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Ferguson spies a green energy future … and steps on the gas

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To be able to plan and prepare for the future, you need first to be able to imagine it. And despite the policies and rhetoric around the government’s Clean Energy Future package, it struggles to imagine what a clean energy future might look like. Unless it’s got a lot of gas.

The Energy White Paper released on Thursday by Federal Energy Minister Martin Ferguson is a big forward from the draft edition released last December – a flawed document misinformed by out-of-date technology cost projections and an inability to imagine anything other than the past.

As the table below shows, there has been a recognition – thanks to the work of the Australian Energy Market Operator, and the Bureau of Resource and Energy Economics that solar – both in rooftop PV and large scale – will play a greater role than previously recognized.

Indeed, in its mid-point scenario, solar accounts for more than one quarter of Australia’s energy needs by 2050, and could account for 29 per cent. That’s compared to a maximum of just three per cent envisaged in the draft. Other changes from the draft paper has the potential of geothermal downgraded, and it doesn’t deploy in numbers till 2030. Wind does not grow much after the completion of the Renewable Energy Target.

Solar and wind could play a much greater role, but the government, or at least Ferguson’s department, remains firmly attached to the dream of carbon capture and storage, and includes this as a mainstay in its scenarios that suggest “clean energy” could account for 40 per cent of Australia’s energy needs by 2035 and 85 per cent of Australia’s energy needs by 2050. Under this 2050, 85 per cent scenario, it sees fossil-fuel-fired with carbon capture and storage contributing 29 per cent, large-scale solar 16 per cent, wind energy and household solar photovoltaic (solar PV) 13 per cent each, geothermal energy 9 nine per cent, and hydroelectricity and bioelectricity 5 per cent.

The other major problem is that the Australian government’s planning– including its assumptions on the global coal and gas market, and therefore Australia’s own export opportunities, – is still based around the International Energy Agency’s “new policies” scenarios, which in turn is based on the world continuing with its limp-wristed response to climate change. The IEA itself has said – and will reinforce this in next week’s World Energy Outlook – that this is unacceptable, and condemns the world to catastrophic climate impacts.

In the government’s Energy White Paper scenario, gas is everywhere. On the domestic electricity market, Ferguson still believes that more money should be spent on coal and gas – up to $125 billion essentially on CCS technologies – than on renewables ($100 billion), even though it is clear where the private sector wants to invest.  Indeed, this whole scenario seems predicated on the fact that CCS is able to deliver as a commercially competitive alternative, a view not widely shared by people in the industry.

Ferguson also wants Australia to develop one of the biggest gas markets in the world” and invest hundreds of billions into export terminals. He wants an Australia that “transitions to cleaner forms of energy over time in a way that does not impede our economic competitiveness.” In other words, regulations that do not get in the way of domestic gas production, including coal seam gas and shale gas and other alternatives.

But here’s the thing, it’s probably not going to work like that, at least in the domestic market. If gas/LNG does become a big export commodity, the cost of Australia’s own gas supplies on the eastern seaboard will rise, and quite substantially. “Domestically, we are facing pressure to move to cleaner fuel sources and at the same time the cost of delivering this energy is increasing,” Ferguson said in his speech. Maybe for gas, but as the BREE forecasts point out, the cost of renewables is coming down fast.

Thankfully, Ferguson does not propose an artificial cap on gas prices for the domestic market, as the state governments have done on coal supplies. As the  CSIRO’s online modelling shows, higher gas prices essentially push it out of the equation, as an energy source. The same result is delivered for high cost CCS. That will throw a spanner in the works of the government’s mid-point scenarios, and may force it to study the cheaper renewables alternative with more vigour.

Essentially, the Energy White Paper – at least as it regards energy sources (regulation and electricity prices are discussed here) is a bet that CCS delivers, and that the India and China energy market continue to demand large amounts of fossil fuels. As we have pointed out here, and Professor Ross Garnaut has pointed out here, that is by no means guaranteed. It’s a bet  more appropriate to the current spring horse racing festival.

As one insider suggested to RenewEconomy, this Energy White Paper  is a vast improvement on the draft, and superior than anything that has preceded it. It will probably be useful for the next few years, but pretty soon the government will need to start all over again. A good place to begin that process will be with the AEMO’s 100 per cent renewables scenario that it is currently preparing.

 

 

 

 

 

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  • Peter Bysouth

    Figure 3.8 “Australia’s electricity generation mix to 2050…” has no increase in hydro over the next 40 years. Watching a TED talk of President Obama’s first Energy Tsar back at her Alma Mata; she said one of her first directions was to call for an assess of the number of dams, weirs and/or rivers that could have the addition of a large or small hydro generation facility. The answer was some 60,000 opportunities. The Australian response/study of or from the CCA, the Federal or any State Government has been………….?

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      The United States has 4.5 times our average rainfall and about 2.3 times our average elevation, so they have a major advantage when it comes to hydropower. But it’s certainly possible for us to get more out of our existing hydroelectric capacity. For example, solar is pushing down electricity prices and could allow us to recharge our existing pumped storage capacity during the day. And there is probably a fair bit of small scale hydroelectric capacity that could be developed, but I doubt we’ll see any large scale increase in hydroelectricity in Australia. One problem is that rainfall appears to be dropping across the bulk of the country thanks to global warming, so we may have difficulty getting more out of hydroelectricity. Especially since a portion of the rain we do get is likely to come in the form of infrequent massive flood causing downpours, which is not a convenient source of water to generate hydroelectricity from.

      • Concerned

        Ronald.

        “One problem is that rainfall appears to be dropping across the bulk of the country thanks to global warming, so we may have difficulty getting more out of hydroelectricity.”

        http://www.bom.gov.au/cgi-bin/climate/change/timeseries.cgi?graph=rain&area=eaus&season=0112&ave_yr=0

        • http://ronaldbrak.blogspot.com.au/ Ronald Brak

          Concerned, eastern Australia includes the bit that may be getting wetter and the bit that may be getting drier. But we don’t know if temperate Australia is getting drier. There is too much variability in the data to be sure. That’s why I used the word appears.

          • Concerned

            Ron, I am gobsmacked.
            There is an amazing amount of information on BOM and CSIRO sites.
            Your logic is staggering.

  • Vic Eldridge

    I think the graph offers a fascinating insight into a mind addled by climate denial. I see it as Martin Ferguson’s Charlton Heston moment. 
    “I’ll give you my gun when you pry it from my cold, dead hands.”

  • Peter

    The more substantial modeling issue is that the decision makers, planners & bureaucrats remain enthralled to an expensive industrial model for energy supply, in an era that sees utilities having to move to a post industrial model. The issue becomes even more murky because of the dysfunction in the various State Governments’ financial systems: dependence on royalties from coal and the need for GST revenues on electricity – these dependencies block reform. These latter aspects truly inhibit real progress, and attempts to stop the sweep of historic forces, foolishly, temporarily and at great cost to the populus.

  • Mark Diesendorf

    Giles,
    I think your articles are excellent, so I hope you will forgive me for mentioning two quibbles about terminology:

    1. “Energy needs” are not the same as “energy demand”. The only genuine energy needs people have is the renewable energy provided by carbohydrates and fats in their diets. Most of our energy use is demand, not need.

    2. There is also a distinction to be made between “energy” and “electrical energy”, which is only a fraction of our total energy demand. Non-electrical heat energy and transport energy are quite substantial.

    Cheers,
    Mark