Sydney, Australia — The mountains that form Australia’s Great Dividing Range are one of the country’s best-known geographical features. But there’s another Great Divide in Australia — the issue of coal, carbon emissions and climate change.
The subject of climate change has had a low profile in many recent national elections — its urgency being displaced by issues such as employment and the global recession. But this year in Australia it played a keen role. And it is carbon policy that will be ultimately be mapping out the future for ongoing renewables development, not least by shifting the economic viability of Australia’s power-generating status quo — coal and natural gas — and by rendering renewables more competitive.
The vast landmass of Australia has a population of just over 22 million. That’s the same as the city of Beijing, or two-thirds of the population of California. Rich in natural reserves of minerals and fossil fuels, Australia is the world’s leading exporter of coal — much of which now goes to China.
But coal is much used at home as well. Australia relies heavily on it for its electric power, with black coal accounting for about 55% of power generation, and brown coal about 25%. Australia’s small population has a high per capita energy consumption, and some of the world’s highest per capita emissions of greenhouse gases, half of which come from the power sector.
As population and energy consumption rise, more coal-powered plants could be on their way. Greenpeace’s John Hepburn is reported as saying that a planned pipeline of 12 new coal plants, if they go ahead, would ‘increase the country’s emissions by 7%’. And a recent report claims that over the past five years, Australia’s four leading banks have invested over A$5 billion (US$4.9 billion) in coal mining, coal-fired power generation and coal export projects. While much of the rest of the world is facing up to an economic downturn, Australia’s economy is freeing itself of debt and, according to reports, could soon be growing at a rate of 10% thanks to its income from coal and iron ore exports. Kieran Davies, the chief economist at RBS Australia, was reported in the UK’s Guardian as saying the two exports now account for 7.5% of gross domestic product.
Hardly surprising then, that half the nation views coal as fundamental to the economic wellbeing of Australia, while the other half wants passionately both to cut emissions at home and to avoid becoming ‘a coal mine for China’.
Former Labor Prime Minister Kevin Rudd — deposed in June 2010 — came under attack from both sides: on one hand when he attempted to introduce a ‘supertax’ on mining profits in order to finance infrastructure developments, and on the other when he backed away from the introduction of a carbon trading scheme, fearing lack of Senate support. This had been a key policy on which he had sought election three years earlier.
Rudd’s successor Julia Gillard, the country’s first female Prime Minister, called an August election to seek a popular mandate. The result was a hung parliament, and almost three weeks of negotiations until she was able to form a government with the support of several independents and a single Green MP. Some commentators have since said the Labor party was being punished for its failure to introduce climate change legislation.
Meanwhile, the Green party’s share of the vote in the recent election doubled to 12%. In return for their support to form a government, the Greens demanded a cluster of concessions from Labor on carbon and renewable energy, the most significant of which is a commitment to creating a cross-party committee on climate change.
This new multi-party Climate Change Committee has now been formed and had its first meeting on 7 October, chaired by the new Prime Minister. Its task is to explore the best way to put a price on carbon, with options including an emissions trading scheme (ETS), a carbon tax, or perhaps a mixture of both.
The introduction of carbon pricing — whatever the mechanism may be — potentially makes a big difference to Australia’s entire energy future. Some mining and metal companies have called on the government to introduce a carbon tax rather than an ETS. As Australia works towards setting its long-term policy, and in doing so giving the market some certainty, investors remain unsure of which projects to back. Clarity ‘is what the investment community is looking for,’ according to Mark Twidell, executive director of the Australian Solar Institute.
‘At the moment it’s hard to roll over debt finance. And it’s quite hard to invest whatever your technology is — clean or dirty — when there’s this uncertainty about what the policy settings will be,’ said Twidell.
In September, Australia’s Clean Energy Council wrote an open letter of support for a price on carbon, signed by member companies including AGL, TRUenergy, Pacific Hydro, Conergy, Siemens, Suzlon, Vestas, Infigen, GE and RPG Australia. It read, in part: ‘Australians voted for a price on carbon at the election three years ago, and they are still waiting. Business accepts the need to act on climate change and wants certainty to invest in clean energy and create jobs.’
