A bit of a change of pace in today’s post – and a quick look at some recent energy news coming out of Australia. Possibly a bit wonky for some, but hopefully I can shed some light on what can sometimes seem like an overly complicated industry and some important recent developments.
Over the past six months, there has been some incredibly positive news coming out of the global renewable energy industry. China is investing millions in solar energy, with 3.3GW installed already this year, and are on track to install a total of 13GW in 2014. Advances in wave and tidal systems are progressing in Scotland. Tesla Motors are moving forward with plans for the Gigafactory, which will both improve and streamline the company’s battery production for their electric vehicles, but also assist with CEO Elon Musk’s vision to provide cheaper batteries to SolarCity for use in home energy systems.
While all this is going on, Australia, (which is blessed with the highest average solar irradiation of any country in the world, along with massive areas of empty land which could easily be tapped into for utility size solar installations) are going backwards on renewable energy – filling the coffers of the big coal and gas companies as it does so.
The Coalition, led by conservative Prime Minister Tony Abbott, recently repealed the Federal carbon tax, which was put in place by Julia Gillard and the previous Government. This operated by taxing the nations biggest carbon generators based on the volume of their emissions, and then using the revenues from the scheme to fund various clean energy schemes and projects.
Most recently, under the supervision of self-professed climate skeptic (and former Chairman of Caltex Australia) Dick Warburton, a review of the Renewable Energy Target (RET) was instigated. This RET, initiated in 2001 and expanded in 2009, called for 20% of energy generation in Australia to be produced by renewables by 2020. At the time, models calculated this to be equivalent to 41,000GWh a year, which was the target set.
A quick note to non engineers out there – since I’m using some technical terms that to me are second nature, but aren’t always the easiest to understand. There are two important terms that I’ll use a lot in this post, energy and power. Energy is traditionally measured in Joules (‘J’), and power in Watts (‘W’). Power is the rate of energy generation or consumption – and one Watt corresponds to a rate of one Joule per second. Your desktop computer consumes approximately 150W when in use, an average home solar installation has a peak power output of 2.5kW (2500W) and a hydro generator may have an output of 1MW (1000kW) or larger. Although the common symbol of energy is the Joule, in the energy industry, the kilowatt-hour (kWh) is conventionally used instead. Although this may seem initially confusing, it’s for a couple of reasons. Firstly, this prevents the need for frequent conversions – one kWh is equal to one hour of operation of an appliance that consumes 1kW, or five hours of a 200W generator running flat-out. The second reason is that the Joule is actually a relatively small quantity, so by using a kWh (which corresponds to 3.6MJ) it means we don’t have to deal with huge values all the time which is confusing and difficult for us simple-minded engineers!
To expand on that slightly, a hydro generator which can generate energy at a rate of 500kW and runs for 24hrs a day, 365 days a year, will produce 12000kWh of energy a day, and therefore 4380MWh a year.
But back to Australia. The RET was put in place to foster a renewables industry capable of providing those 41,000GWh of electricity by 2020. The various electricity distributors were legally obligated to assist in meeting those targets. How this worked is a little bit complicated. Basically, any renewable energy installation would be eligible to create Renewable Energy Certificates (RECs) which could then be sold to the generators at a market driven price. Because the generators were obligated to sell set numbers of these RECs to a government arm called the Clean Energy Regulator each year (these numbers changed each year depending on how progress was being made towards the 41,000GWh goal), a market was thereby ‘created’ for them – and the company constructing the wind farm or the solar array could be confident of a significant injection of money into their projects when they completed the installation and began producing power.
The catch came once the current government were elected last year. After the carbon tax repeal, there was still pressure from the major coal and gas companies within the country to help protect their interests and investments. Since (as I’ve mentioned in previous posts) there are significant changes beginning to occur within the utility sector, the move towards distributed generation, small-scale solar and the rise of renewables is not something that many of these utilities want to see. They’ve paid for large, centralised networks and built expensive coal-fired power plants which they want to make the most of – that’s where their profits lie and that’s their traditional model of operation… Why change?
So – the RET was next in the firing line. The tactic that’s been used was this. Due to investment in energy efficiency as well as some broader demographic shifts (including rooftop solar installations), the rate of increase in electricity demand in Australia is actually declining. Models now predict that by 2020, if the RET was enforced, then the 41,000GWh target would actually be more than 20% of total demand. This, coupled with the incorrect claim that the investment in renewables would significantly increase household bills in the long run (this has been debunked – it’s actually quite the opposite) led the Coalition to initiate a review of the RET. The man they chose to head this review committee was Dick Warburton, who has publicly stated his personal doubts that the burning of fossil fuels contributes significantly to global warming.
His team consisted of Matt Zema, the CEO of the Australian Energy Market Operator, Shirley In’t Veld, the former head of WA government-owned generation company Verve Energy, and Brian Fisher, the former long-term head of ABARE who has some pretty hard-line views about climate change and renewables.
One of their first moves was to make the modelling assumption that there would be no increases in gas or coal prices in the next twenty years – which is so unrealistic and biased that the review immediately lost all credibility in the eyes of many independent observers.
Now, it doesn’t take a rocket scientist to see where this was headed. The Committee has just released their report, which calls for the RET to be significantly lowered or potentially scrapped altogether. This has resulted in an outcry from the Australian renewables industry and predictions that many will lose their clean energy related jobs, along with the very real chance that Australians may see rising bills over the next ten years as a direct result of these recommendations.
It also provides a massive boost to the coal industry. Coal already provides a whopping 75% of Australia’s power, but without the RET, the coal and gas industries could see another 10billion dollars flow into their pockets over the next 15 years.
In my book, this is typical of the short-term, money influenced thinking that we can’t afford right now. Australia is full of smart, innovative people, and it has renewable resources that many countries would dream of, but decisions like this, and the general trajectory that Tony Abbott is taking with his energy policy, are taking the country backwards when it comes to renewables.
On the bright side, the market is very much in favour of the new – and as the price of solar PV rapidly drops, along with advances in energy storage and all the other exciting developments that are happening around the world, then we will begin to see major uptake of distributed generation and renewables whether the Australian power industry likes it or not. It’s sad to see that instead of being a world leader on this incredibly important topic, Australia has decided that the best course of action is to recarbonise their energy mix, pollute the atmosphere, and affect thousands of clean energy jobs in the process.
ps. If you’re interested, there’s some great articles on this topic below, including a great interview with Miles George, Chairman of the Clean Energy Council in Australia, who is seriously heavy hitting about the review process and the resulting recommendations.