Prospects for renewable energy sources are exciting, but high costs will restrict their role to being minority players, writes Nigel Wilson
FORGET signing the Kyoto Protocol, the Rudd Labor Government will have far more impact on the way everyday Australians respond to climate change through its election promise to set a mandatory renewable energy target of 20 per cent by 2020.
The Kyoto symbolism is important in that it signals to the rest of the world that Australia, which has a high per capita contribution to global warming, is prepared to play a major role in developing global reduction strategies.
But the MRET is seen as a practical sign of what the Government thinks can be done, and here it is beginning to emerge that the rhetoric is perhaps not capable of being matched by reality.
What the Rudd MRET means is that within 12 years one- fifth of the electricity used in Australia will have to come from sources such as tidal or wave, geothermal, solar, hydro or wind. None of these sources is currently economically viable, though wind is making an increasing and controversial contribution to the nation’s generating capabilities.
According to the Australian Greenhouse Office, the number of renewable projects around the country capable of producing 3 megawatts or more is nearing 600 — less than 4 per cent of national generating capacity.
That is a small return considering that various forms of assistance for renewables have been in existence for more than a decade.
In October last year, when the 20 per cent MRET commitment was published as part of Labor’s election campaign promises, it was estimated the target would increase a typical family’s electricity bill by around $ 40 a year because generating electricity from renewable sources is more expensive than either coal or natural gas — which currently make up most of the fuel used in power stations.
But Rudd said the economic costs to the nation would be negligible and the plan would significantly reduce greenhouse gas emissions — by 325 million tonnes.
In fact, the economic costs to the country will be huge.
Australia’s electricity demand by 2020 is estimated to be 300,000 gigawatt hours. One fifth of that would be 60,000GWh in 2020. Of this, 15,000GWh will be hydro ( very little additional hydro electricity will be built). There will also be 9500GWh contributed by the Howard Government’s MRET scheme.
That leaves 35,500 GWh to be supplied by renewables.
The Energy Supply Association of Australia, representing the major generators, private and government- owned ( which provide the bulk of the electricity supplied throughout the nation), points out that on demand projections generating capacity will have to expand by 9000MW by 2020 ( from around 50,000MW now) and up to 70,000MW by 2030. ( This is about twice the current total generating capacity of Western Australia, for instance.)
It is a core part of ESAA’s estimate that the Australian electricity system is facing a capital cost of around $ 130 billion in generation, transmission and distribution investment just to keep pace with national economic growth over that period.
The 35,000GWh needed under Rudd’s MRET promise, if supplied conventionally, is the equivalent of about 4000MW of capacity, which on current expectations in the generating industry would be fuelled by gas.
Industry analysts say 4000MW would require 280 petajoules of gas a year, or 2800PJ between 2020 and 2030.
So, the analysts conclude, meeting the 2020 MRET target will cost the Australian gas industry $ 14 billion in the decade after the 20 per cent renewables target is mandated based on a delivered gas cost of $ 5 a gigajoule ($ 5000 a PJ), a conservative estimate considering domestic gas prices are rising substantially.
As gas has only about half the carbon content of coal it has been promoted as the fuel to transition Australia from dependence on coal, which currently accounts for 70 per cent of electricity generation fuel across the country.
On the ESAA figures, of the 9000MW of new generating capacity required by 2020, 6300MW would be fuelled from coal if the 20 per cent MRET was not in force and there was no incentive because of global warming to find an alternative.
Of the 9000MW in new generation required, around 5000MW will be renewable which brings us back to the original question: how much will be supplied by wind, or geothermal or other non- fossil fuels?
It is obvious that if wind power is to be an increasing part of the supply equation more wind power stations must be installed in Tasmania, Victoria and South Australia for the simple reason that these are the states connected by the National Electricity Grid where the wind blows longest.
Wind is generally regarded as only around 30 per cent efficient — wind turbines don’t generate when the wind doesn’t blow.
Modern, combined- cycle gas turbines are substantially more efficient than this, meaning that their greenhouse gas contribution is reduced in terms of the volume of electricity they produce compared with conventional steam generators — though even these have had greatly increased efficiency in recent years.
The issue for wind power is that because wind turbines cannot be guaranteed to supply electricity into the system at any time they must be backed up by other generators, otherwise the lights will go out.
So instead of removing greenhouse gasemitting fossil- fuel power stations for greenhouse- friendly wind, it is possible that more fossil fuel stations ( presumably gas) will have to be built to provide cover for wind power.
South Australia has the greatest proportion of wind turbines in its mix, but relies on importing fossil- fuel generated supplies from other states when wind fails to deliver.
But as the generating surplus in other states is eroded by increasing demand, the capability of the national electricity grid which delivers electricity for the national electricity market falls.
ESSA estimates, for instance, that NSW alone needs 10,800GWh of new supply by 2013. Very little of this will come from what is now generally regarded as clean energy.
Renewables other than wind power in Australia are in their infancy in terms of demonstrating commercial viability.
Geothermal energy, on which much hype has been lavished in recent years, has yet to demonstrate that it can make a large- scale difference. Geodynamics, with its Habanero wells in the far north of the Cooper Basin, which appears to have the most advanced project, is at least five years away from a commercial development and that is designed to develop a maximum of 500MW.
Similarly with wave power, where projects such as CETO ( promoted by Perth- based Alan Burns’ Carnegie Resources) appear to have real potential but are still a long way from establishing a commercial track record.
And solar power, where costs have been reportedly going to go down for decades, appears to have stumbled on the realisation that the main host for photovoltaics, glass, is fairly energy intensive to produce.
All these mean that by 2020 the chance of renewables supplying one- fifth of Australia’s electricity requirements is not great, even if all the known alternatives to fossil fuels were to be in the mix.
They have yet to demonstrate they are commercial, not withstanding an enormous contribution from taxpayers in the form of research and development grants. Without major changes to the electricity market and changes to the way we price electricity, renewables will continue to struggle.
Now it has to be said that Labor has a plan to cut greenhouse gas emissions by 60 per cent of their 2000 level by 2050. Rudd said during the election campaign that this was necessary to protect jobs into the future and was necessary also to protect the environment.
On the basis of simple mathematics and the capability of the renewables sector to develop commercially quickly it will be a huge challenge for Australia to meet the 2020 MRET target.
It will be an even greater challenge for the renewables sector to meet the 2050 emissions reduction projection which will require the commercialisation of clean coal technology and carbon capture and storage to be remotely achievable. These technologies, which are again only just beginning to look capable of commercial development, will not make a serious contribution to the federal Government’s carbon reduction plans by 2020 but they could by 2050.
It is not clear that the renewables sector can meet either target without huge changes in the scale of their development capabilities or through reducing the existing as well as future contribution from fossil fuels and the current electricity generation sector.
That will have significantly more impact on household electricity bills than the $ 40 a year forecast when the 20 per cent MRET target was announced only six months ago.