A bridge too far?
Stephen Sondheim once said that “perpetual anticipation is good for the soul but it's bad for the heart.” The clean energy industry could testify to that, although they would likely add that it’s also bad for business.
Australia’s renewable energy industry has been in a state of perpetual anticipation for some time: Long on promises of a carbon price, renewable energy targets and grants-based assistance, but short on any traction for getting things built.
There is hope that the roadblocks may finally be lifted by the troika of initiatives unveiled in the government’s Clean Energy Future – a carbon price, a new Clean Energy Finance Corporation muscled up with $10 billion in funds, and the creation of the Australian Renewable Energy Agency to bring the myriad smaller programs under one roof and into the hands of an independent, and hopefully proactive and properly resources body.
The surge in the handful of stocks that make up Australia’s listed renewable energy community suggested that investors are in a more buoyant mood, even if the industry itself is cautious. “The devil is in the detail,” was an oft-repeated refrain. As one noted, this is an industry that is still shell-shocked by the experiences with the CPRS, and the failure of other schemes such as the renewable energy target.
Indeed, the renewables industry may have to be patient for a little while longer. A carbon price may well lift the mood, and the long term incentive for renewables, but it doesn’t by itself bridge that immediate gap. And it won’t be in place for another year.
The CEFC – possibly the biggest game breaker for emerging technologies – will not be up and running for two years. It gets its first investable funds of around $450 million in 2013/14, with another similarly-sized lump a year later. The rest of the money will come through in the three years following.
That’s a pity. Because the best way to unblock the logjam in the renewables market would be to arm the CEFC with funds in the current financial year and do something useful like buy up some of the surplus renewable energy certificates that have flooded the market and rendered it impossible for wind energy developers and other renewable energy developers to even seriously negotiate power purchase agreements.
These PPA’s – without which a project is difficult to build, although some such as Infigen Energy have taken a punt on merchant contracts – have been virtually impossible to obtain for several years, and it seems it will be another 6-12 months before the retailers are forced to seriously negotiate with project developers.
The CEFC, however, is not designed to help shovel mature technologies such as wind into the renewable energy target. Its focus appears to be on bridging that yawning Valley of Death that separates good ideas and potentially viable technologies from commercial deployment, and the opportunity to discover if scale can deliver the cost reductions that are needed.
The extent of that Valley of Death in Australia has been described on this site on numerous occasions. It’s the principal reason why David Mills and Zhongreng Shi took their solar technologies to the US and China respectively, and it’s been a blockage for numerous others.
The extent of the blockage on a global scale was highlighted today by Michael Ottaviono, the CEO of Carnegie Wave Energy, who noted that 95 per cent of the $240 billion spent on renewables last year was directed towards deploying existing and proven technologies, i.e. wind and solar PV.
“Arguably, it is the newer, emerging renewables like wave that have the potential to be game changers, providing high availability, predictable clean energy,” Dr Ottaviano said. Wave energy, of course, is one of those technologies, like solar thermal and geothermal, that are expected to be supported by the CEFC.
Australia has the expertise and the potential to be world leaders in each of these technologies, although the government still appears reluctant to recognise that potential. Treasury modeling suggests that renewables will provide 40 per cent of Australia’s energy needs by 2050. That is a massive transformation, but most in the renewables industry are convinced that Australia could and should have a higher ambition.
The CEFC at least is a recognition that it is the emerging technologies that will provide the cheapest and most dependable energy in the future, and not necessarily those such as wind that meet the “current lowest cost” criteria of schemes such as the RET.
There is still no clear outline of what sort of beast the CEFC will be. As Climate Change minister Greg Combet said in this interview with Climate Spectator, it will be expected to get a return on its investment, and ultimately be self-funding. But the actual mandate and mechanisms will not be clarified until a chairman is appointed and has decided what he wants to do.
The government has not given any indication of who it has in mind, although the likes of IFM boss Garry Weaven – he ticks the boxes of Labor connections, renewables experience and finance – and Infrastructure Capital chairman Mike Fitzpatrick were being suggested. Others suggested people in the finance sector with experience in energy finance.
Australia, however, has a strong record of announcing funding for clean energy initiatives and not spending them. “It’s an interesting beast,” said the Grattan Institute’s Tony Wood. “You could conclude that the probability of spending all the money is actually quite low.”