‘A price on carbon will drive the process of decarbonising Australia’s energy market and is the most prudent way for Australia to manage the risk of dangerous climate change,’ it continued.
Interestingly, in the days between the August election and the formation of a new federal government, the government of one of Australia’s states, or territories — the Australian Capital Territory, which is home to the country’s capital, Canberra, and could be thought of as Australia’s ‘DC’ — said it would introduce a climate change and greenhouse reduction bill that would set its own target of cutting its carbon emissions by 40% by 2020 from 1990 levels. The cut would rise to 80% by 2050, with the aim of the territory of nearly 400,000 people becoming carbon neutral by 2060.
‘Looking forward, the introduction of any form of carbon pricing, whether it is in the form of a carbon tax or a cap-and-trade scheme, is going to change the relative pricing of electricity… That means the cost of renewables versus the cost of conventional fossil fuel power is fundamentally going to flip in the next 5-10 years,’ David Scaysbrook of Capital Dynamics, told Reuters Global Climate and Alternative Energy summit in October.
While all this goes on, Australia has a fabulous solar resource, some excellent wind locations, and a history of off-grid and on-site renewable energy. And Australia’s renewables sector is already on the move, thanks to funding packages introduced by the Rudd administration and federal legislation introduced in 2009 and updated mid-2010. At state level, small-scale renewables are also being encouraged by a number of feed-in tariff structures.
The 2 GW Liddell coal/solar hybrid station in the Hunter Valley, New South Wales (Ausra)
Renewable Energy Target Gets on Track
Australia’s first nationwide mechanism to support renewable energy was introduced by the Howard administration back in 1997, and implemented under legislation in 2000—2001. The Mandatory Renewable Energy Target, or MRET, set out to create a market for renewable electricity by obliging wholesale purchasers of electricity and large users to purchase a certain amount per year. The mechanism included use of Renewable Energy Certificates, which could also be traded. The obligation grew yearly, by increments, with the end target of 9500 GWh of renewable electricity by 2010 — a modest figure, equal to only an additional 2% of electricity from renewable sources.
What’s more, the 9500 GWh target was achieved four years ahead of schedule, but by this time and following a review, the government had decided to cap the MRET, and resisted attempts to push through extensions to the scheme. To avoid a complete stalling of renewable development, a number of state governments, including South Australia, Victoria, Western Australia and New South Wales set renewable energy targets of their own.
So the introduction of the RET, or Renewable Energy Target, in August 2009 was a significant step forward. Like its precursor, it had targets rising by increments over a 10-year period. This time it was a much more significant 45,000 GWh to be delivered by renewables by 2020 — expected to be 20% of Australia’s electricity supply (up from a current level of about 5%).
Unfortunately, instead of coming on line, a pipeline of projects stalled, but what was the problem? Speaking in a recent interview, Damian Moyse of Australia’s Alternative Alternative Technology Association explained how this came about. The RET market works by having a fixed target each year — as with the MRET, electricity suppliers are obliged to buy a certain amount of renewables each year. Under the RET, all technologies, and all scales, qualified to create tradable certificates — large wind, wood waste, biogas, small PV, hot water — the whole range.
The problem that emerged during the second half of 2009 and first part of 2010 was that the uptake of certain technologies was, at the same time, being encouraged by other government funding measures — in particular solar hot water and small PV (and many states have some kind of feed-in tariff). The response was good, so the small solar sector experienced accelerated growth. The upshot was that some 80% of the RET target for 2009 was taken up by solar hot water, and a further 10% or so by PV.
This meant that the market was saturated with certificates, and the system offered slower-moving large scale wind or biogas projects the capacity only to supply the final 10%. With this oversupply of RECs, the price tumbled to well below A$30. This was well below the estimated A$50 needed for wind projects to obtain finance and to operate effectively, and consequently larger projects were not moving. A rapid review was needed, and in March the RET was reconfigured, with legislation passed in June. The revised system creates separate zones for large and small-scale renewables.
