If Australia continues to rely on a renewable energy target to help meet its share of the global goal of capping global warming by 2°C, it is likely to result in new coal plants being built in the 2040s.
Sound implausible? Does it sound completely crazy? Yes, but this is the advice that was given to the Climate Change Authority and presumably helped them form their controversial stance on climate policies that was delivered to the government last week.
The idea that Australia, in a world aiming at cutting missions, would be likely to open new coal plants at a time when it should be hitting a zero net carbon target seems extraordinary.
Yet that is what consultancy Jacobs is suggesting, even though its modelling shows that 90 per cent of Australia’s generation by 2040 would come from renewables under an extension of the RET.
Here’s the graph above. Under Jacobs’ modelling – apart from the reference case where Australia ignores global warming – coal-fired power becomes extinct in all its policy scenarios in Australia by the mid 2030s.
Until suddenly, in the renewable energy target scenario, it makes a comeback in the late 2040s. (That’s the blue uptick on the bottom right).
“Fossil generation increases from 2040, largely driven by new CCGTs (combined cycle gas plants), although some supercritical black coal generators are also built,” it says. This is despite the share of renewable energy in generation being at 74 per cent in 2030, and peaking at 91 per cent in 2039.
Quite where baseload coal plants, or gas plants for that matter, fit into that high renewables scenario is not clear, given the need for flexible generation.
And just who would invest in a new coal plant two decades hence, with 90 per cent renewables, as the world nears the zero emissions target it has locked itself into through the Paris agreement, boggles the mind, but that is what we are told the modelling tells us.
This scenario is just one of a number of extraordinary assumptions made by Jacobs in its modelling, which in itself is just the latest in a series of modelling assumptions to afflict Australian policy making, and judgments about the impact of various policies, including the carbon price, the RET, and feed-in tariffs.
Perhaps the most egregious was the Tony Abbott government’s Energy White Paper, which assumed no action on climate change, but there have been plenty of examples.
Why is this important? Because modelling is crucial to assessing whether one policy approach is better than another. The key assumption is the cost of abatement and the impact on economy.
The problems arise when the modelling is based on false premises. One of the reasons that the world was able to forge an ambitious agreement in Paris was the realisation that the cost of wind and solar and other technologies had fallen significantly, and effecting an energy transition would be nowhere near as expensive as it was made out to be. In fact, it might just save money over the long term.
In Australia, however, policy is still being set and advised on the basis of wrong assumptions about the renewable energy competitors to our current suite of coal and gas-fired plants. The idea that anyone would build a new coal plant in a high renewable, 2°c scenario more than two decades from now is a hint that something is wrong.
This is not the first time that Jacobs has made some outlandish predictions. In a report released last month for the Energy Networks Association, the main networks lobby group, it predicted that no new large-scale solar would be built before 2030.
It picks up this theme in the report for the CCA, saying that in the carbon pricing scenario “large-scale solar technology does not materially emerge until after 2040”. It says this is because it is competing with small-scale rooftop solar (haven’t they heard of storage?).
It also predicts in some scenarios that geothermal energy will be built before large-scale solar – which will be news to the company that just closed the last of the geothermal pilot plants, and the several dozen about to build large scale solar facilities.
How does it get it so wrong? Because its modelling makes extraordinary assumptions about the cost of technologies. As this graph below shows, its estimates of renewable energy are even more conservative than the widely discredited AETA report from 2012, and nearly twice as expensive as the more credible 2015 APGT version.
Its assumptions on the capital costs of large-scale solar PV for 2030 have already been beaten – in 2016 – judging by the results of the tender announced last week by the Australian Renewable Energy Agency.
(In its report for the ENA, Jacobs predicted 768GWh of large-scale solar in Australian by 2030. The ARENA tender guarantees there will be at least 1,300GWh, and there is clearly plenty more to come.)
But while its assumptions for renewables are far more pessimistic, its assumptions for nuclear are nearly half the price of the APTA report of 2015 and the recent nuclear royal commission.
It is broadly in line with other forecasts for gas and black coal. This leads it to favour gas because the “contribution from CCGTs in the 2020s prevents locking in more expensive renewable plant, such as large-scale solar with storage.”
This matters because these cost assumptions are then used to argue in favour of one policy suite over another. The Jacobs report says a high renewables policy scenario is more costly to business and consumers, and for emissions abatement.
It is perhaps not surprising that the CCA – having had its board stacked by Greg Hunt with former Coalition politicians and the architects of Direct Action – should come out with a recommendation that supports the continuation of … Direct Action.
But the growing reality is that Australian policy appears to be being framed on the basis that the country should proceed as slowly as it possibly can. Dud technology cost estimates and modelling are being used to justify that.
And that was probably the underlying point of the dissenting paper presented by CCA board members Clive Hamilton and David Karoly – that it is in Australia’s short-term, mid-term and long-term interests to be acting as fast as it can.