TiP

Burrowing in to the “clean energy future” (CEF) spin from the federal government, something is becoming clear: it has adopted a view of future electricity demand that is at variance with conventional wisdom.

The government’s 2050 boasts rely on (a) world action to achieve a 550ppm atmospheric target, (b) carbon price-based policy domestically, starting with a $23 charge, but what it would be under emissions trading anyone’s guess, (c) local renewable energy development, notably in geothermal power, to deliver 40 per cent of generation and (d) reliance for 60 per cent of mid-century power delivery on carbon capture and storage for (mostly) gas and coal plants because it eschews nuclear power.

Most of our fellow citizens suffer an attack of MEGO – my eyes glaze over – three minutes in to the debate among policy wonks, engineering types and green goblins as to how to bring about this brave new world, but the issue is important.

Lower the horizon from 2050 to 2030 – not that this will cure Australia-wide MEGO – and one can still see many elephants crowding in to the CEF room.

Opinions of which technologies will make a significant contribution to electricity generation in 2050 are just that – opinions – unless, of course, you are a government set on mandating handcuffs for the market to ensure that your guesses are made reality. And which future governments can overturn.

On the other hand, a mindset that the long-term trend for our society to need more electricity will be, more or less, reversed is a crucial perspective that needs to be challenged. It could lead to really serious errors of judgement.

This outlook relies on carbon policy to drive down electricity consumption by mid-century so that it is no higher than present trends indicate for 2030, the medium term in this context.

How this would work with a low emission trading price is for government economists to explain.

To understand where domestic power consumption may go, you need to understand demand today.

Currently 52 per cent of the electricity consumed in Australia is used by households (28 per cent) and commerce (which includes hospitals, education institutions, shopping malls and other retail outlets and office blocks).

The logical starting point is the hard work ABARES and Geoscience Australia put in to producing the current national energy resource assessment, published 15 months ago, and essentially being ignored by the Prime Minister as she pursues her CEF propaganda.

The assessment (NERA) picked 366,000 gigawatt hours as the likely level of 2030 national electricity demand.

To appreciate this number, you have to know that the current level is 220,000 GWh a year and, until the enlarged renewable energy target and Kevin Rudd’s CPRS came along, ABARES was forecasting that demand would rise to 406,000 GWh by 2030.

In other words, under NERA terms, the Rudd policies would deliver a reduction in demand roughly equal to removing today’s consumption in Victoria from the mix. A big assumption in itself.

Via the modelling issued by Federal Treasury in early August, it now appears that the Prime Minister and some others in government believe 2030 electricity demand will be around the 280,000 GWh level – and this will lead to mid-century demand around 400,000 GWh a year instead of the 550,000 GWh that is conventional wisdom.

This ignores the industry projection that we are likely to be at 275,000 GWh in 2020. In effect, the Gillard approach assumes a reduction in 2030 demand amounting to scrubbing New South Wales (at today’s demand levels) from the generation mix.

To demonstrate how ambitious this is let me assume that we will have 12 million householders in 2030 instead of 10 million today and their power use stays at 8MWh a year on average – which it won’t if we all driving electric cars by then and if we have all air-conditioned our homes to deal with the warming trend.

Sticking to the current residential average would give us a 2030 household demand of 96,000 GWh a year compared with 60,000 GWh today.

As we are assured by the government that we have nothing to fear about the economic impact of its carbon policies, if we assume this 2030 residential demand level still represents 28 per cent of the total, residential plus commercial plus industrial consumption could be around 342,000 GWh.

This is not much different to what the NERA says – but well north of the Nirvana scenario in the new Treasury modelling.

The government’s present policy is to have the RET deliver 20 per cent of consumption in 2030, so it follows that, even under the official, much-reduced outlook to 2050, green energy output under CEF will have to more than double in the Thirties and Forties. Under a higher demand outcome, it would have to treble.

Bear in mind that the RET should have vanished from the scene by 2030 because of an ever-growing carbon price. It won’t. Vested interests will see to that. But it should, the economists say.

The long and the short of all this is that the government is playing with a set of consumption numbers that are “courageous.” As in “Yes Prime Minister.”

The opinion polls show that most Australians are not buying the policy that flows from such assumptions – but that doesn’t mean we won’t get it.

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