Energy Pulse Blog

Now that the din of chickens coming home to roost is gradually subsiding, and with the Howard government rejected by the Australian public, how will the energy scene change direction in Australia with Rudd leading the new Labor government?

Firstly, Labor will ratify Kyoto, which means our emissions in the 2008-2012 period should not exceed 451 million tonnes CO2e excluding land use and foresty, or 540 million tonnes including land use and forestry. Excluding land use and foresty, Australia’s emissions were 525 million tonnes in 2005 (ie 25% above 1990) and have grown strongly in 2006 and 2007. (Australia was one of three Annex A countries that negotiated an increase in emissions over 1990 levels: Norway +1%, Australia +8%, Iceland +10%).

Labor has committed to a 20% renewable energy target by 2020. This is actually 20% of the electricity supply, estimated to be 60,000 GWh in 2020, assisted by increasing the Mandatory Renewable Energy Target (MRET) to 45,000 GWh. The target will be phased out after 2020 as emissions trading should provide sufficient support for renewable generation. In 2006, the renewable energy fraction was about 9.5%. In effect, the new promises add an existing 5% to what is already in place, and what has already been committed by state governments. This extra target should bring forward a lot more investment in solar (both PV and solar thermal), wind, geothermal, biomass and potentially some wave power schemes.

Labor plans to introduce an emissions trading scheme by 2010, with a detailed design of the scheme finalised by the end of 2008. There has been some expectation of a carbon price starting at about $12/tonne in 2010 and increasing to $33/tonne in 2030, but it is likely that prices will need to be higher if effective emissions targets are introduced. This will help close up the gap between coal fired electricity and lower emission technologies like gas and renewables, but the effects in the early years are likely to be small.

Labor also promised to introduce measures to improve household energy efficiency, and rebates or solar power systems and solar hot water. A national solar PV feed-in tariff will be considered. While these have been very effective in Europe, the initial one or two state and territory-based schemes in Australia seem feeble, with very low caps on the size of the systems and the amount of energy eligible for the tariff.

Some other initiatives included a $20 million Clean Energy Innovation Centre, a $50 million funding package to establish an Australian Solar Institute, and a $50 million investment in geothermal drilling to expand hot dry rock technologies.

Labor earlier announced a National Clean Coal Initiative, committing $500 million in funding to accelerate the development and deployment of clean coal technologies in Australia over the period to 2015. There is however a growing scepticism that so-called “clean coal” technologies may not deliver any benefits for 10-15 years, if at all.

Labor has also ruled out nuclear power as an option.

In transport, the labor party has commited $500 million over 5 years from 2011 to support industry research on the manufacture of hybrid and low emission vehicles in Australia. I’m not quite sure what this is aimed at. There are already plenty of hybrid electric and high fuel efficiency vehicles manufactured around the world. What Australia needs is a policy that encourages their purchase and use. Maybe the $500 million would be better spent on public transport, better urban design and public awareness programs. The rising cost of oil will probably be more effective in driving change than any industry support.

These Labor policies will help new lower emissions technologies gain a tiny foothold in Australia’s coal based energy supply but I can’t see them making a dent in our emissions for at least a decade. We’ve wasted the last decade and a half, and lost many important initiatives and opportunities. Witness the spectacular growth in the Clean Technology business in Europe, Japan, California and more recently China - much of it having origins in Australian R&D. We’re now so far behind in Clean Tech, it’s going to take a lot of money, effort and bright people to get back into the race, let alone reducing our emissions. In the meantime the rest of the world will be accelerating its investment, attracting the best people and technologies to markets that are already open and working.

The Howard legacy has a lot to answer for and the Rudd government a lot to live up to.

Two recent reports have made for particularly interesting reading. The first was the New Zealand Energy Strategy to 2050: Powering Our Future - Towards a sustainable low emissions energy system. This report, prepared by the NZ Ministry of Economic Development is a refreshing and challenging look at how New Zealand sees its energy future. The core of the strategy is to achieve:

• Resilient, low carbon transport
• Security of electricity supply
• Low emissions power and heat
• Using energy more efficiently
• Sustainable energy technologies and innovation
• Affordability and wellbeing

It is interesting how often the word resilient comes up. In transport, the NZ government has realised that there are at least 2 major crunches coming; the need to reduce greenhouse gas emissions and the likelihood of international oil price uncertainty and risks of supply disruptions. Among the many actions to be taken are:

The government has made in-principle decisions to set a target of halving domestic transport emissions per capita by 2040, and for New Zealand to be one of the first countries to widely deploy electric vehicles.
Increasing the diversity of transport fuels by introducing biofuels and, in time, electric cars will also make New Zealand more resilient to international oil price uncertainty and risks of supply disruptions.

Provision for travel alternatives such as public transport, walking and cycling should be continually upgraded and improved to ease traffic congestion, provide an alternative to private vehicle travel and reduce greenhouse gas emissions.

For stationary energy, an even bolder position is put forward … How about restricting new fossil fuel power plants?

The world is in a state of transition. The government believes that, during this transition, some areas of the energy sector would benefit from clear guidance to ensure we make the necessary changes to reduce our emissions of greenhouse gases.

As a result, the government has stated a clear preference that all new electricity generation be renewable, except to the extent necessary to maintain security of supply. In support of this principle, and providing time for the full introduction of a price on greenhouse gas emissions, the government’s view is that there should not be a need for any new baseload fossil fuel generation investment for the next ten years.

The government expects all generators, including state-owned enterprises, to take its views into account when considering new generation investments, and the government will advise state-owned enterprises that it expects them to follow this guidance. Currently there are no powers to regulate or restrict new fossil fuel generation.

The government will consider regulatory options to reinforce the government’s objectives for limiting new fossil fuel generation. It is important that any new regulations are a flexible and effective means to restrict new fossil fuel generation except where necessary to ensure security of supply.

This is real leadership in energy.

The second report is Power plays - Energy and Australia’s security by the Australian Strategic Policy Institute. This report is a sobering look at energy security risks in general and asks the question: Are we (ie Australia) vulnerable or just sensitive?

Clearly, oil is at the centre of any discussion about energy security, with the geopolitical instability in the Middle East, Central Asian rivalries, the emergence of Russia as an energy superpower, and ever escalating demand for oil from the West and the new growth from Asia and India. While Australia has considerable energy independence, many of the countries in our region are deeply vulnerable to the impact of an energy shock. Their vulnerability will have profound and unsettling consequences for Australia.

Looking back at the Energy White Paper the Federal government put out in 2004, oil prices were yet to reach $US40 a barrel and electricity from nuclear power in Australia wasn’t even mentioned in the report. This report also concludes that “Australia will not impose significant new economy-wide costs, such as emissions trading, in its greenhouse response at this stage” and “further major action on transport fuel security is not, at this stage, needed in Australia.” The paper was about the “long term framework”. It looks to me that the framework is starting to buckle and maybe we need a new White Paper, except this time one that will actually help Australia readjust to the new energy paradigm instead of ignoring it.

I can’t help but feel Australia is a bit too complacent, slow and unprepared for our energy future. A future that is going to be very different to what we have been used to, and that is going to arrive a lot faster than expected.