Fu­ture lies within a wide band of pos­si­bil­ity

The Weekend Australian - Review - - Clean Energy - COM­MENT Paul Balfe

FOR a long time now we’ve known that it might come to this. We’ve known that the days of send­ing our car­bon emis­sions sky­ward for free were num­bered. But with the re­lease of the re­port of the Prime Min­is­ter’s Task Group on Emis­sions Trad­ing the re­al­ity is upon us — there is nowhere left to hide.

Pub­lic aware­ness has pushed the is­sue to the fore­front of the po­lit­i­cal agenda. The risk in this is that pol­icy de­ci­sions will be taken to demon­strate a com­mit­ment to de­ci­sive ac­tion with­out fully un­der­stand­ing the con­se­quences.

To il­lus­trate, one needs only re­flect on the work un­der­taken by the Na­tional Emis­sions Trad­ing Task­force ( NETT), ap­pointed by state and ter­ri­tory gov­ern­ments un­der the ban­ner of the Coun­cil for the Aus­tralian Fed­er­a­tion, dur­ing 2006. The NETT com­mis­sioned anal­y­sis that con­sid­ered a ‘‘ busi­ness as usual sce­nario’’ ( BAU) to­gether with two abate­ment sce­nar­ios un­der which emis­sions from Aus­tralian elec­tric­ity gen­er­a­tion would be lim­ited to be­tween 150 and 175 mil­lion tonnes of car­bon diox­ide equiv­a­lent per year by 2030, com­pared to a BAU case of more than 260 mil­lion tonnes.

The NETT anal­y­sis as­sumed that the abate­ment pro­files could largely be achieved, with ap­pro­pri­ate pric­ing sig­nals pro­vided by a car­bon trad­ing regime, through a mix of rapid up­take of re­new­able en­ergy tech­nolo­gies, biose­ques­tra­tion and strong de­mand- side re­duc­tion. Un­der this view of the world there would be lit­tle in­crease in the re­quire­ment for gas for power gen­er­a­tion; most of the tar­geted emis­sion abate­ment would be achieved by us­ing more re­new­able en­ergy and re­duc­ing de­mand. The prob­lem with this anal­y­sis is that elec­tric­ity de­mand is not fall­ing and will not fall with­out ma­jor struc­tural adjustment in the Aus­tralian econ­omy. The Na­tional Elec­tric­ity Mar­ket Man­age­ment Com­pany, NEMMCO, in its most re­cent anal­y­sis of elec­tric­ity de­mand in east­ern Aus­tralia fore­cast me­dian de­mand growth of around 1.9 per cent per year through 2015- 16. While higher prices with car­bon trad­ing will have some damp­en­ing ef­fect on de­mand, the de­sign prin­ci­ples pro­posed by the NETT would see en­er­gy­in­ten­sive, trade- ex­posed in­dus­try ex­empted from the car­bon pric­ing regime.

There may well be sound eco­nomic jus­ti­fi­ca­tion for such a pol­icy. How­ever, the fact is that ex­empt­ing our largest en­ergy con­sumers from pay­ing for car­bon emis­sions places the bur­den of abate­ment tar­gets squarely on the shoul­ders of smaller in­dus­trial, com­mer­cial and res­i­den­tial con­sumers that for the most part dis­play low de­mand elas­tic­ity. Thus it can be ar­gued that the strong de­mand- side re­sponse pos­tu­lated in the NETT anal­y­sis is un­likely to emerge.

As a re­sult, the chal­lenge in adopt­ing an abate­ment tar­get such as the NETT sce­nar­ios in­ves­ti­gated is to re­duce the ab­so­lute level of CO2 emis­sion by al­most half — from around 950kg of CO2 for ev­ery megawatt of power gen­er­ated to about 500kg, while elec­tric­ity de­mand con­tin­ues to grow at around 1.9 per cent per year. How might this be done? Re­duc­ing emis­sion in­ten­si­ties means adopt­ing power gen­er­a­tion tech­nolo­gies that emit less CO2 for each unit of power pro­duced. To achieve this, the al­ter­na­tives among ex­ist­ing tech­nolo­gies in­clude re­new­ables, hy­dro­elec­tric­ity, nu­clear power and nat­u­ral gas.

Emerg­ing clean coal tech­nolo­gies such as in­te­grated gasi­fi­ca­tion com­bined cy­cle with car­bon cap­ture and stor­age ( IGCC- CCS) may of­fer ef­fec­tive al­ter­na­tives in the fu­ture. How­ever, such tech­nol­ogy com­bi­na­tions are not yet com­mer­cially es­tab­lished.

The up­take of re­new­able tech­nolo­gies such as wind, so­lar and geo­ther­mal will con­tinue to grow strongly, but com­ing off a low base will ac­count for a rel­a­tively small part of to­tal en­ergy sup­ply. Op­por­tu­ni­ties for more hy­dro­elec­tric power are very lim­ited. Nu­clear en­ergy could of­fer a nil- CO2 so­lu­tion, but will po­lit­i­cal op­po­si­tion and deep- seated pub­lic con­cerns be over­come to al­low a nu­clear con­tri­bu­tion?

Right now — and for per­haps the next decade — the only well- es­tab­lished, com­mer­cially proven tech­nol­ogy ca­pa­ble of de­liv­er­ing large re­duc­tions in car­bon in­ten­sity for bulk power gen­er­a­tion is com­bined cy­cle gas tur­bine ( or CCGT) tech­nol­ogy. Gas- fired gen­er­a­tion is seen as the bridg­ing tech­nol­ogy that can pro­vide a tran­si­tion from con­ven­tional coal- fired power gen­er­a­tion to nearzero emis­sion coal based tech­nolo­gies such as IGCC- CCS. So here per­haps lie the bones of a so­lu­tion: use CCGT to meet elec­tric­ity de­mand growth un­til such time as clean coal tech­nolo­gies can take over.

As with so many of the ar­eas of un­cer­tainty in re­la­tion to en­ergy sup­ply and car­bon abate­ment, the fu­ture re­al­ity lies within a broad band of pos­si­bil­ity. The range of pos­si­ble out­comes and as­so­ci­ated costs is wide. In de­sign­ing an Aus­tralian car­bon trad­ing regime, un­cer­tain­ties need to be recog­nised. Lock­ing into bind­ing tar­gets could be dis­as­trous.

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