Australia's clean energy dawdle

New government statistics suggest Labor's 'clean energy future' plan will do little to reduce our reliance on fossil fuels, leaving Greg Combet with some explaining to do.

In one of those interesting coincidences, Greg Combet was flying back from Durban to tell us of the "spectacular success” of the UN climate conference, claiming the federal government’s 'clean energy future' package puts Australia "in the front of the world,” just as a federal agency in Canberra was releasing new modelling showing that we will be relying on fossil fuels for three-quarters of our electricity supply 25 years from now.

In its publication of national energy projections to 2034-35, the Bureau of Resources and Energy Economics, which sits in Martin Ferguson’s department, forecasts power production to two horizons, the earlier one being 2019-20.

Generation output, now 245,000 gigawatt hours a year, will reach 310,000 GWh by 2019-20, BREE claims, and then the pace of growth will slow down significantly under the impact of carbon charges and higher power bills to stand at just 348,000 GWh in 2034-45.

(This implies a change of about 100,000 GWh a year from the ‘business as usual’ power supply outlook before Julia Gillard and Bob Brown got to work on the carbon policy package, a massive downsizing in an economy that has been growing its electricity demand for 60 years.)

But here’s the rub: under the BREE view, black coal use (mainly in New South Wales and Queensland) will barely alter this decade, falling only 4,000 GWh to 125,000 GWh in 2020, while brown coal (dominantly used to make electricity in Victoria) will continue to deliver 53,000 GWh.

Looking out a further 15 years, BREE sees black coal generation holding up rather well – having fallen back to 114,000 GWh – while brown coal power plants now deliver only 20,000 GWh.

The big winner in the race to capture electricity market share will be gas, lifting from 40,000 GWh today to 64,000 GWh at the end of the decade and virtually doubling to 126,000 GWh by 2034-35.

Sure, wind power will increase its output almost 12-fold, rising from 4,000 GWh now to 49,000 GWh in the mid-30s, but other renewable contributors (bio-energy, solar and geothermal) between them will be contributing just 25,000 GWh in 2034-35.

Toss in the steady supply of 13,000 GWh a year from hydro-electric power, and renewables overall will be delivering 84,000 GWh – or a third of the fossil-fuelled supply.

BREE offers a second scenario – one in which the export LNG business has delivered world parity gas prices to the east coast. It says this will serve to slightly depress demand (pushed down to 340,000 GWh a year in the mid-30s), but it doesn’t change the role of renewable energy at all.

In this future, renewables are still delivering 84,000 GWh a year while a substantial fall in gas use (its output drops to 74,000 GWh annually) is taken up by black coal (producing more than in 2020 at 137,000 GWh) and brown coal (holding a 40,000 GWh share of the market).

As BREE notes, the outlook for coal is highly dependent on technological development of carbon capture and storage.

(Modellers for Treasury don’t see CCS playing a role in 2030 – it only comes to the fore in the later 30s and the 40s).

BREE might have added that the pictures it paints – either of them – also involve several hundred billion dollars worth of investment in not only generation but also the infrastructure required to bring the new mix of power supply to market.

In this environment, the population is pushing 32 million (up from 22 million today) and the bulk of the extra numbers are living in urban areas – far from the supply resources.

As BREE points out, on the basis of Treasury modelling, this is also an environment where the carbon price has shot up from just under $30 per tonne at the end of this decade to almost $53 in 2030 and almost $70 in 2035. (These are today’s dollar values.)

Given that population growth will have led to about 12 million households – compared with nine million today – even a big move to greater energy efficiency is likely to see residential power demand around the 70,000 GWh a year mark.

A larger commercial sector could have its segment of demand in similar territory.

Mining demand had better be much higher than today or the economy will be in an interesting state.

Given the BREE power production numbers (which are about a fifth higher than consumption allowing for network line losses and what generators use themselves), the implication is that manufacturing, metals processing and aluminium production, together responsible for almost 40 per cent of today's demand, will have shrunk and some segments will have disappeared from Australia.

All this number work makes it clear that Prime Minister Gillard, Combet and Wayne Swan still have a lot of explaining to do about their ‘clean energy future’ and its implications for Australia’s domestic greenhouse gas emissions and our energy bills.

As soon as the bleary-eyed Combet has recovered from his lack of sleep in Durban and his jet-lag, could he put the spin aside and talk us through what the BREE modelling brings home?

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.

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