Later this year a conference will be held in
Paris that will determine the global response to climate change. While the international jockeying has
commenced, it seems there is a ‘tipping point’ that, if exceeded, will ensure that the world will never be the same again. Australia’s contribution is being keenly watched.
Australia was one of the first to introduce an Emissions Trading Scheme (misnamed by both sides of politics as ‘the carbon tax’) and certainly the first to almost
ditch it. The ALP at its recent conference has committed to generating 50% of Australia’s electricity using
renewables by 2030. It seems the current government has yet to make up
its mind. Given that the world’s environment is warming and 2014 was the warmest year
on record, doing nothing is not an option — and if the worst result is that fossil fuels last longer, is that a bad thing?
The ALP’s commitment to 50% renewables
made some people happy but others were claiming the costs could
be excessive. Abbott went as far as claiming that the ALP policy would cost
$60 billion — pity the claim was based on a calculation ‘
on the back of an envelope’.
The reality is that, according to the International Monetary Fund, Australia will
subsidise coal, petroleum and gas consumption to the
value of $41 billion during 2015.
Australia's current electricity mix can supply power at about $30 to $40 per megawatt-hour, according to estimates provided by the Grattan Institute.
If we were to build new fossil fuel power plants today they would produce power at about $50 to $75 per megawatt-hour based on the same Grattan model. New wind power would cost about $80 to $90 per megawatt-hour, while large-scale solar would be about $180 (Estimates by other groups put the cost of new coal power at higher rates.)
As the article points out, this is just the cost of generation — not the cost of the environmental mitigation required from burning fossil fuel.
Not everyone agrees on the costs. Alan Jones claimed on Q&A during July that:
“Eighty per cent of Australian energy comes from coal, coal-fired power, and it’s about $79 a kilowatt hour,” he said. “Wind power is about $1502 a kilowatt hour.”
He was
spectacularly wrong (and to his credit he did apologise for the error), but there seems to be a trend here of plucking numbers out of thin air and constructing an argument to ‘demonstrate’ the economic madness of renewable energy.
While the IMF has new coal-fired power stations at a slight cost advantage (before the ‘on-costs’) over renewable power, Bloomberg has a
different view:
By Bloomberg New Energy Finance’s most recent calculations a new wind farm in Australia would cost $74 a megawatt hour.
“A new large-scale photovoltaic project would cost $105,” says the firm’s Australian head, Kobad Bhavnagri. “A new coal-fired power station would cost $119. And a new gas base-load station would cost $92. So both wind and solar are already cheaper than coal.”
What’s more, says Bhavnagri, the cost advantage of non-polluting energy is rapidly increasing. “Wind is already the cheapest, and solar PV [photovoltaic panels] will be cheaper than gas in around two years, in 2017. We project that wind will continue to decline in cost, though at a more modest rate than solar. Solar will become the dominant source in the longer term.”
The Saturday Paper reports that Bloomberg has determined global spending on the construction of renewable generation capacity since 2013 has been higher than coal, gas and oil combined. The trend is likely to escalate. On top of that, electricity demand across Australia is reducing. Stanwell Power in Queensland closed down two generation units at its Tarong Power Station — citing lack of demand in 2012.
Renew Economy reported:
The closure of the two units at Tarong follows the closure of the ageing 600MW Munmorah power station in NSW, Stanwell’s 125MW Swanbank B power station in Queensland, and the 240MW Playford B and the 520MW Northern brown coal generators in South Australia. Energy Brix has also reduced output. Northern recently reopened and will operate in the immediate future only in summer, when demand is higher.
Climate Works Australia, a partnership between the Myer Foundation and Monash University, has prepared a report, housed on the United Nations Sustainable Development Solutions
Network, that discusses the probability that Australia could effectively be ‘carbon neutral’ by 2050 while maintaining current
economic growth.
Denmark is targeting to be completely free of fossil fuel by 2050. They are well on the way, having around 40% renewable energy on their electricity grid now. The
New York Times reports that there are a number of practical problems in the transition to a completely fossil-free future, from winter nights with little wind through to ‘range anxiety’ for electrically driven vehicles.
The Danes are now subsidising fossil and nuclear power stations to remain on-line to cover eventualities such as still nights, as the cost of fossil or nuclear electricity production exceeds the price the generators can sell electricity for. Believe it or not, some Australian states are having the same issue. In Australia, electricity is traded on a ‘market’ across Queensland, New South Wales, Victoria and South Australia. Queensland and South Australia have excess generating capacity so they can sell surplus electricity into the market, which acts, as economists will tell you, ‘rationally’ (the price paid for surplus electricity is governed by the demand for the product). Electricity generators make decisions on how much electricity they will produce based on the expected return from the market meeting or exceeding the cost of generation. If the generators miscalculate the demand, the price paid for electricity increases rapidly, causing generators to increase production. If there is a surplus of electricity available, the price goes down. Those that can change production quantities quickly make more money than those that can’t. On occasions during the middle of the day in July 2015, the wholesale price for electricity in Queensland was a negative value rather than the ‘normal’ $40 to $50 per megawatt hour. While not the sole cause (the infrastructure allowing Queensland to ‘export’ power to Southern States was not working at
full capacity):
The influx of rooftop solar has turned this model on its head. There is 1,100MW of it on more than 350,000 buildings in Queensland alone (3,400MW on 1.2m buildings across the country). It is producing electricity just at the time that coal generators used to make hay (while the sun shines).