He says the concessional loans and loan guarantees being contemplated will not by themselves make new technologies such as large-scale solar financially viable. In the US, loan guarantees are still supported by a PPA under the various state-based renewable energy targets. “If it is designed to finance the RET – then people would be upset. But it is hard to see how large-scale solar would be suddenly financially just with this. There is a lot of detail to work out.”
Solar, marine energy and geothermal will likely only account for half of the funds to be allocated. The rest of the money will go to what is described as “low-emissions technologies,” and the industry is hoping that this includes “enablers” such as storage and grid connections to remote areas such as the Eyre Peninsula and the Cooper Basin.
“We need to expand and augment power systems to get the best renewables in the right location,” said Brett Thomas, the local head of Spanish renewable energy giant Acciona. Thomas said the CEFC would be important in deploying large-scale solar PV and solar tower technologies. “We know that they are commercial, and that we can build them at large scale, but not in Australia because of the cost relative to wind within the renewable energy target. If the CEFC is to provide equity funding and commercial technology, then expect to see bit of money going into large-scale solar.”
Meanwhile, the established renewable technologies continue to play a waiting game. WestWind, a German wind farm developer with two projects in Victoria, says a carbon price will do little to benefit PPA agreements in the short term, although it will take over as the primary incentive in the long term. CEO Tobias Geiger expects activity in PPAs in 2012 as retailers finally start to prepare for a shortfall of RECs in 2013/14.
Comments on this article
The cost of emerging renewables vs not doing anything
The debate should be about the emerging technologies and how they can support the low carbon economy, employment growth and protect Aus from the decline coming from the world need to reduce emissions - in all forms not just carbon. The solar PV industry are indicating price parity to coal - thanks to China's massive developments and production - within the next 5 years. There are new developments which if proved to be scalable will be pollution free as soon as they are commercialised and cheaper than coal - if they can cross the valley of death. Lets focus on the opportunity rather than arguing for sameness - Australia has a lot of smart people and technologies - lets give 'em a go and support innovation. Thanks Climate Spectator for the support.
The cost of emerging renewables vs not doing anything
The debate should be about the emerging technologies and how thay can support the low carbon economy, employment growth and protect Aus from the decline coming from the world need to reduce emissions - in all forms not just carbon. The solar PV industry are indicating price parity to coal - thanks to China's massive developments and production - within the next 5 years. There are new developments which if proved to be scaleable will be pollution free as soon as they are commercialised and cheaper than coal - if they can cross the valley of death. Lets focus on the opportunity rather than arguing for sameness - Australia has a lot of smart people and technologies - lets give 'em a go and support innovation. Thanks Climate Spectator for the support.
Ian Youle, here's why we should cease CO2 emissions.
CO2 emissions are trapping heat near the earth's surface. With nowhere else to go, ~90% of that heat is being absorbed in the oceans and delivered to polar icecaps.
Melting polar ice converts this sensible heat to latent heat, leaving the earth's spatial temperature distribution unchanged ... and the process continues until polar ice loss decreases earth's reflectivity of shortwave (solar) energy. That's when it really starts to warm up, but by then we'll have abandoned most of our existing coastal cities and other infrastructure.
Meanwhile, industrial air pollution, primarily emissions from burning high sulfur fossil fuels, increased reflection of sunlight in the post-WW2 decades (Europe, N America, Japan) and in the last decade (China). That the world is continuing to get warmer, despite polloution and decreased solar intensity, is particularly concerning.
There may well be a role for nuclear fission, provided reactor design is intrinsically safe ie not dependent on continuity of cooling water supply.
All you fantasists out there should rest easy: Australia has ample non-nuclear renewable energy resources. We can sell the world all the uranium and thorium it wants, and we don't need it here.
Now, you can't possibly want better than that, can you?
Some things to be addressed first...
...by the nuclear industry before asking for handouts for more power stations.
First of all, clean up the mess you have already made.
Reading today's news on Fukushima it says that new technology has to be invented to clean up the molten fuel. Work cannot begin on that job for another 10 years and it will take a couple of decades after that to get the job done.
So, before you start thinking about creating more problems, fix the current ones first. That should keep you occupied for " a little while".
Why avoid carbon dioxide emissions?
Giles makes the comment "most in the renewables industry are convinced that Australia could and should have a higher ambition" than Treasuries' 40% renewables by 2050. Of course they are - they would wish to be on the gravy train of government largesse for dubious returns.
No problem with developing alternative energy supplies for areas not connected to the electricity grid, but why shut down our efficient, very low cost, coal-fired power stations? Apart from knocking our economy about, the world will need all the carbon dioxide it can get.
