Now that the closing date has passed for submissions to the 2017 Review of climate policies, we begin the wait to see how the Government will address the dual challenges of meeting our 2030 national emissions reductions target and ensuring a smooth transition to a clean energy future.
Energetics’ submission include the findings from modelling of a number of policy-related issues. Firstly, it is clear that Australia’s energy sector must be the source of the bulk of emissions reductions achieved through to 2030 if we are to reach our national target.
Secondly, across a number of energy productivity improvement scenarios we found that the associated reductions in demand (together with well-established market forces driving uptake) will drive decarbonisation of Australia’s energy systems over the period through to 2030.
In this article we step through these insights and their implications in more detail. Two thirds of Australia’s emissions reductions need to come from the energy sector
The energy sector (electricity, fuel combusted for stationary energy and fuel combusted for transport) must deliver the bulk of the abatement needed to meet the 2030 target, as can be seen in Figure 1. The horizontal line shows where emissions must be to achieve the 2030 target
With the exception of Australia’s energy generation sector, other parts of the Australian economy cannot make a significant contribution to the 2030 target. In particular, the LULUCF sector could struggle having already provided the bulk of the abatement in the Kyoto commitment periods and the majority of emissions to be purchased by the Emissions Reduction Fund. Energetics’ questions whether there remain significant untapped opportunities in the land sector below $15/t CO2-e.
Therefore meeting our 2030 climate target requires either measures to decarbonise energy (policies such as an expanded RET) or measures that drive down demand for energy (energy productivity). For instance if the current 40% energy productivity improvement target remained[1], the burden of achieving the emissions reduction target must shift to measures that decarbonise energy supplies.
In examining the impact of different energy productivity targets we assumed the following:
- The closure of Hazelwood and the planned closure of Liddell power station does not reduce electricity from coal fired generators as the remaining generators currently have unused capacity. In practice, there is some contraction of coal fired generation as the baseload power stations cannot act as substitutes for gas-peaking plants.
- Any shortfalls in generation capacity are met by new gas fired generators.
- Solar PV will continue to grow outside of the RET due to the favourable economics that support its continued take up. We have assumed that solar PV will contribute 24.4 TWh in 2030, up from 6.2 TWh in 2015 (an annual growth of 10%).
[1] The 40% energy productivity target for 2030, on 2015 levels as outlined in the National Energy Productivity Plan (NEPP). Department of the Environment and Energy.
The impact of improving energy productivity
Scenario 1: ‘Business as usual’ – we still see a doubling of solar and wind
No forced closure of power stations, no expansion of the RET and no additional abatement from the non-energy related sectors, would see national emissions fall by just 6% relative to 2005, by 2030 – well short of our emissions reduction target. If the land sector met this shortfall (some 136 Mt CO2-e) a fivefold increase in the current rate of reafforestation would be needed.
Interestingly under BAU, with more wind generation needed to meet the current RET, more solar PV and the planned closure of two power stations (Hazelwood and Liddell), the variable renewable generation fraction rises from 10% in 2015 to 20% in 2030. This rise in renewable energy results in a 40% reduction in the quantity of electricity from gas-fired generators.
Scenario 2: 40% improvement target – not enough for the 2030 climate target, additional measures needed
Increasing national energy productivity in-line with the NEPP means that overall electricity demand is roughly constant through to 2030, and the anticipated growth in wind and solar will squeeze out some fossil fuel-fired generators in the absence of any other policy measures. The variable renewable component of electricity increases to 22%. However, our modelling showed that emissions would fall by only 11%.
Even if all coal-fired generation was replaced with gas fired generation, emissions by 2030 would only fall by 21% relative to 2005. So what could be done? Some 42 Mt CO2-e in additional abatement from the non-energy related sectors would be needed. Or the rate of decarbonisation of stationary energy (other than by electrification[1]) would need to match the rate of decarbonisation of electricity generation. More than tripling the RET will also see Australia meet the emissions reduction target. The required 75 TWh of additional variable renewable generation will see the fraction of variable renewable generation in the electricity networks rise to 51% although this would reduce the quantity of new gas fired generation required.
There are a number of different combinations of measures that could deliver the required abatement.
Scenario 3: Doubling energy productivity – more renewables, but as energy demand falls, no further gas fired generation is needed
Doubling energy productivity on its own will not see Australia meet its 2030 target. However, the resultant reduction in electricity demand will see a change in the generation mix, with the need for some gas peaking capacity causing around 50% of coal-fired generation forced from the market. This scenario also sees the penetration of variable renewable generation rise to 29%.
Deeper cuts to emissions which will be needed for the 2 degree world will require more rapid energy productivity improvements for stationary applications and transport, and more rapid decarbonisation of transport and stationary energy. For instance, an additional 33TWh of
[1] Decarbonisation of either stationary energy or transport through electrification will increase the demand for electricity.
renewable generation will see emissions reductions in the order of 33% and variable renewable generation penetration increase to 46%.
The compelling case for bringing forward abatement measures
Finally, Energetics’ submission noted the critical need for early action. Emissions are currently rising across the economy and this trend needs to be reversed. Energetics’ modelling demonstrates the economic value of early action: one tonne of abatement implemented before 2020 displaces over three tonnes of emissions reductions needed over 2020 to 2030.
Gordon Weiss is associate director with Energetics.
