a Business Spectator publication

Breaking oil's grip

At the Cancun climate talks last week, entrepreneur Sir Richard Branson publicly stated that he believed oil would reach $US200 per barrel by 2015. Branson’s claim once again draws attention to the consequences of inevitable oil price rises, providing additional reasoning for decarbonising our energy system.

A $US200 per barrel oil price by mid-decade is consistent with Beyond Zero Emissions’ internal analysis and will have massive economic consequences for Australia. The issue presents us with an opportunity to achieve multiple outcomes: reduce our impact on the climate, while increasing our economic competitiveness and energy security. We can sandbag our economy from punishing oil prices, but only by equipping our automotive sector for the 21st century and utilising modern electric rail in upgraded national transport and freight networks.

The Australian economy will be importing 80 per cent of its oil by 2015, which means we will be forking out as much as $66 billion for imported oil per year from 2015 (based on Australian Petroleum Production and Exploration Association figures combined with BZE and Branson oil price predictions for 2015). Although this huge figure is equivalent to a quarter of the Australian federal budget, federal and state energy ministers refuse to acknowledge it, despite several years of trying to bring these facts to their attention. It is a significant economic vulnerability that will only grow in the decade ahead.

The increased cost of imported oil on the horizon is akin to a 'great big tax' on Australian families and already stressed industries. But unlike government taxes that pay for new schools, hospitals, train lines and other critical infrastructure and services, this multi-billion dollar price hike will solely benefit oil-rich nations. Instead of driving the Australian economy into a $66 billion brick wall, we need to get on the front foot and retool the economy for the safety and security of Australian families and industry.

Our government must push domestic car factories to retool for pure electric and plug-in hybrid vehicles. This is the case for leading US car maker GM. The company has successfully retooled its Michigan factories to mass-produce the Chevy Volt at the affordable $41,000 per car (in line with what average cars cost in Australia). There is no reason why Australia can’t do what Michigan-based automakers have done.

Given the rapidly rising demand for electric vehicles, reorienting the automotive industry is a strategic economic move. GE just announced it will aim for 25,000 electronic vehicles (EVs) in its global fleet by 2015. Anticipating increased demand, the European car-giant Renault will aim to produce 500,000 pure EVs per year by 2013. Even with ramped-up production though, EVs are expected to be in short supply globally over the next three to five years.

So what can the Gillard government do to encourage the automotive sector restructuring? There are several options.

The government can leverage existing subsidies to manufacturers to build Australia’s capacity as a green car powerhouse. Fringe benefits tax arrangements combined with government procurement now drives around half of the one million car purchases in Australia each year. This tax could be amended easily to incentivise the purchase of EVs which, given short global supply, are best sources from retooled Australian plants.

The government sector can use its position as the country’s largest car purchaser to ensure demand and help the EV market mature. Investments in R&D can help Australia keep up with the quickening pace of EV innovation. And it can assist the roll-out of critically important recharge stations – the infrastructure that will allow Australian families to meet their travel needs with confidence. These measures will revitalise the domestic car-manufacturing sector and significantly lift sales.

Automobiles are only half of the story, though. Improved renewable electricity powered public transport and freight networks will also reduce the demand for oil-dependent vehicles.

Each Australian car driver travels around 15,000 kilometres per year. To seriously address the coming oil shock we must target 50-80 per cent of all passenger kilometres to be modally switched to electric rail within 10 years. We need to start mobilising the industry today to do this, ahead of the shock.

Australia needs to convert the bulk of these kilometres to public transport. Fast trains between Australia’s largest cities, new metropolitan train lines (like the French and Spanish metros) and adapted freeways and arterials for trains and trams would all see massive upswings in public transport patronage.

Moving increased quantities of freight by train is also part of the solution. Dedicated freight corridors would benefit regional Australia particularly. Moving freight vast distances on trucks will become increasingly costly, so people living in the bush will face increased costs of living if our government fails to plan and respond effectively to the threat of inflated oil prices.

