these new, low-emission technologies are wind, solar PV, geothermal, nuclear, concentrating solar power, carbon capture and storage and bio- energy.

Some then say that technology will save the day. By this they mean that technological innovation will always extend resources and reduce prices through efficiency gains and substitution. It's the mastery of nature argument.

The Grattan study states that it is widely accepted that the federal government's emissions trading scheme will change the behaviour of Australian businesses, especially those in the energy sector. For instance, in the short-term, the scheme will make gas prices competitive with coal, and investment will shift accordingly. So an energy transition is under way. But gas will not deliver the emission reductions required and is at best a bridging technology.

However, it adds, what businesses will not do, under the current policy mix, is to invest in new, low-emission technologies – at least not to the degree which many hope and expect. As a result, Australia is at grave risk of not being able to meeting its carbon emission commitments by 2050 while at the same time keeping electricity affordable.

The report argues that any one of these technologies has the potential to be scaled up sufficiently to play a role in meeting Australia's energy needs. However, all face major obstacles to achieving their full potential, and none can deliver the bulk of Australia's needs alone. Despite current projections, it is possible that none of the technologies can produce power at a scale and at costs similar to today’s electricity.

In other words existing policies will not on their own produce the transformation in energy that we need.The carbon pricing scheme, while a good start, is not enough. So what is to be done? The report argues that:

Markets must be the primary mechanism by which Australia reduces its emissions.To ensure markets work properly, government must also remove barriers to deployment of several technologies, such as transmission connection hurdles and subsidies to incumbent technologies.

The current regulatory regime is designed to favour the incumbent gas and coal technologies; and these are supported by between $8 billion and $9 billion of annual subsidies. Imagine the resistance and opposition from the mining and coal interests and their allies to further government intervention to remove these subsidies.

If that is not enough, the report makes another point:

Yet even then, it remains unlikely that enough funds will be invested in the short term to give any of the low-carbon technologies a chance to deliver ... Governments should therefore support research and development in areas of national interest, and demonstration and early-stage deployment of a suite of technology options.

The battle lines over clean energy finance are being drawn up.

The Grattan report says that says regulatory reform is essential if the national electricity grid is to integrate sources such as solar, wind and geothermal, and not merely serve to protect incumbent gas and coal generation. Right now, the grid is designed essentially to connect major coal basics to capital cities. It needs to evolve to include wind and solar and other sources, and it needs to get smarter--- ie., substantial new transmission capacity is necessary including greater interconnection capacity between state regions to cater for variability in wind and solar.

Australia has just taken a few hesitant steps down the path of energy transformation, and it's political institutions have been convulsed by the effort. Imagine the effect the necessary policy interventions beyond the emissions trading scheme is going to have on them. Imagine the resistance and opposition to further intervention to support renewable energy from the mining and coal interests and their allies. This energy transformation is going to be a long and bitter battle.

| Posted by Gary Sauer-Thompson at 3:23 PM | | Comments (4)


If you do the maths then nuclear is not an economic proposition without massive government subsidy. The Grattan Report says it would take 15-20 years for a nuclear plant to be developed in Australia, and it questions whether nuclear would be able to play a constructive role in the local grid, noting that it is relatively small, and nuclear is not capable of responding to peak demand.

Then there is public resistance and waste disposal. Fukushima casts a long suppressing shadow on the future of nuclear electricity. Progress will be slow.

The fossil fuel industry's scenario of a comfortable future for fossil fuel energy is based on their vision of mass carbon capture and sequestration (CCS) being put into practice. However, they are waiting for the government subsidy for the capital and operation costs of the continuous removal and burial of billions of tonnes of compressed gas because there are no energy companies in Australia, that can afford to invest $1 billion or more for a demonstration plant, without a very high probability of success.

Progress will be very slow.

Australia's core energy problem is: can it continue to use coal, an abundant and inexpensive fuel, in a way that mitigates, instead of worsens, the global warming crisis.

Carbon capture and sequestration (CCS) is the critical enabling technology to help reduce CO2 emissions significantly.

However, the coal industry shows little interest in providing demonstration of technical, economic, and institutional features of CCS at commercial scale coal combustion and conversion plants.

This is needed to give policymakers and the public confidence that a practical carbon mitigation control option exists, will reduce cost of CCS should carbon emission controls be adopted, and will maintain the low-cost coal option in an environmentally acceptable manner.

Instead of an aggressive R+D effort we have an aggressive political campaign to block energy reform and the emergence of a renewable energy industry.

The Grattan study says wind power could provide more than 20 per cent of Australia energy needs (it currently provides just 2 per cent) and is the only low emissions power technology that is ready for rapid scale up in a short period of time.

Grid access is a major issue for remote resources, and grid capacity is also a factor, causing some less favourable areas to be developed rather than stronger wind areas in South Australia for instance.

The report notes that Australia is capable of substantially expanding the amount of wind power that is fed into its electricity systems – (South Australia has 22 per cent wind, one of the highest in the world) – but ultimately it will meet some sort of constraint without storage capacity.

Australia is one of the most fossil-fuel dependent economies in the world, with around three-quarters of our electricity generated by burning coal in base-load power stations.

Getting to 50 or even 80 per cent below 2000 levels by 2050 through renewable electricity will mean a massive re-alignment of our entire energy infrastructure.