Feelpinions

The Energy White Paper

No, I haven’t sat down and thumbed casually through the Energy White Paper (EWP), and I have no intention of doing so. I will likely refer to it in future, but I am not expecting any surprises. Why? Because, by it’s very definition, there will be no surprises in it for me, or anyone else with an eye on the industry.

It is a public document, so there is no confidential information, or anything of national significance. Here it is if you’re an enthusiast.

It’s a story about energy in Australia, using publicly available information. So if you read the business section of newspaper and a couple of industry websites you’re probably on top of most of this stuff. It is also non-binding, as attested by the delays in its release, and besides, there’s nothing to which to bind. There may be suggestions of policy options, but no new policy nor new declaration of direction from government. It’s a gigantic boilerplate designed to show that ‘this energy thing, government has it in hand and we know what we’re doing’.

In any case, if there’s a change of government next year the whole thing might be re-written. The EWP is essentially an answer to the hypothetical exam question: ‘Energy in Australia; you have unlimited words and four years to write your response’.

Originally it was due for release at about the end of 2009 but was initially shelved because of the uncertainty regarding the carbon price. How could the government possibly comment on energy without knowing if there was going to be a price on carbon? So it was shelved in draft form until the dust settled, then re-drafted substantially when it was thought there wouldn’t be a carbon price, then changed again when it turned out that yes, there really is going to be a carbon price, even if the Greens drag us there kicking and screaming.

All this is not to suggest the EWP is likely to be a bad or useless document. The team working on it were some of the sharpest public servants I have ever met, with a remit to answer a complex question very, very thoroughly. However, we come back to the initial problem; these smart people were hamstrung by their terms of reference and so were stuck with telling an accurate story of energy in Australia. It is a comprehensive reference document. Nothing more nor less.

What does it say? Indulge me while I guess. I am happy to take corrections in the comments.

Australia has a lot of coal and we sell a lot of to China. Most is metalurgical coal and to some degree our economic success is linked to China’s. We sell coal to a few people now and are looking at fancy ways of shipping brown coal as well. It would be really great if we could burn the coal here and there were no emissions but someone needs to invent something before that happens.

Australia also has lots of uranium. We sell it to a few people now and are considering selling it to more people in the future. We have no plans to use it ourselves, but we’re not ruling out considering using it in the future. We still don’t have any of our own oil and it would be great if we did, because we use lots of diesel digging the holes that are driving the economy.

We have lots of gas and it’s in all sorts of interesting forms. There is about $160 billion being spent on the north west shelf on extraction and we’ll sell loads of it to China. There’s lots of gas in the coal seams around the place and we’ll extract it pretty soon and sell that too, but there are some community objections to overcome. There’s a new natural gas hub opening in Gladstone in Queensland, which will mean gas is now linked to international prices which will likely lead to increased prices for domestic consumers. However, there is a chance that increased domestic supply will buffer this rise, so your guess is as good as mine. We still get most of our electricity from coal and some of our power stations are literally the worst in the world. But the carbon price will probably slow them down a bit.

The Renewable Energy Target (RET) seems to be working and emissions intensity is trending down over the past five years. The RET has mostly supported wind developments and will likely continue to do so until 2018 or so, but moves to fiddle with the eligibility laws and the Small-scale Renewable Energy Scheme/Large-scale Renewable Energy Target relationship might change things a bit.

Apart from wind, most new developments in electricity generation are peaking gas turbines driven by cheap gas prices and increased daily-peakiness in the grid. The peakiness comes from higher residential demand driven by air-conditioning and heating loads, and from an increased penetration in intermittent renewables.

Annual grid demand is down for the past three years, because of a combination of milder weather, the effects of previous energy efficiency schemes (housing insulation and the Energy Efficiency Opportunities program) and increased penetration of domestic PV (photovoltaics, electricity panels on roofs, as opposed to solar hot water) which appears to the grid as reduced demand. There is more to be gained in energy efficiency and it is likely the trend of PV will continue, so the annual demand will probably continue to trend downward for a couple more years. Aluminium smelting uses about 25 per cent of grid electricity in Australia, so demand could really fall off a cliff if they pull out of Australia entirely, which many analysts have predicted and many companies have threatened.

Increased short-term peaks are driving up electricity prices, principally through increased demand charges or increased network costs for residential consumers. This can be addressed with smart meters, further rounds of insulation and ‘time of use’ pricing. Unfortunately, consumer groups and nutjobs oppose smart meters and ‘time of use’ pricing, so nothing will probably happen.

Insulation has become anathema after pink batts and now no-one is even sure if it works any more. Residential PV prices are still coming down and will likely continue to do so, but this will have minimal effect on short-term maxima, and may have an exaggerating affect in some areas.

Wind remains the cheapest renewable energy technology and can be considered mature in Australia. Residential PV installations passed 1 GW recently and will continue to grow and is cheaper than grid-power in many places now even without subsidies. Solar thermal looks promising but is developing slowly as demonstration scale plants are expensive. Hot dry rock geothermal has amazing potential but it’s in the middle of the desert and everyone is worried about fracking now. Wave and tidal energy is a fringe activity in Australia and will continue to be so out to 2020, despite some promising demonstrations in Western Australia and Victoria. Biomass is the greatest renewable contributor in Australia, mostly because of cane burning, and that will probably continue until wind catches up. Soil carbon sequestration looks like it might make a difference to Australia’s emissions but the industry is in its infancy. Something about electric cars and using the batteries for grid support, but I am not convinced this is technically feasible.

Those are my predictions on what the EWP contains.

So ignore the EWP, or refer to it if you want some statistics or explanations. The real action in government is in public submissions and, of course, policy announcements. Submissions tell you what the industry participants are thinking and how they want the rules changed. So have a look at the Renewable Energy Target submissions to see how the big players view the renewable energy targets. Or perhaps check out the Australian Energy Market Operator’s consultation page. It is here that the big levers which drive our economy are being pulled, and where the real interest is in the energy sector. Go and get your hands dirty as there is some very interesting information out there.

 

Image by Michael Kappel via Creative Commons Licence.

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