Of course, as with any major infrastructure project, we must account for its climate impacts. A renewable energy electricity system, like the one outlined in the Zero Carbon Australia Stationary Energy report, can power this transport system with no adverse impacts on the climate.

A dollar saved is a dollar earned. With automotive industry restructuring and smart transport policies, Australia can avoid sending up to $66 billion offshore each year. This saving can offset the cost of funding a transport revolution while strengthening our economy at the same time.

Australia’s transport system is currently oil dependent. But it doesn’t have to be. In 2011, Beyond Zero Emissions will release a fully costed plan for a zero carbon transport system. The report will spark debate and inform policymakers about the type of transport Australians need – one that is good for our climate and good for our economy.

Matthew Wright is director of Beyond Zero Emissions and 2010 Young Environmentalist of the Year.

Beyond Zero Emissions is currently seeking donations and pro-bono researchers to produce the Zero Carbon Australia Transport plan due for release Q4 2010.

Comments on this article

It may make more sense for

It may make more sense for larger organizations to own the installations with rooftops being leased from householders. he change in model would result in an increase in the average size of rooftop installations, the potential for competitive tendering and the possibility of a number of rooftop installations being linked to a more sophisticated, grid friendly converter. Visit Our Site

Fringe benefits tax

Fringe benefits tax arrangements combined with government procurement now drives around half of the one million car purchases in Australia each year. This tax could be amended easily to incentive's the purchase of EVs which, given short global supply, are best sources from retooled Australian plants.
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Beyond Oil's Grip

If Matthew Wright is the Young Environmentalist of the Year, maybe he is too young to realise CNG fuelled cars have been around since the 1970's in Europe, and CNG is currently being used in Sydney to power buses. This is not Rocket Science. In Uzbekistan, that hub of technological development, they convert their own ex-USSR vehicles to CNG.

We have more natural gas in Australia than we can possibly use domestically, which makes this the logical way to go, economically and environmentally, rather than over-priced electric cars which still, for the next 20 years at least, run on coal-fired power.

Beyond Oil's Grip

If Matthew Wright is the Young Environmentalist of the Year, maybe he is too young to reasize CNG fuelled cars have been around since the 1970's in Europe, and CNG is currently being used in Sydney to power buses. This is not Rocket Science. In Uzbekistan, that hub of technological development, they convert their own ex-USSR vehicles to CNG.

We have more natural gas in Australia than we can possibly use domestically, which makes this the logical way to go, economically and environmentally, rather than over-priced electric cars which still, for the next 20 years at least, run on coal-fired power.

Biomass co-firing of Molten Salt Storage towers in ZCA plan

To answer a few questions here, if you read the Zero Carbon Australia Stationary energy plan which is available at beyondzeroemissions dot org website.  Then you'll find that we have a limited amount of biomass co-firing to deliver less than 2% of annual demand during the winter period.

It is probably with the new improved v2.0 of the plan and the access we'll have to hub height data in WA, QLD and NSW that we'll be able to prove less requirement or no requirement for this biomass co-firing.   If this is the case 1 tower at each site maybe provisioned with such a setup as a contingency but no more.  We'll also be optimising a whole lot more including storage/field turbine ratio etc.

I look forward to being able to publish v2.0 along with our team, showing an improved case for how to take the economy to 100% Renewable energy in the least cost way.

Set fuel a consumption target

set 9L/100kms target for passenger cars and 4WD, add a taxon new cars of 2%/1L over the target of 9L/100kms so they cost more; give 2%/1L credit on cars that better the target.  There is no place on this Earth for 6L V8 Commodores using up precious oil reserves. Next scrap the State rego and 3rd party insurance and replace it with a tax on petrol/diesel that goes back to the States.  Base the tax on 9L/100kms fuel consumption for 15,000kms/annum which works out to 50c on petrol/diesel to generate $675/annum for the 'average' annual usage of a medium car.  If you don't use your car, you save money and there is no 3rd party risk.  If you choose to drive a fuel inefficient car it will cost you heaps.  If you drive a fuel efficient turbo-diesel larger vehicle you will save money.  If you drive a small fuel efficient petrol car you will save money.  Our car aspirations have to change.  Last quarter there was a 33% increase in 4WDs/SUVs clogging our suburban streets for no reason other than to be seen in the biggest tank.  Sorry we have to get rid of these monsters by fiscal means.

