New year, same old energy Furphies: Fact-checking the pollies

Bill Shorten and Malcolm Turnbull’s National Press Club speeches are likely to feature clean energy and climate in one way or another. While the quality of discussion on these topics had slowly been recovering, with business and civil society calls for bipartisan responses, the political debate has regressed significantly. Some old Furphies have re-emerged and I wanted to provide some fact checks.

1. Policy uncertainty is the biggest threat to energy security and prices, not renewables

While there are undoubted cost of living pressures this is also a high stakes political gamble that scare campaigns can overcome support for renewables, broadly seen as an important economic opportunity – Abbott failed to land that scare campaign from PM’s office when last trying to demolish the RET.

Here are a few quotes:

Energy Users Association of Australia

“Without a national plan to create an orderly exit of coal, improve energy security and minimise cost to energy users we will continue to create price and supply impacts hurting our economy and creating an unworkable environment for all energy users.” EUAA CEO, 14 December

“We need investment grade policy that can be trusted to last beyond the next election cycle. If this isn’t achieved, energy users will continue to suffer from increasing costs and decreasing energy security.” EUAA, 5 December.

Australian Energy Council

‘“At the moment the electricity system isn’t transforming, it’s just degrading. Fewer generators supplying the same demand is increasing costs. The new investment that would normally be signalled by higher prices is stalled by a decade of policy uncertainty. No one knows what is going to happen next. In this environment continued uncertainty is driving up power bills. It is difficult to see how this will substantially change until we provide sufficient confidence to the energy market so that we can begin re-building the system. The longer we delay an agreed national strategy, the more we can expect price volatility and supply reliability to be compromised.” (14 December 2016 https://www.energycouncil.com.au/news/electricity-price-volatility-to-continue-without-national-plan/)

“The announced closure of Hazelwood highlights the need for a clear, national energy and climate policy to guide the decarbonisation of Australia’s electricity supply.” 10 November 2016

‘The most immediate barrier for Australia’s electricity sector successfully transitioning to a net zero emissions economy, which includes the eventual closure of coal-fired power stations, is the absence of a national long term climate and energy policy. Major investment is required for future energy generation, as coal-fired power stations are decommissioned. Such investment will not take place unless there is policy that investors expect to last through multiple election cycles. Delayed national policy, and mismatched Commonwealth and state energy and climate policy will increase costs and see the potential early closure of coal-fired power stations, leaving the energy market open to supply, affordability and security issues, as demonstrated by recent events in South Australia. To assist and manage the transition towards a net zero emissions economy, a national, stable climate and energy policy is required.” (analysis piece, 10 November)

Joint statements

“The status quo of policy uncertainty, lack of coordination and unreformed markets is increasing costs, undermining investment and worsening reliability risks.” Joint statement from AiG, BCA, St Vincent de Paul, etc etc, 13 December

“Absent a bipartisan approach to the tightly connected issues of energy and climate change, uncertainty will cause essential energy investments to be deferred or distorted, to the ultimate cost of us all.” – AEC, ENA, ECA, AiG, BCA, CEC, EEC, EUAA

2. Australia is not too small to take action – we are one of many countries in the same boat:

Saying Australia should not act on climate change because it is only around 1 per cent of global emissions is the moral equivalent of telling an oil giant it is ok to leak a few million litres of oil into the Great barrier Reef because it is only a fraction of the total extracted each year.. Pollution is pollution – damage is damage.

No country can solve the climate change problem by itself. Though it is true that the USA and China account for 13 and 24 per cent of global emissions respectively, a full forty-five per cent of global emissions come from countries that, individually, produce less than 2 per cent of the global total. Australia is one of them but is still the world’s 15th in absolute terms with one of the highest per person emissions rate. If all these countries were to do little or nothing, that is 45 per cent of global emissions that would not be tackled – why would the USA or China feel they should make any effort? All countries share Earth’s only atmosphere, after all. So it is incumbent on all of us to share in preserving it.

This is why the Paris Agreement commits all countries to take action – and progressively strengthen action towards achieving net zero emissions.

