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Where to for energy policy under a Coalition government?

The Coalition has returned to government at a time of uncertainty and rapid change in almost every area of energy policy. With an energy policy released and a responsible minister named, what can we determine…

Electricity prices, renewable energy, climate change, uranium exports: what does the Coalition plan to do about our energy future? akeii/Flickr

The Coalition has returned to government at a time of uncertainty and rapid change in almost every area of energy policy. With an energy policy released and a responsible minister named, what can we determine about where this new government is headed?

The Coalition’s formal policy tries to address some of Australia’s outstanding energy issues. Emphasis will be on national energy security, energy market transparency and roles of alternative transport fuels.

The policies are mostly quite specific. They target key existing issues and agendas: resolving the coal seam methane controversy, developing infrastructure so interstate truck drivers can fill up with gas rather than diesel, selling uranium to India, and encouraging exploration and extraction of mineral resources.

The government proposes a new energy white paper within a year. This seems to be an alternative to announcing comprehensive policies. The previous government published a white paper only recently but there are strong grounds for revising this seriously deficient paper.

Changes to electricity and gas markets are long overdue. The recent Productivity Commission report on electricity can only be described as scathing. Lack of competition in gas markets seems to be driving uncertainty and unacceptably high prices, which will be exacerbated by export of gas from Queensland in coming years. The question is whether the policy focus will be on propping up the incumbent energy industries or supporting transformation.

Other proposals are outside the energy policy, but will affect the sector. There is a proposal to allow electricity from waste from native forest management to qualify under the Renewable Energy Target, decisions to focus on expanding road infrastructure but not rail, commitments for government to lead on e-service using the national broadband network, and cuts to a number of sustainable energy programs funded from carbon price revenue.

It is also interesting that in his new cabinet, Prime Minister Abbott has not appointed an energy minister. Former energy minister, and now industry minister, Ian Macfarlane will play this role. He may have his hands full.

More fuel exports, but is there demand?

The tone of the new government’s policy statement suggests that it wants to see increasing energy exports, stronger development and roll-out of alternative transport fuels. It also wants to review electricity and gas market models.

The focus on increasing exports seems to imply more coal, gas and uranium mining and export. But will there be sufficient demand and profitable prices on world markets?

The International Energy Agency, in its 2012 World Energy Outlook, estimated global demand for coal would decline by 30% by 2035. This is predicated on a scenario that limits atmospheric concentrations to 450 parts per million of CO2 equivalent.

China has recently taken steps to limit future demand for coal, while improving the economic efficiency of its own coal mines. Recent analysis suggests a peak in global coal demand for power generation by 2020.

Global uranium demand will be strongly influenced by the reactions to the Fukushima experience and the challenges of managing an ageing fleet of power stations. It will also depend on progress in renewable energy and energy efficiency; we may not need nuclear.

The picture for liquid natural gas exports may be rosier, but the situation is still challenging. Gas production is very capital intensive, and competition is increasing. Our Asian customers are increasingly critical of Australian pricing, compared to cheaper US prices.

The emergence of coal seam gas and shale gas development technologies also opens up new production possibilities around the world. The future level of demand for gas is also open to debate: it faces plenty of competition from other options.

Energy security is also an increasingly topical issue that now involves electricity and gas, as well as oil supply. Increasing and volatile international oil prices are certainly important when Australia is becoming more dependent on imports.

Increased use of gas for heavy road freight offers potential benefits. But the lack of rail freight infrastructure commitment is a major issue, and providing urban public transport and planning for easy access to services is critically important for many reasons beyond energy security.

Climate policy as a driver of energy policy

A new white paper also needs to explore the nature and implications of the sustainable energy revolution and climate response. These are transforming our whole approach to energy.

The new government’s climate policy is focused on “direct action”: paying businesses via auction to reduce emissions beyond their “business as usual” baseline emissions.

The government expects farming and forestry related projects to deliver most of the abatement to meet its 2020 target (5% below 2000 emissions). But other sectors will also be able to bid for the $2.9 billion allocated.

It seems likely that energy efficiency projects will deliver a substantial proportion of the abatement under this scheme. There is a large amount of energy efficiency potential available at low and even negative cost.

The Energy Efficiency Opportunities industry program is saving around 8 million tonnes of CO2 annually and over $800 million at an average carbon cost of minus $95 per tonne of CO2 avoided.

Our appliance energy efficiency scheme is also avoiding millions of tonnes of emissions annually at negative cost. This helps explain the recent unprecedented and ongoing decline in National Electricity Market electricity sales.

