One of the big concerns about Australia’s transition from a fixed price to an ETS in 2015 is how to manage the price difference between Australia’s proposed floor price ($15), and the international market (currently $10). The chances are that the international market will be closer to the floor come 2015, but that depends on so many different factors, but it’s interesting to note how they are coping in New Zealand.

The NZ scheme does not have a floor price, but it does have a differential with the international market. Right now, that premium is almost 10 per cent, with spot NZUs selling at $NZ13.60, a rise of over 5 per cent this week, and the international price at around $NZ11.80 Nigel Brunel, from OMFinancial Markets, sees this premium as a permanent feature given the oversupply of carbon within Europe and the reluctance of NZU holders to sell down at these levels. Other obligated parties have been happy to buy the cheaper offshore credits.

Brunel expects the EU carbon price to be under pressure for some time to come, as it buckles under the weight of the broader problems within Europe. He also has a wry take on Australia’s great moment this week: “Finally, Australia, the world’s biggest emitter per capita has a price on carbon. Congratulations and welcome to the carbon club. This is exciting news for the region as we will link with the Australian ETS when it comes into force after 2015.  Despite the “blood oath by Abbott”, there is more chance of Australia being hit by a meteorite than this carbon egg being unscrambled by the opposition should they win government in 2013.”

Blinkers and you'll miss it

One of the inside jokes at the AFR in the early 2000s (I used to work there), was that the paper managed to miss the first part of the resources boom because it didn’t have a mining writer. What’s the chance of missing the next big industrial revolution as well?

I nearly fell off my chair this morning when reading a story saying green energy subsidies had caused electricity prices to jump 50 per cent. Say what? Didn’t the Australian Energy Market Corporation this year say that the total cost of renewables energy schemes (federal and state) in the three years to 2013 would amount to between 2 and 6 per cent of the total electricity price? ...Oh I see, the source for the 50 per cent quote came from the Institute of Public Affairs.

The International Energy Agency also puts the cost of green subsidies in some perspective. Under its “new policies” scenario, it proposes that renewable energy subsidies around the world will total $180 billion a year (up to $250 billion) in its 450 scenario. It says this will have a minor impact on end-user electricity prices, and will range from 3 to 7 per cent in various regions. Fossil fuel subsidies currently account for $450 billion a year.

The IEA also dismissed another Furphy – the one that each megawatt hour of intermittent renewable energy requires an equivalent MWh of fossil fuel back up. The IEA says, at most, it would be on a one-for-five ratio, and less with larger and smarter grids. The experience in South Australia, where wind provides more than 20 per cent of energy, shows that hardly any back-up generation has been needed, and the use of peaking power plants has actually declined.

Eye poppers

Some other interesting facts from the IEA report:
 
– If Russia increased its energy efficiency in each sector to the levels of comparable OECD countries, it could save almost one-third of its annual primary energy use, an amount similar to the energy used in one year by the United Kingdom.
 
– If US consumers bought cars of the same size and weight that are driven in Europe, new vehicle fuel economy would improve by about 30 per cent per kilometre driven and total US oil demand would fall by 2.4 million barrels a day, or about $250 million a day, within about 15 years. Sadly, the IEA notes, vehicle size, comfort and status are important to US consumers. And they don’t seem to get fuel economy.
 
– The 100km long traffic jams in China are going to get worse. The IEA says vehicle sales in China will reach 50 million a year by 2035, and still the market will not be saturated, as the rate of ownership per 1000 people will be just 300 (up from just 30 now), compared to nearly 600 in Europe and more than 700 in the US.
 
New Frontier
 
Frontier Solar, the Brisbane-based local offshoot of a Chinese group, will become the first company to list on the newly created SIM-VE exchange. The prospectus for the solar mounting technology company with an established international client-base, will be unveiled next Tuesday. The technology is designed and manufactured by the parent company based in Shanghai.
 
SIM VSE (Venture stock exchange) is a newly established stock market that will focus on cleantech, renewable energy and related technology and service companies. It announced in June that Indigo Technologies, an Australian-based company specialising in providing sustainable air emissions solutions for clean coal combustion and industrial processes, had also applied for a listing.

Origin gets planting

Origin Energy is reported to have bought $30 million worth of carbon credits from a Australian forestry scheme this week, in what the Australian Financial Review says is the first deal of its kind since the Senate passed the government’s climate legislation on Tuesday.  The deal will see Australian offset supplier Carbon Conscious plant about 10 million trees in 2012, offsetting a small portion of the annual greenhouse gases generated by Origin. Origin has $163 million of options to buy carbon offset credits under the agreement, which can be exercised between 2013 and 2015.

Origin says the agreement with Carbon Conscious, which was established in 2009, “involves the large-scale planting of Mallee eucalypt trees on less viable agricultural land in the wheat-belt regions of Australia.” And Carbon Conscious chief Peter Balsarini told the paper the deal and future offset programs would become part of a multi-billion dollar industry that could attract overseas investment. Carbon Conscious has $45 million-worth of contracts with offset clients including Origin and BP Singapore, and its share price has more than tripled over the past 12 months to 39c.