If Queensland has excess power during the time that is usually profitable for power generators, and South Australia has the capability of operating entirely from renewable energy, as occurred
late in 2014, the world is changing without waiting for the government to change.
Ergon Energy in regional Queensland (which is owned by the Queensland government) is conducting a trial of battery storage for the power generated from solar panels in a
domestic environment which, if successful, will allow the use of domestic solar panel generated power at night or if it’s raining heavily. The Queensland government is also planning to install a number of renewable energy powered electric
vehicle chargers along the Bruce Highway, which runs from Brisbane to Cairns.
Clearly the world is changing. It is conceivable that in the not too distant future we will be able to power our houses using electricity generated on the roof and stored in batteries under the house. Our cars will be plugged into a charging point each night and when we do want to travel further than the battery capacity, there will be a recharging station en-route (in a similar way to filling the car at the petrol station). Both of these fundamental changes will reduce our need for fossil fuels as well as infrastructure such as power lines. These fundamental changes will also reduce the business plans of a number of companies to historical artefacts. These companies are in a similar position to the tobacco companies were some years ago when the evidence that smoking is hazardous to health was overwhelming but before cigarette packet warnings and education programs were introduced.
The problem for energy companies is that if they don’t adapt, they will gradually fade away. However, there is an economic problem here — who will be the first to try and adapt to a new business model that addresses the rise of renewable energy, potentially giving their competition a ‘free kick’? The first to withdraw from the traditional generate, distribute and retail business model will leave a hole in the market that others will attempt to fill, so unless the strategy is planned and executed correctly, the early adopter could fail completely. While Ergon is conducting a trial of battery storage, they are a government owned business with a legislated supply area and no competition — so they effectively have a monopoly. The business and economic risks of the trial are significantly less in Ergon’s case than they would be in the case of Origin or AGL.
This doesn’t explain the Abbott government’s reluctance to support renewable energy. The Abbott government has reduced the RET (
Renewable Energy Target), instructed the CEFC (Clean Energy Finance Corporation) to remove funding from ‘established’
renewable technology — which was profitable to the agency and the government — and launched various hysterical campaigns on wind farms, emissions trading schemes and aspirational targets for the move to renewable energy by the country over the next 15 years.
It is even harder to understand Abbott’s responses when it is considered that Pope Francis (the spiritual leader of all Catholics — including Abbott) has released an encyclical that not only acknowledges climate change caused by humans burning fossil fuels, but demanded immediate action to stop the world becoming ‘
an immense pile of filth’:
In the encyclical, titled Laudato Si (Praise Be), On the Care of Our Common Home, Francis advocated a change of lifestyle in rich countries steeped in a "throwaway" consumer culture and an end to an "obstructionist attitudes" that sometimes put profit before the common good.
Not that Abbott is alone in ignoring the Pope’s ‘teaching’. Father James Grant is an adjunct fellow of the IPA (Institute of Public Affairs) and wrote an article in
The Australian (which is paywalled) on 10 July entitled ‘It’s unchristian to oppose coal generated power’. However, we can all read the smackdown of the article and the government’s lack of action written by Neil Ormerod and published in
Eureka Street. Ironically,
Eureka Street is published by the Australian Jesuits, the Catholic order that Abbott tried to join
when younger.
The scientific and moral debate on climate change is over. Climate change is real — we are all are causing it. So why do Abbott and other conservatives continue to ‘fight the fight’? Is it, as Pope Francis commented, because profit outweighs the common good? Abbott is probably finding it hard to justify to other countries why they should purchase greater quantities of Australian coal at the same time that our national consumption is reducing dramatically. Or is it that the government is so bereft of capability to devise and implement cutting edge policy that the easy option is (with apologies to 1914 ALP Leader Andrew Fisher) resist to the ‘
last man and the last shilling’ with a determination to (in the words of Churchill) ‘
never, never, never give up’.
What do you think?
As 2353 points out, the world is changing. Why can’t Abbott accept the reality when even his beloved markets are reading the writing on the wall, are reacting to climate change and the challenge of renewables? We are seeing more investment banks divesting some of their fossil fuel assets as they foresee that they will, in future, become stranded assets. And yet Abbott continues to live in a different reality and will fight the changes to the last man. How can one man be so obstinate and ignorant and yet lead our country?
Next week Ken returns to his theme of the bankers versus democracy in his piece ‘Bankers 3 Democracy 0 with Abbott running the sideline’.
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