Dave

Nuclear waste is the solution, not the problem

"Why do people insist on mentioning nuclear as a cheaper alternative even when including decommissioning costs...what about the waste that is around for 1,000's of years that is stored is steel drums that at best would last a couple of hundred"

 

Because the storage would not be in steel drums, but in geology that will be impermeable and stable for the next billion years.  Though even this would be a, well, waste:  the vast bulk of this material will ultimately be consumed by Generation IV reactors, generating further vast amounts of energy in the process.  See http://bravenewclimate.com/integral-fast-reactor-ifr-nuclear-power/

Find More

While I strongly agree with the tone of this article and almost all the detailed proposals. I feel i must point out that we must not forget that Australia with a little bit of political will could dramatically  increase its own oil production. With the right fiscal arrangements vast areas of previously unexplored acerage might erase this potential problem all together, especially if all these other measures are effectively implemented at the same time.

The 500 Year Thing

I still await a reply from Mathew Wright regarding the fuel backup needed for solar thermal during winter.

Strange, but I have been asking this question for the last couple of years from all sorts of experts, and get no reply.

WHY? Guess?????

no nuclear

Why do people insist on mentioning nuclear as a cheaper alternative even when including decommissioning costs? Sure cheaper power is one thing but what about the waste that is around for 1,000's of years that is stored is steel drums that at best would last a couple of hundred.

People need to stop thinking that nuclear will save the environment just because it has less emissions than coal.

Mike Borgelt

With such erudite comments Mike should be politician, how little they think.

Even more reality

@James: I'd guess Greg hasn't actually read the ZCA2020 report.  There's certainly a lot of consideration of engineering and practical issues in there...

RE: Some reality

@ Greg.  Greg what is your point?

Some reality

It would be desirable when such arguments are put up the protagonist would consider all the engineering and practical issues along with the economics of his proposal. Without them the argument is all bluster and this one is no exception. Whackjob indeed!

When the fire is at your back you will move

Either you accept Climate Change and Peak oil or you don't.  If you don't then there is not point in further discussion.   If you do and you fully understand the risks then you will see why the BZE 2020 plan is alot more feasible that at first glance.  When peak oil causes $2 per litre + petrol many people will move or be bankrupted.

Cost of electricity

While trying to find some numbers on Levelised Cost of Electricity (LCOE - total cost, including all capital & ongoing costs), I found this page. (copy & paste to Excel for readability)

It suggests nuclear is similar in price to coal, and about 40-70% cheaper than most renewables.

I don't know if they included decommissioning costs in there, though, and they certainly didn't include any price on carbon for the coal plants.

Get it right

"why not go straight to renewables...nuclear...is so expensive if the decommissioning costs are taken into account"

 

Not true, David Bruce-Steer.  See http://bravenewclimate.com/2010/11/28/nuclear-is-the-least-cost-low-carb... Cradle to grave, nuclear is considerably cheaper than renewables per watt generated.  Even if Wright is right about feasible build rates for solar and wind, the same is even more true for nuclear, given the same level of financial firepower as that demanded by ZCA2020.

Oh No Not The 500 Year Thing Again

Bruce  I totally agree, that is what I was trying to discuss with the Minister(You know Who) . It can not last. NG is one of the most flexible fuels and should not be exported to the detriment of this country at 6 cents a litre to produce electricity in Asia.

The bloke is a dill.

There is no input into how long all these things last. And by the way he advised he did not know what "The Dutch Disease " is.