Now the Small Renewable Energy Scheme (SRES) and Large Renewable Energy Target (LRET) work in parallel. The large-scale market works much as the RET functioned before, with a target of 10,400 GWh by 2011, increasing gradually each year to 18,000 GWh by 2015 and 41,000 GWh by 2020 (total generation in Australia 2007—2008 was 228,600 GWh). Achieving the target will mean the addition of around 10 GW of new renewable energy capacity in the coming decade, with wind power likely to play a leading role.
The small-scale market is uncapped — any quantity of its certificates can be bought and sold alongside the large-scale ones. The certificates for small-scale are to be fixed at A$40, but the government has the power to adjust that price in the future. It is expected that small-scale will at very least make up the 4000 GWh gap between the original RET 2020 target and the current one for large-scale projects, and many anticipate that by 2020 a level of 22% is likely to be achieved, rather than the 20% target.
Early signs are that the new structure is working. ‘We are starting to see a pipeline of projects in the multi-megawatt range developing in solar, and renewed interest in investment in large-scale wind, and a buoyant residential sector for small-scale distributed generation — generally the market participants are all quite busy at the moment,’ said Twidell.
In a radio interview Moyse said: ‘One good thing about the RET is it allows government to control the end point – the target will be met. And if we get the target increased over coming years that will be met too.’
While the RET has its advantages, there are nonetheless calls for introduction of a feed-in tariff (FIT). Several states, or territories, have already introduced a FIT in some form. Those in Victoria, South Australia and Queensland are net FITs, which pay only for surplus electricity that is exported to the grid, rather than paying a gross FIT for the total produced. That makes revenue harder to anticipate and lengthens payback periods, but can encourage installation of larger systems.
In November 2009, Australia’s largest state, New South Wales, announced a gross FIT of A$0.60/kWh over seven years for systems up to 10 kWp. This tariff is approximately four times the rate that residential customers pay for electricity. Initially proposed was a net FIT that would have run for 20 years. In May, Western Australia introduced a residential net FIT for new and existing solar, small wind and small hydro systems, set at A$0.40/kWh, in addition to income from an existing scheme, the Renewable Energy Buyback Scheme. And at the moment, all these FITs work hand-in-hand with renewable energy certificates under the federal scheme.
But other groups, such as the Clean Energy Council, are pushing hard for a federal feed-in tariff. Green party senator and deputy leader Christine Milne put forward a bill in 2008 to introduce a federal, gross FIT for all renewables. It was supported in principle by a senate committee but failed to progress to fruition. Milne and others insist that the planned rate of growth for renewables in Australia is too slow, and remain adamant that only with a FIT will Australia be able to upscale at the right pace.
Australia’s total operational wind capacity at the end of 2009 was 1.712 GW, of which 406 MW was installed that year — a record year for new installations. By the middle of 2010 just one new wind farm had been commissioned — making for a total of 52 wind farms generating almost 2% of the country’s electricity consumption (5 TWh), though others are coming through the system now the RET is restructured. Currently over 7 GW of large-scale wind farm energy projects are proposed around the country, many of them having already received planning permission.
About 45% of the nation’s installed capacity, about 740 MW, is in South Australia, while Victoria has just over 200 MW installed. In early August, Western Australia announced the building of the state’s largest wind farm, the 206 MW Collgar Wind Farm, scheduled to operate by August 2011. It is estimated that this 111-turbine wind farm will prevent 1 million tonnes/year of greenhouse gas emissions.
Australia is no newcomer to PV — by the end of 2008 some 100 MW was installed and in 2009 the sector grew by over 350%. More than 56 MW of new grid-connected solar went on line in 2009 but the really important development is in off-grid installations at remote farms and off-grid homes, often supported by the Renewable Remote Power Generation programme.
It is estimated that 70% of Australia’s solar PV is still off-grid, even though the figure dropped significantly after support schemes for grid-connected systems started to take effect.
