Australia's schizophrenic energy policy

The recently released Energy White Paper is a sensible starting base for a general chat about domestic energy policy, even though on energy exports it appears to become schizophrenic in relation to climate change. 

Overall the document is a vast improvement on the last Energy White Paper issued in 2004. The 2004 White Paper seemed to think that having the most emissions intensive electricity supply in the developed world wasn't anything to worry about.

Instead, it pushed the delusional idea that this might all be solved through a simple demonstration of carbon capture and storage (a.k.a. Clean Coal). Apparently $500 million would do the trick, because of course CCS was just a cheap add-on and so the Low Emissions Technology Demonstration Program was born. Or should I say stillborn because we're still waiting for it to demonstrate anything of scale.

Anyway, thankfully the mandarins in Canberra have moved on.

They now recognise that cleaning up coal won't be cheap and won't necessarily be the answer to all our ills. In addition, they've also moved on from the subsequent delusion to take Canberra by storm after clean coal – nuclear power. While Canberra's Switkowski report argued nukes could solve our problems for a small premium, they've now accepted it would be something closer to the same costs as wind power, at about $80 to $150 per megawatt-hour. And it won't get up just through a carbon price, instead requiring government to stump-up some serious money to get it off the ground.

Since 2004, Drew Clarke, and his Department of Resources and Energy, as well as other bureaucrats, have gradually developed a more sophisticated understanding of how energy and climate change interact, and how energy technologies are likely to evolve. They've realised that there is no energy modelling consultant with a magical mirror on the wall that can give you a definitive and highly certain answer on what is the most beautiful low emission energy technology in the world.

They've learnt this through hard experience. So far they've been badly burnt by consultants' miraculous projections about clean coal and geothermal, compared to the abject failure of their efforts to support these technologies. And on the other side, the incredible cost reductions and rapid growth of household solar PV has led them to treat those outside the mainstream energy and resources sector with a bit more respect. Furthermore the real-world experience of South Australia in obtaining 25 per cent of their electricity from wind power, has illustrated that intermittency isn't the horrible bogeyman they'd been led to believe. 

Of course this doesn't mean they've suddenly transformed into tree-hugging, solar panel loving hippies. They still love coal and gas, and when someone waves $197 billion of investment in your face it's kind of easy to understand why.

This is the great schizophrenic element in Australia's energy policy.

At home the public service is beginning to accept (although somewhat grudgingly) that a carbon price with a beefed up Renewable Energy Target will mean we'll clean-up our world-beating emissions intensive electricity supply now, and not in maybe 20 years' time after using-up cheap international credits.

But overseas we're hoping that international leaders don't actually follow-through on their aspirations to keep temperature rise below 2 degrees. Nowhere is this contradiction better illustrated than pages x and xi of the Energy White Paper. This section proudly boasts of how exports of coal and gas will grow considerably over the next few decades and then bizarrely follows this with the statement:

“Through this diverse portfolio of energy exports  – and our efforts to develop clean energy technologies, such as carbon capture and storage and renewable energy technologies – Australia is well placed to help our customers manage their long-term efforts to address climate change.”

While it's true that we also export a fair amount of uranium, most logical people would find it incredibly hard to reconcile the huge rise in coal and gas exports with helping our customers to address climate change.

While Ross Garnaut seems to think that thermal coal is in “deep shit”, you'd be a brave man to bet on it. Especially as India, not just China, has what appears to be an insatiable appetite for energy – if only they could manage to build and operate infrastructure effectively in that country.

In the end money talks, even if the tale it tells doesn't make much sense in the longer-term.