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Martin Ferguson is a big forward from the draft edition released last December – a flawed document misinformed by out-of-date technology cost projections and an inability to imagine anything other than the past.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