Energy white paper: the highlights package

Debunking myths, perpetuating others: Ferguson on nuclear, gas and the cost of air-con, solar tariffs and privatisation. Plus, clean energy costs and EVs.

Energy modeling: The white paper acknowledged the work done by the International Energy Agency on technology and policy scenarios, and future cost curves, and then ignores them. The three scenarios relied on by RET are based on data that is at least two years old, and ignores the huge declines achieved in solar PV, for instance, in that time frame. According to the Bureau of Resource and Energy Economics, more than half of the country’s brown coal generators, and two thirds of the black coal generators would still be in operation by 2030 – with no carbon capture and storage. No model predicts solar at more than 1.3 per cent by that date, or 3.3 per cent by 2050. (Most industry modeling puts it at least one third by then). One model has geothermal at 8.4 per cent by 2030 and 22.9 per cent by 2050. The final version of the white paper is due in 2012, and will then be repeated every four years: let's update the technology costs, it might change the picture.

Feed-in tariffs: Ferguson again railed at the “dog’s breakfast” of  state-based feed-in tariffs, but would not bite at the prospect of a national tariff, preferring instead to see some “harmonisation” of state-based schemes. He said state and territory governments would be held accountable for the rises in electricity costs that overly generous schemes produce. He was particularly scathing of NSW and the ACT. This latter is a little ironic, as it is just about to hold its first tender for a large-scale solar tariff, allowing the market to set the lowest possible price. That may prove embarrassing to the federal government’s own stalled schemes.

Clean energy costs: One important aspect of the white paper was its statement on the costs of clean energy. The Australian government acknowledges that cleaner energy will impose marginally higher energy costs on consumers in the short to medium term. However, it will also offer commercial opportunities for innovative Australian researchers and businesses through the creation of new jobs and skills and regional development opportunities, and potentially support our export industries. It said this was the case for CCS, as well as large-scale solar, geothermal and energy storage technologies.

Electric Vehicles: The white paper predicts only a "modest" uptake of EVs, particularly in the short to medium term, due to cost and the relatively slow speed of fleet turnover. But it recognises that it has the potential to be a "disruptive" technology if current barriers can be addressed, including limitations in battery technology, establishing charging and battery infrastructure, managing impacts from recharging on the grids, and increasing consumer awareness. It says, however, that even a high level of EVs would result in only a moderate increase in energy demand, and with new metering and pricing structures could reduce the need for more expensive peak generating capacity.

Privatisation: Ferguson is not in a position to impose electricity privatisation on the remaining states, but he says the experience in Victoria, which has had demonstrably lower increases in network tariffs, has proved their worth. This goes back to the “gold plating” argument, raised by Professor Ross Garnaut, that so upset some of the utilities. Privatisation, however, is not the only answer; regulatory change is also key. The Australian Energy Regulator is seeking to have its power boosted so it has the ability to resist the bullying tactics of the network operators. Right now, it says it is not a fair contest. Regulations that govern the deployment of distributed energy are also needed, as they are for interconnectors.

Peak demand: There have been numerous estimates of the cost impact on the electricity network from the widespread deployment of air conditioners, but Ferguson has produced the highest figure yet: $7000 of costs for each $1,500 air-con unit. This is based on new Queensland government data that estimates it costs $3.5 million for each megawatt of incremental network and generation capacity to meet peak demand growth. A 2kW unit therefore adds $7,000 to the cost. Demand swings can range as high as 65 per cent from day to day in the Brisbane area, and network operators are obliged to build infrastructure to meet that demand, even if it is only used for a few days, or even hours, a year.

Energy efficiency: The easiest and cheapest response to peak demand increases. The white paper says measures such as energy efficiency regulation on appliances will save 19.5 million tonnes of Co2e at a negative cost to the community of $56/tonne (That is, it saves money). It also speaks of the importance of incorporating distributed generation and direct load management, and forcing networks to seek demand-side alternatives, rather than just erecting more poles and wires.

Will the lights go out? As part of the white paper, the government released an update of its National Resource Security Assessment. One of the scenarios it considered was a sudden loss of capacity from Australia’s largest coal-fired generator, the Loy Yang A power station. What would happen? Well, not a lot actually. Australia has an excess of baseload capacity, and if Loy Yang went offline, other generators would come online. The lights wouldn’t go out, although prices would, inevitably, rise. This would even be the case after the proposed buyout of 2000MW of capacity (but expect even higher prices). The closure of Loy Yang may actually reduce network constraints, the study concluded.

Gas: Ferguson is firmly convinced about the “golden age” of gas, even in the IEAs grim 450 scenario when I posed the question to him. Indeed, the government appears poised to release a significant upgrade of Australian gas reserves following a new survey by Geoscience Australia – presumably, this is centred around the potential of shale gas, which in the US has proved even more contested than coal-seam gas in this country.

Nuclear: The support for nuclear in Australia is based on the premise that renewables, or other clean energy technologies such as carbon capture and storage, cannot deliver. Ferguson, possibly thanks to ALP politics, is obliged at least to give renewables a go at proving their worth, and the white paper notes that there is no compelling energy security argument now in support of nuclear, given Australia’s diverse energy resource base. However, the white paper says a future government may wish to review the nuclear question, if technologies such as “low emissions base-load” energy or energy storage cannot deliver by 2025. But it says a decision may need to be taken earlier, because deployment would be required by 2030-35 and it would take 10-15 years to roll out, even if, as Ferguson suggested, Australia could buy “off the shelf” nuclear technology.

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