The table below shows other G20 countries that make comparable contributions to global emissions to Australia. With the exception of Saudi Arabia, all have policies to price carbon, regulate emissions from cars and/or power stations, and boost investment in renewable energy.

Data source: CAIT Climate Data Explorer (2015), Washington, DC: World Resources Institute. Available online at: http://cait.wri.org

Meanwhile in China, the national energy planners cancelled the equivalent of 103 future coal plants. In Davos and Geneva, President Xi Jingping used his speech to stress the importance of staying on course with the Paris Agreement. China is also set to invest $361 billion into clean power generation by 2020.

Australia’s pre-Paris commitment to reduce 2030 emissions to 26-28% below 2005 levels would leave us alongside Saudi Arabia and Russia in per capita terms in 2030, well above the global average in 2030 to be on a pathway to the Paris goal of keeping warming to 1.5-2C.

3. It is not constructive to cherry pick IEA scenarios for ideological reasons 

The International Energy Agency’s scenarios are often misrepresented. The IEA constructs several scenarios to explore possible energy futures. Key scenarios are “New Policies”, which assumes only announced policies are implemented out to 2040; and “450” or “2DS”, which assumes collective global action to limit climate change to 2 degrees. None reflects a “most likely” future. As the IEA has said:

As in previous Outlooks, we devote most attention to the results of the New Policies Scenario in order to provide the clearest picture possible of the outcome of continuing with the policies that are in place and those that are currently planned. The results however, do not constitute a forecast. New policies, as yet unformulated, will certainly be adopted over the course of the next twenty-five years. Indeed, one purpose in projecting the future is to demonstrate the need for their adoption.

When the IEA released its latest World Energy Outlook in late November 2016 I addressed it’s implications from the Marrakech climate talks in an opinion piece “IEA issues a Paris reality check”, making the following points

1. The International Energy Agency’s (IEA) World Energy Outlook 2016 makes clear Paris commitments equal near full decarbonisation of energy around 2040– IEA scenarios are often misused to justify half measures, but after Paris, they provide nowhere to hide for governments, businesses and investors.
2. Australia backs long-term Paris objectives in high level session– meaning it needs to move on from its excessive focus on 2030 targets to longer-term modernisation and decarbonisation planning.
3. More countries do just that and release or announce 2050 and decarbonisation plans– Canada, US, Mexico, Sweden and others join Germany in releasing 2050 plans or objectives to guide investment and boost competitiveness in a world moving to clean energy.

In the 2016 WEO report, the traditionally conservative IEA is more bullish on renewables and sceptical on coal than it has ever been. It notes energy emissions have stalled in recent years and that China’s coal consumption appears to have peaked in 2013. Globally, coal consumption actually fell in 2015 (but hasn’t necessarily peaked).  It’s “450ppm scenario” which it acknowledges has softer than Paris agreement outcomes (which they state they will redress in 2017) reveals a 2040 energy mix that is 58 per cent renewables and 24 per cent fossil fuel.  Under this scenario global coal demand is the inverse of past 25 years – a decline of 2.6 per cent/year, steeper than the average 2.4 per cent/year increase in the past 25 years. By 2040 coal is only providing 7 per cent of electricity, and 70 per cent of that coal has carbon capture and storage. So there’s only a sliver of conventional coal that can be around globally in 2040 under this Paris conservative scenario.

It is important to understand that the IEA has consistently underestimated the growth in renewable energy. Like many they have missed the dramatic cost reductions in wind and solar. Even their latest report which explicitly tries to redress past mis judgements, is estimated to have over-estimated capital expenditure costs by 20 – 30 per cent. See this Carbon Brief analysis.

4. Ultra supercritical coal is not clean energy and not investable without major government support

There’s been a big push for ultra-supercritical coal in some circles of late. Without carbon capture and storage, which would require strong carbon pricing or other policies, USC doesn’t cut it for the emissions intensity required to meet Australia’s pre-Paris 2030 target or its Paris commitment. See figure below.  Earlier this month a senior policy adviser at the Australian Industry Group explored why new coal is not investable on economic as well as emissions grounds in his paper “Should we be looking at new coal fired power stations?”

John Connor is CEO of the Climate Institute