In addition can Mathew Wright tell me how much fossil fuel/or other fuel is needed for the Solar Thermal during Winter months. From my research it would appear that the energy collected from March to September is at least 40% less than the  summer months. Apart from that, temperatures generated are less than ideal for efficiency regarding steam turbines. Please quantify.

 

Going electric may not be that easy

By the time hip pocket nerves start to sway opinion, the electric and renewable market place may not be an easy place to source product from.

If China were to decide to preferentially service their domestic market, many countries, Australia included, could be left in a precarious position.

Even without a chinese monkey wrench, most of australia's electricity infrastructure can't cope with present demands.

As coal becomes increasingly fingered as the prime culprit in an environmental disaster, power stations will have to be re-thought.  

Widespread use of EVs will undoubtedly make this bad problem a lot worse. Big heavy 'dino-burner' based EVs will need a lot of energy to operate. It'll be like every household buying the biggest air conditioner on the market. 

Maybe we should be riding electric bicycles ??

I see one thing for sure: western society needs a radical overhaul and my previous post indicates that there is little time to waste arguing with the obfuscators and the "business as usual" stooges.

Good news?

What are the chances Oil won't  make it to $200/Bbl before it causes a crash.

Oh No, not the 500 year thing again

From Richard Simpson's "Awareness"

"On both counts said nothing, apart from the fact that is not investment in resources great, and it will last 500 years at current useage."

This convenient "500 year" statement has to be viewed very skeptically every time it is seen. It stems from a long mis-quoted estimate of the US domestic coal supply, originally from a National Fuels and Energy Policy Study delivered to the US senate in 1973. The forgotten qualifier is "at present consumption levels".

Assuming 500 years at present (constant) consumption levels, the following time to exhaustion is obtained for various compounding growth rates:

  • 0% - 500 years
  • 1% - 178 years
  • 2% - 120 years
  • 3% - 93 years
  • 4% - 77 years
  • 5% - 66 years
  • 6% - 58 years
  • 7% - 52 years
  • 8% - 47 years
  • 9% - 43 years
  • 10% - 40 years
  • 11% - 37 years
  • 15% - 30 years
  • 20% - 24 years

    So much for 500 years!!!

    Given Richard Branson's statement, I would be looking near the bottom of this list for my prediction of the future. 

  • Trains and boats and planes 2

    Also agree that the indications for EV’s appear positive, and some R&D concessions might have merit. But as much as the car companies can appear short-sighted, relying on a market based process where consumers retain freedom of choice, rather than a Canberra bureaucracy deciding which cars consumers will have access to is probably the lesser of evils. Ultimately, the car industry builds cars it thinks it can sell, not what some cheerful climate lobbyists think consumers should be buying. Despite the seeming irrationality of the FBT for cars, it is the only thing keeping the industry afloat. At least the industry is competitive with the big-6’s. Once again, I’m not sure the community would accept the ZCA plan to take all diesel and petrol cars off the road, essentially limit households to one car, and limit choice.

    I strongly support your raising of the issues but I don't believe the radical social engineering of the ZCA plan is the solution.

    Trains and boats and planes ....

     

    Agree with your enthusiasm for high speed rail - wouldn't it be great to have a Bris/Syd/Can/Melb link? But the hundred billion dollar question is - who's going to pay for it? And I'm not sure either the airline industry or community would support shutting down the domestic aviation industry by 2020 as proposed in the Zero Carbon Australia plan.

     

    Always wait for a crisis

    It is human nature not to do anything till we forced to, and then it is that much expensive and that much more inconvenient.

    In my opinion politicians wont do anything till petrol gets to +$2.00 per litre and the average citizen starts complaining loudly. So then we have electric cars

    But how to generate the electricity?

    So why not go straight to renewables as outlined in the BZE Plan (http://beyondzeroemissions.org/zero-carbon-australia-2020) . Both gas and nuclear are not renewable and the latter is so expensive if the decommisioning costs are taken into account not to mention how to get rid of the highly radioactive waste.