At an individual level, everyday decisions that used to drive an increase in energy use and emissions now lead to reductions. Buying a new TV or fridge saves energy; switching from a laptop to a tablet slashes energy use; new office buildings and renovated ones use less energy; new industrial equipment is much more energy efficient. We are now on a savings-multiplying path, despite our ignorance, and our reluctance to pursue effective policies.

For energy efficiency to capture its cost-effective share of Direct Action funding, energy efficiency proponents will have to prove Treasury and other economic modellers have dramatically underestimated the energy savings from efficiency.

There is scope to do that. But it will require redirection of business towards action and government policy towards energy efficiency and innovation. This will apply even more pressure to the existing electricity industry and fossil fuel industries.

It will certainly be interesting to watch energy policy evolve over the coming year.

Join the conversation

33 Comments sorted by

  1. John Newlands

    tree changer

    China's purported coal aversion is relative to GDP not necessarily an absolute reduction. India seems to need our coal so we are aiding and abetting global emissions with export plans such as developing the Galilee Basin, Use of compressed natural gas CNG as a truck fuel could have a bigger effect on the gas price than LNG export from Gladstone, The diesel equivalent price of gas is more like $45 a gigajoule not the current industrial spot price of $4.50. The Japan export equivalent gas price is about $12.

    The big problem is how to replace the big coal stations say 15 years from now. In my opinion the idea we can seriously replace most of that reliable capacity with wind, solar and non-draconian demand management is a fantasy. Something will need to replace the generating units in the NSW Hunter and Vic Latrobe valleys. I don't see any number of solar panels and windmills replacing Hazelwood, Given the future gas price it's nuclear or more coal.

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    1. Ken Fabian

      Mr

      In reply to John Newlands

      As long as the LNP sticks to climate obstructionism there will never be nuclear in Australia. These mainstream 'friends' of nuclear have been so thoroughly subsumed into opposition to climate and emissions action that they are incapable of giving nuclear the strong backing that only a genuine appreciation of the seriousness of the climate problem can bring.

      Nuclear is used politically as a criticism of Greens but it's a deliberate distraction from the absence of any actual commitment to nuclear…

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    2. John Newlands

      tree changer

      In reply to Ken Fabian

      Here's a sobering assessment of Germany's renewables success
      http://theenergycollective.com/maxluke/274041/trash-trees-and-taxes
      Despite over $100 bn a year in subsidies more renewable power in Germany comes from hydro and waste incineration than from wind and solar. Most of the nukes are still operating and new coal plants are being built. Emissions increased in 2012 and are expected to increase again in 2013. Germany is showing what not to do.

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    3. Nicolas Bertin

      Physicist

      In reply to Ken Fabian

      Hem no, Germany has not ditched the fuel back-ups...They still have coal power plants, and will keep using them. Their biggest problem right now is their huge plan for building high voltage power lines, to distribute the electricity from their big wind farms in the North to the big cities further South. Locals don't want the government to clear huge forested areas, which is needed.

      Yes Australia should have stuck to nuclear, ditching it for coal was a big mistake. But that's not why electricity is expensive here. It's expensive because there's no competition. Our closest neighbors, New Zealand and Indonesia, aren't exactly big electricity producers, hence there's no price self-regulation through competition. Australian electricity providers just meet and agree on a preposterous price, same with gas. So the energy policy should be this first : fair prices, with a law allowing the government to regularly evaluate their fairness.

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    4. Doug Hutcheson

      Poet

      In reply to John Newlands

      "Given the future gas price it's nuclear or more coal": or the more radical idea of moderating our individual consumption to keep demand within the current supply envelope. Increasing demand is the underlying problem and we won't solve it by increasing our population and our individual profligate use of electricity delivered over the grid. A simpler lifestyle will not kill us. Utopian, I agree, but poets can dream ...

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    5. Ken Fabian

      Mr

      In reply to John Newlands

      Interesting that no-one seems to be disputing that the LNP's position is inherently anti-nuclear as well as anti-renewables or that it's been to the Fossil Fuelers advantage to have anti-nuclear greenies to point the finger at for why they can't bring themselves to push for nuclear. Not even the risk of permanent irreversible harm to Australians for tens of generations to come is enough for the LNP to risk the absence of income from coal and gas by committing to nuclear.

