Renewable energy

In a world where carbon emitting energy sources are increasingly seen as the work of the devil, Janine Mace reports on the tricky position in which Australia currently finds itself

For a country traditionally associated with sunshine, it is odd that harnessing such an abundant resource is not a priority in Australia.

It even leads the world in solar power advances such as thin film and silicon sliver photvoltaics (PV), as well as other renewable energy technologies such as hydrogen research and hot dry rock geothermal energy.

Blessed with an abundance of renewable energy resources, it is that most old-fashioned of energy sources – coal – underpinning most of Australia’s energy supply and economic prosperity.

But in a world where carbon emissions from fossil fuel-based energy sources are becoming an increasingly sensitive topic, Australians are starting to ask whether the traditional downplaying of the potential for renewable energy needs to be readdressed.

Debate about whether alternative energy sources from the sun, wind and geothermal sources should be encouraged is becoming increasingly shrill as the Australian Government continues to press for its preferred solutions of nuclear power and ‘clean coal’.

Australia’s problem is that it has an embarrassment of riches when it comes to energy resources, as it has significant supplies of liquid petroleum, natural gas, coal and uranium. In fact, it is one of the few OECD countries that is a significant net energy exporter.

As the world’s largest exporter of coal, energy commodity exports represent a significant portion of the Australian economy and were valued at A$21bn in 2005/06. Domestic energy is also dominated by coal, with 85% of the electricity supply provided by coal-fired baseload power stations.

The Australian Prime Minister, John Howard, has continually emphasised that despite concern about climate change, his Government will not take any actions likely to harm the local economy or damage the nation’s economic prosperity. And that includes signing the Kyoto Protocol or setting carbon reduction targets.

Given the economic importance of coal, the Australian Government has placed much of its faith – and dollars – in developing clean coal technology.

In March, the Government’s Low Emissions Technology Demonstration Fund awarded an additional A$100m to a project working on the development of clean coal technology, with A$50m already awarded to a project for drying brown coal.

The Government’s views about the importance of clean coal technology have been clearly articulated by the Minister for the Environment and Water Resources, Malcolm Turnbull. ‘While there is no single silver bullet to deal with climate change, Australia’s progress towards cleaner coal is one of the most important ways we can make a global contribution. The coal industry is vital for Australia and vital for the world,’ he said when announcing the grant.

In comparison, funding for a large scale solar concentrator project has only received A$75m, with A$17.6m awarded to five projects working on more efficient ways to store electricity from renewable energy sources.

International funding and targets for renewables are far more ambitious. The Portuguese Government recently announced it planned to investment over US$10bn in renewable energy projects over the next five years.

Despite rapid capacity growth in areas such as solar PV and wind energy, the actual percentage of electricity generated by alternative energy sources in Australia has been progressively falling in recent years, from around 11.5% in 1998 to 8% in 2006.

While renewable energy makes a significant contribution to energy supply in remote areas, it has not achieved similar success in urban areas. And although renewable energy costs have fallen, they are still not competitive with fossil fuel-based energy in providing grid supplied electricity.

Incentive schemes

Another factor in the slow take-up of renewable energy in Australia has been the Government’s incentive schemes.

The Mandatory Renewable Energy Target (MRET) scheme provides financial incentives for the renewable industry, but it is likely there will be sufficient investment to meet the target by early next year, and there are no plans to increase it. This means investment in renewable energy in Australia is expected to decline significantly.

As a report commissioned by the Renewable Energy Generators of Australia (REGA) noted: ‘Without the development of new policy measures in Australia, investment in renewable generation will peak in 2007 and then fall off sharply. By the end of this decade, investment could fall to a trickle, in stark contrast with the world trend.’

Both its rhetoric and funding indicate the Australian Government is convinced renewables will only ever supplement energy provided from fossil fuels. As Minister Turnbull recently noted on ABC Television: ‘You cannot run a modern economy on wind farms and solar panels. It’s a pity that you can’t, but you can’t.’

This is a very different view to that in Europe, where countries such as Portugal have plans for 45% of the country’s total power consumption to come from renewable sources by 2010.

In the US, California Governor Arnold Schwarzenegger has set the ambitious target of having 33% renewable power by 2020 for the enormous Californian economy, while the Swedish Government has announced it intends to replace all fossil fuels with renewables, becoming oil-free by 2020.

Back in Australia, incentive schemes such as the MRET have helped foster growth in the renewable industry, particularly wind power, by helping to reduce the pricing differential between fossil fuel and renewable energy sources.

To really encourage renewables, the REGA report argues it is vital for Australia to introduce some form of carbon pricing mechanism or a requirement for all new energy generation to meet strict emissions limits as a way of speeding up the price convergence between traditional and renewable energy sources.

But the Australian Government has stubbornly refused to agree to any targets for emission reduction, and has only recently changed its position on emissions trading.

In June a report from the Prime Minister’s Task Group on Emissions Trading recommended establishing a domestic emissions trading scheme, but implementation is to be delayed until 2012. A national emission reduction target will not be announced until next year, well after the federal election due later this year.

Scary impact

The argument about setting a target that will not damage the Australian economy has been helped along by a study by the Government’s key industry research agency, ABARE, which forecast several scary scenarios about the economic impact of setting carbon emission targets.

The ABARE report noted: ‘Unilateral action to achieve deep cuts in Australia’s emissions is estimated to cost the Australian economy significantly more than not undertaking that action and offers no perceptible additional benefits to the rest of the world – neither in economic terms nor in terms of global environmental benefits.’

Despite this, the local renewable energy generation industry is becoming increasingly vocal about the benefits it can bring to the table and about what it perceives as unfair advantages given to the coal industry.

The Business Council for Sustainable Energy and the Australian Wind Energy Association (Auswind) has started a lobbying campaign to push the Government on the use of clean energy.

‘Clean energy like solar, wind, bioenergy and hydro provides around 10% of Australia’s electricity right now,’ explains BCSE CEO, Rick Brazzale. ‘With the measures to deliver 20% renewable energy by 2020, we can rein in our emissions without hurting the economy.’

The campaign argues that ‘on the surface coal looks cheaper’ and is urging Australians to look more closely at the real costs of different energy technologies.

As Auswind’s CEO Dominique La Fontaine argues: ‘Clean energy doesn’t produce harmful greenhouse gases or use truckloads of water, so it costs less in the long run. And with economies of scale it becomes cheaper over time.’

Even the electricity and gas industry body, the Energy Supply Association of Australia, agrees the cost of moving to a renewable target of 20% by 2020 would be only 4%–6% at the retail level.

So with the debate really hotting up, Australia may eventually start to use more of that endless free sunshine it receives every day.

Janine Mace is an Australian freelance finance and business journalist.