    We need to have a mechanism to temporalily make renewable power stations as cheap as coal through a feed-in tariff or a carbon tax. The latter preferably.

    BZE critiques

    @Jeff Poole: There are a number of critiques of the BZE  report (assuming you're talking about the ZCA2020 report) here:

    http://bravenewclimate.com/2010/09/09/trainer-zca-2020-critique/

    Most of the criticisms seem to relate to a few points:

    1) Can the energy efficiency improvements be realised?

    2) Can it be done in ten years?

    3) Is it affordable?

    4) Can renewables provide baseload power anyway?

    Number 4, in particular, seems to draw a lot of fire from advocates of nuclear energy, some of whom are adamant that renewable energy can not, and will never be able to, provide stable & secure energy supplies.

    The numbers I've seen on the cost side (re #3) vary widely.  Some figures I've seen suggest large-scale solar thermal with molten salt storage is already very close to being cost-competitive to nuclear, and cheaper than coal-with-CCS.  Other figures put it at nearly ten times the price - which seems unrealistically high to me, but I'm no expert.

    Nice work. Keep it going Matt!

    $200/barrel oil may indeed be in our future, but I fear it will be shortly followed by considerable economic pain and subsequently another leg down in the next stages of the great global deleverage/sovereign debt crisis. I find the idea of an already over indebted Australian population buying new electric cars without significant subsidies highly unlikely. I do however applaud your efforts for putting together such a convincing case (ZCA2020). I too am optimistic given that we are one of the few developed countries in the world that have the capacity to move to a completely sustainable future. I only hope that our government has the foresight to use this policy as an alternative means to stimulate our economy (as opposed to inflating residential property), as I believe it’s only under extreme economic circumstances that this could ever be implemented.

    Utopian Dreams

    Utopian dreams of energy efficiency and a totally changed society are fine, until you try to shove them down the throat of someone else. The reality is, the only system that has raised peasants up out of the mud is Capitalism. How are you going to keep them down on the farm? In Capitalism, production (and quality of life) is proportional to the energy you use.

    Your choices are drop Capitalism, and go back to a steady state farm economy in which most people are verging on starvation, or drop the world population by around six billion. If every country had the same population per square kilometre as Australia, there would be no problem.

    cars on trains

    We can do toll roads without payment collection. Surely we can extend that to a drive-on drive-off system for moving cars on electrified train services.

    Re BZE Believable

    "There have been many well documented criticisms of the BZE Report" 

    Oh really? Funny you can't find a single link then - or were they all written by Woodside Petroleum, BHP and GM...? Perhaps you should try backing up your statements if you don't want to be taken for a fossil-fuel employed spin doctor.

    RE: BZE believable

    BZE build rates for Solar and Wind are not Hurclean.  The rate that we are installing turbines in our plan is lower than the rate that other leading countries have installed turbines in the past when the industry was less developed. ie lower than rates seen in the past in Denmark, Germany, Texas, California and Spain.

    On Photovoltaic, this year Germany will hit 18,000MWe and has installed 8000MWe of Photovoltaic.  In June alone they installed 2GWe of photovoltaic.

    The construction of Solar Thermal plants, ie molten salt power towers has been shown to occur in under 24months for FOAK plants.  ie Torresol Energy Gemasolar is commissioning right now and it is less than 18months from when they broke ground.

    We are in a $1300 BIllion dollar economy that markets imports or builds 54 Billion dollars per annum of motor vehicles and spends $38 Billion on insurance.  We are talking about $37 Billion per annum.  When Super contributions tax was adjusted by the Howard government we have forgone $25 Billion in tax revenue.  Passing $37 Billion per annum onto electricity consumers would cost about 6.5cents per kilowatt hour.

    RE: oil grip

    Fossil Gas doesn't come into it - this is a plan for getting off fossil fuels.  Australian's don't want to be tied to fuel;s that will be subject to international price parity and global supply constraints.  They want the independence and energy security that using the Sun and Wind (which can't be exported) for our fuel will bring.