      For those that are determined…

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    6. Alan Parker OAM

      logged in via email @labyrinth.net.au

      In reply to Ken Fabian

      So Abbot is going to put Australian infrastructure at the top of his agenda. His visionary policy of building farming and communities at the top end of Australia to feed Asia’s growing population to grow enough food. In future there would be even bigger potential market for food. Sadly he does not seem to understand the constraints standing it the way of his vision . Rudd would be better to equipped to cope given his great experience of China’s skill in tackling constraints different but…

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  2. Peter Campbell

    Scientist (researcherid B-7232-2008)

    I have spent money on various things that will reduce my energy consumption. We live comfortably with half the consumption of petrol, electricity and gas of a typical Canberra family. Not hair-shirted at all. In most cases there is a long-term saving but the up-front cost has been considerable. My motivation has been the belief that there would be a double benefit-I will save money in the long term and there is an environmental benefit. Much of that environmental benefit depends on my energy savings…

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    1. John Bromhead

      logged in via email @netspeed.com.au

      In reply to Peter Campbell

      By 2020 very little of Peter Campbell's voluntary effort to save electricity will have made much difference, except to his finances. Because of the ACT's target to (nominally) source 90% of its electricity from renewables by 2020, all Canberra electricity consumers will use (pay for) low emission electricity.
      Even if the Renewable Energy Target was reduced, it will have no effect on the carbon dioxide intensity of Canberra's electricity supply.
      Electricity prices will increase, which might mean those Canberrans who don't cut their usage will have less than others to spend in the Duty Free shop before they fly overseas, emitting a African family's annual output of CO2 in a day.
      PC can further reduce his emissions by using some of his savings to switch from gas to electricity.

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    2. Peter Campbell

      Scientist (researcherid B-7232-2008)

      In reply to John Bromhead

      "PC can further reduce his emissions by using some of his savings to switch from gas to electricity."
      I agree we could further reduce emissions going entirely to electricity so long as it is from renewable sources. The reduction might not be as much as might be expected because we don't use much gas. From our bill it would seem only about 0.3 of a tonne of CO2. Our gas consumption is only for space heating and a cooktop. We have electrically-boosted solar for hot water. In the two summer quarters…

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  3. Mark Lawson

    senior journalist at Australian Financial Review

    While energy saving appliances may be one means by which people save energy, the primary driver is a doubling of electricity retail prices since 2007. Much of this is due to changes in the distribution network investment. There are indications that this surge in investment is finally coming to an end, and rules for granting price increases are being tightened, so it will be interesting to see whether the undoubted flattening in demand will continue. Price signals rule as they always have.

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    1. Liam J

      logged in via email @gmail.com

      In reply to Mark Lawson

      Wishful thinking re grid investment; we've only just started adapting to climate chaos. Half the fires on Black Saturday were started by downed powerlines (46.7C stretching + high winds), i wonder if 'gold plating' of grid was just the start of the rebuild, hardening infrastructure against the consequences of denial.

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    2. Mark Lawson

      senior journalist at Australian Financial Review

      In reply to Liam J

      No the investment super cycle in the grid network is now past its peak.. the points you make have very little to do with network investment as such. the bulk of the network is in the city, not the country and powerlines have been blamed for bush fires since they put them up. It is also difficult to see what extra investment in the grid would be required to adapt to any change in temperature, up or down. They should already be designed to survive quite extreme conditions.

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    3. Liam J

      logged in via email @gmail.com

      In reply to Mark Lawson

      Wrong on several counts. SP Ausnet subsidiary SPI p/l has already admitted fault & paid tens of millions in 2012 settlement over 09 fires. Heat makes metal soft, record temps on Black Saturday combined with unusually high winds, acting on softened powerlines (probably cheaper aluminium-cored, not copper) results in breakages. Extreme heat is also already causing increasing # of transformer fires. We have barely begun to pay the costs of economic 'rationalism'.

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    4. In reply to Mark Lawson

      Comment removed by moderator.

    5. In reply to Mark Lawson

      Comment removed by moderator.

  4. Ivan Quail

    maverick

    The Tides of the Kimberly can generate at least 6 times (300Gw) more electricity than we currently generate in the whole of Australia. Installed National generating capacity is about 54Gwatts.

    A 6G/watt (6,000Mw) bulk HVDC power line can transmit the power to Sydney for a cost of 1c per Kw hr. It is cheaper to build and operate a bulk HVDC transmission line than a natural gas pipeline which carries the same amount of usable energy.