There have been some notable additions this year, such as Horizon Power’s 505 kW PV installation, based at two remote sites in Western Australia, which is now the largest tracker system in Australia and part of a hybrid solar-diesel power station completed at the beginning of August.
And in September, Verve Energy of Perth announced it would be partnering with BP Solar Pty Ltd on the construction of a 10 MW PV plant near Ellendale, also in Western Australia. Verve Energy will own the project and BP Solar will supply the technology and operate the plant. Verve says construction on the A$58 million plant may begin in March 2011, with completion expected by the end of the year. A Verve spokesman said the solar farm would be ‘the first step towards expanding Western Australia’s renewable energy away from the high reliance on wind farms’.
Solar Hot Water
Often heated by electricity, water heating accounts for a quarter of the energy used in the average Australian home and is responsible for 23% of total household greenhouse gas emissions, according to the country’s Clean Energy Council. Installing a solar water heating system can cut a typical home’s greenhouse gas emissions from water heating by between 60% and 90%. In 2008 about 600,000, or 7%, of Australian homes used solar, and this number has been growing rapidly thanks to the RET and other incentives. Australia has several well established solar thermal system manufacturers.
Concentrating Solar Thermal Power
One of the big names in solar thermal power, Ausra, has its origins in Australia. Founded by Dr David Mills, formerly of the University of New South Wales, Ausra was recently acquired by Areva. In spite of its technological innovation, Australia has only a very small number of working solar thermal power systems, the largest being the Liddell Power station. Liddell is operated by Australia’s largest energy utility company, Macquarie Generation, and is the world’s first solar-augmented coal fired power station or ‘booster’ power energy facility, initially as a demonstration plant of 1.5 MW.
Many companies, such as Acciona Energy Oceania, Transfield, Parsons Brinckerhoff, WorleyParsons and Wind Prospect CWP are believed to be evaluating much larger systems (150—250 MW) in Australia, and the commercial deployment of large-scale solar power generation could play a significant role in the nation’s renewable energy mix.
Though only one plant is currently in operation, nearly 50 firms are working on geothermal exploration in Australia and several of these expect hot rock geothermal generators to be producing power within the next two to five years. According to the Clean Energy Council, about A$1.5 billion worth of exploration work is in progress in four main areas of Australia: the Cooper/Eromanga Basin in South Australia; the Hunter Valley near Newcastle; Otway Basin in Victoria; and Tasmania.
Australia has well-developed hydro schemes (and 100 hydro stations) in several regions — particularly Tasmania and New South Wales’ Snowy Mountains Scheme — with a combined capacity of 8.3 GW. The small hydro sector still has opportunity for development however, and the Clean Energy Council wants to see a market mechanism to ensure its further roll out.
There is resistance to the use of large-scale forest bioenergy, due to the need to protect Australia’s indigenous forests. But its sugar-cane industry has been producing heat and power from bagasse for over 100 years. The installed capacity for the bioenergy sector in Australia amounts to around 767 MW, according to the Clean Energy Council. There are also some biogas plants in operation on pig, chicken and dairy farms, and for anaerobic digestion of wastewater sludge.
Jackie Jones is consulting editor to Renewable Energy World.
Sidebar: The Australian Solar Institute and Renewable Australia
Renewable Australia and the Australian Solar Institute (ASI) are government-funded initiatives set up as part of the government’s Clean Energy Initiative to foster the development and commercialisation of Australian technologies.
ASI investment money, which comes from the Federal government, is to be used to leverage industrial investment, whether it be international or local, and research investment, international or local, into Australia-based research activity.
Mark Twidell describes the focus as being on research that can be applied commercially — technologies need to show cost reduction and increased efficiency in generation. They should also help tackle some of the barriers that are currently preventing solar technologies from being deployed without specific incentives. Australian universities and their commercial offshoots are well regarded outside Australia. The group run by Professor Martin Green at the University of New South Wales is a notable example.