As global temperatures have plateaued from about 2000 and the sun weakens its heat and magnetic outputs, the planet is going into a cooling phase. Carbon dioxide increase will give increased plant growth and warmth - godsends during a time of global cooling.
Spot on , Peter Lang, nuclear fusion and fission are the ways to go. Let the current hysteria of Fukushima have its day, just like Three Mile Island and Chernobyl (how long ago?). In the long run, commonsense will prevail. Also see vasso massonic's comment - commonsense it is.
nuclear makes me laugh
It would have been great if the pro nukers had spent there time hiding under that rock called the fukishima disater to actually come up with some figures that support their arguments.
But I guess to them decomissioning nuclear plants and taking care of thousnads of years of radioactive waste is always a cost to be bourne by society, considering if you can get subsidies to build the thing , why wouldnt you right off any other expenses that would kill any other buisness as a fait-a-compli.
Hey you might even kill the planet, if the right sought of japanese style regulatory process ensued......and then ther would be so much radioactivity that left overs would barley rate a blip on the gieger counter. Good one guys.
Now is not the time to squander our war chest.
In the final analysis, the transition to renewable energy will, by necessity, be through evolution and not revolution, of the B.E.R. kind.
True, Australia has the expertise to develop and market renewable energy technologies but we, clearly lack the massive capex needed. Fortunately, our emissions amount to only 1.5% of the global total and, whilst we need to do our utmost to keep that level in check, it is not incumbent upon us to find the solution to the global emission burden.
Julia Gillard is relentlessly pursuing the imposition of a carbon tax in the current risky economic climate, yet is making a song and dance over Peabody Energy Corp's second tilt for Macarthur Coal which clearly degrades her costly carbon tax drive simply because Peabody will export the coal and thus increase the global pollution and make no difference at all to our tiny 1.5% pollution.
No Stress..
Peter Lang, no need to stress about anti-nukes because in a few years as the chickens come home to roost, meaning the resources industry comes off the boil, Government is committed and locked in to compensation and the tax from polluters diminishes to pay for those commitments, money flows overseas to buy offsets thereby trashing our terms of trade, and the real cost of what we have witnessed on Sunday becomes clear to all, plus the failure or tardiness of other countries to also wreck their economy and instead grab advantage from Australia while they can, thats when the rot will really set in.
The vague hope is that shale gas is viable, since CSM will almost all be committed to LNG export, and we will have to outbid foreign countries to buy our own CSM gas. Maybe shale gas will be enough, maybe not, who knows at the moment if its there, or if protestors seek to close it down. A few windless hot summers and a week or two of black-outs after major coal plants are removed will make people realise just how good they had it and what a fools errand has been pursued. It seems all the effort has been dedicated to getting a tax up and zero thought for ...what next?
There is no technology breakthrough, things can't be invented just when you want them. There is what there is now and its not good enough..
Australia has completely abandonned low cost energy security...for now.
Brett - irrational anti-nuke phobia
You ask "how much to save emissions with nuclear?"
Surely you should know the answer to that. The answer is its a negative cost where nuclear is cheaper than coal generated electricity. That could be the case in Australia if we wanted to remove the impediments to low cost nuclear.
The cost ot avoid emisisons with nuclear, at the high costs that would be the case under the prohibitively constrained situation likely in Australia given the impediments imposed by the anti-nukes, the cost would be about $22/tonne CO2 avoided. That is about 25% the avoidance cost with wind and 15% the avoidance cost with solar and geothermal.
So, if you get rational and leave your irrational anti-nuke phobia aside, the way ahead should be clear to all.
a few more well paid jobs for a few selected!
I wonder how many more senior Public Servants and people from the inner circle of Labor and the Greens will be rewarded with a few overpaid positions in these new bureaucracies?
So, Mr. Peter Lang
One word -
Fukushima
and can you tell us how much it would cost per tonne to save emissions from a nuclear power station?
Best Regards,
Brett
Carbon Tax
$23 per tonne carbon tax does not equal 1 tonne of emmissions abated. How many tonnes taxed at $23 per tonne will = 1 tonne of emissions abated? Then that is a comparable "cost" of the carbon tax.
Emissions avoidance cost with renewable energy
The Productivity Commission says it costs about $80/tonne to save emissions with wind power and about $150/tonne with solar. So why is the Green-Labor government mandating renewable energy. And why is Climate Spectator supporting such bad policy if it is genuinely interested in cutting emisisons?