    However, to achieve this there needs to be a serious…

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    1. Jeremy Culberg

      Electrical Asset Manager at Power Generation

      In reply to Ivan Quail

      This project fascinates me. The transmission line would have to be 4000km long, so roughly 13% losses. However the sheer volume of power available would make Australia THE place to be for any high energy industry.
      HVDC is a well proven technology - the Bass Strait interconnector uses that right now, and it has been in use across North America and Russia for decades.
      From a system stability perspective, I'd hate to have all my eggs in one basket - a major cyclone could devastate all of Australia…

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    2. Ivan Quail

      maverick

      In reply to Jeremy Culberg

      To Brisbane is about 3000Km. The Qlnd grid is already connected by HVDC to NSW. ABB has advised that their is not much difference in cost between overhead and under ground power lines. 6000Gw is about 11% of total generating capacity. The Snowy scheme could be used for pumped storage and/or molten salt storage could be used.
      Hot rocks could provide even more power.

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    3. Greg North

      Retired Engineer

      In reply to Jeremy Culberg

      I think you could end up with multiple power suppliers Jeremy for you would need multiple installations and as for having all your eggs in one basket, the Kimberly is a huge area and cyclone hits can other than for the immediate area where one crosses the coast be more of an immense storm just as we can have in east coast areas.
      Power stations are designed to be rather robust too, it not as with tidal that you need to have a fuel supply chain of conveyors etc. as with coal.

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    4. Greg North

      Retired Engineer

      In reply to Ivan Quail

      You are right Ivan in that it would be a project far surpassing the Snowy and it could even fit in with a Northern Futures concept that ws put forward on TC during the election campaign and that was for massive solar farms in the NW wired up to HVDC feeding southern Asia as a future for the north.
      I know there is work going on with tidal power all be it mostly in preliminary stages and smaller generation though there is one development in either China or Japan where they already had a large tidal…

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    5. Greg North

      Retired Engineer

      In reply to Ivan Quail

      " 6000Gw is about 11% of total generating capacity. The Snowy scheme could be used for pumped storage and/or molten salt storage could be used. "
      I'd not be relying on hot rocks or the Snowy for that matter as it is always going to be reliant on good winter snows which can be rather random and then desired releases into the Murray and evaporation can drastically cut what storages you have.
      With multiple generation locations it would seem more appropriate to run additional HVDC capacity so as eventually you have a grid to service most if not all of Australia, there is afterall more than just the Kimberley, Sydney and Queensland and Sydney is already far larger than what is desirable so green power across the country could be a boost to decentralisation.

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    6. Ivan Quail

      maverick

      In reply to Greg North

      Tidal could supply 80% + of total power required Greg. The balance being those who are not grid connected consumers.
      With high speed electric trains cris crossing the country carrying freight and passengers and battery powered local suburban transport systems it might be possible to get to 80% of transport energy needs
      as well.
      Yes you are right the more schemes the more secure is supply and
      the tides could generate 6 times more than we currently generate.

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  5. George Michaelson

    Person

    The IAEA says China has 18 nuclear plants in operation and another 32 in construction. The last one to come on-stream was February 2013.

    Unless you have some magic insight that they won't be proceeding with these 32, I see no lack of markets for Australian Uranium and products. The same IAEA chart says they are 98% non-nuclear so theres heaps of growth potential.

    http://www.iaea.org/PRIS/CountryStatistics/CountryDetails.aspx?current=CN

    If the Chinese complete work on the pebble-bed, the 'it will take 20 years' story about nuclear power in Australia could be much shorter. We can buy almost all of the short term skills needed to operate a plant, and acquire the long term engineering to be self sufficient in parallel. And, after all, we did the same to them, flogging them wool at the same time as we help them build a merino flock, flogging them wine as they build up a native wine industry..

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  6. Alan Parker OAM

    logged in via email @labyrinth.net.au

    Hi Alan
    Coalition politicians do not know that the fracking technology that revitalized gas drilling in the USA could start an entirely new energy age of cheap energy. By releasing vast reservoirs of geothermal energy underneath our feet at depths of 1 to 7 Kilometres. Tapping only 2 percent of it could satisfy current annual U.S. energy use 2,000-fold for each and every year of the foreseeable future.

    Fracking,, may provide an economical way to get at that geothermal energy in Northern…

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    1. Greg North

      Retired Engineer

      In reply to Alan Parker OAM

      Fracking technology has already produced a number of undesirable results for some people and the big question mark over it is just what control you can institute at hundreds or thousands of feet below the surface.
      In my time involved with underground mining, shear zones were a common enough occurrence and they could be of seams less than a hundred feet across to more than that and so you would have solid rock either side and then find that loose rock existed to the extent that shoring up mine access…

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  7. Geoff Taylor

    Consultant

    Greg Hunt is going to do a very questionable thing today by stopping Clean Energy Finance Corporation payments.

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  8. Comment removed by moderator.