TiP

On Valentine’s Day, while the ABC was querying the value of the Kevin Rudd-invented, Canberra-based Global Carbon Capture & Storage Institute, Barack Obama and China’s next president, Xi Jinping, were having a robust discussion on energy issues (among other things) at the White House which included at least one area of potential amity: how the two countries can work together on advancing CCS technology.

American commentators on the energy industry agree that the world is not going to achieve substantial advances in carbon capture and storage unless America and China can meld the long history of research on the topic in the US with the heavy investment the Chinese have been pursuing recently to drive down its costs.

The Chinese are now spending more than anyone on CCS. Projects costing $US1 billion to $2 billion are “just noise” in China, says one American proponent of CCS partnerships.

“US research could live off the table scraps” of what is being done in China – which, of course, has been attracting much more publicity because it is head-to-head with America over its subsidies of solar manufacturing and the way they are undercutting US plants and jobs.

The ABC’s focus on an essentially negative local story and the White House discussions on possible solutions underline the topsy-turvey nature of the CCS debate overseas and especially here in Australia..

Hated by the Greens, who have forced the federal government to keep CCS out of the $10 billion Clean Energy Finance Corporation legislation due to be debated in federal parliament sometime this year, the technology figures very prominently in the modelling released to promote the long-term “clean energy future” Julia Gillard, Wayne Swan and Greg Combet have been spruiking as part of their sales pitch for the incoming carbon price.

The Federal Treasury’s models assert that coal and gas generation using CCS could account for 40 per cent of the national generation mix by mid-century – but none at all by 2030.

This raises all sorts of questions about priorities.

Is it more important, for example, to pitch $1.5 billion at large-scale solar thermal, as the government is doing, rather than ramp up spending on CCS support when Team Gillard’s own modelling says the latter will be 10 times more important to mid-century power supply than the former?

The answer, of course, is all about politics and the art of survival by a minority government.

As an illustration of potentially how important CCS could be much sooner than 2050, I recently saw modelling by a leading consultancy – the material is not in the public arena – canvassing, among a range of scenarios, that, if the technology was viable, investors could install 10,000MW of new black coal plant and 4,000MW of baseload gas plant fitted with it in Queensland between 2020 and 2030.

With an additional interconnector of 1,500MW capacity between the State and New South Wales, the consultants said, these developments could enable the retirement of a substantial amount of old NSW coal power and meet a lot of the extra needs of the southern State as its demand grows.

(The Bureau of Resources & Energy Economics sees generation output in NSW rising from 75,000 gigawatt hours in 2008-09 to 96,000 GWh in 2019-20 and 110,000 GWh in 2034-35 versus Queensland production rising from 56,000 GWh in 2008-09 to 76,000 GWh in 2034-35.

(There is no law of nature, of course, that insists generation must take place in a State to meet its local demand. That’s a hangover from a century of State politicking. At what point does the federal government orchestrate a meeting of minds among State governments about the most efficient way to pursue supply, making the best use of transmission?)

I don’t mention the consultants’ views here as anything other than another example of why we should take CCS seriously and pursue its earliest possible commercial deployment – not through stand-alone Australian projects but in an internationally co-operative approach, which, of course, is what Kevin Rudd had in mind.

This is anything but easy, however.

As the Grattan Institute has observed in recent days, early-mover CCS projects here and elsewhere in the world have not advanced at the speed or scale envisaged at the time Rudd was putting the Global CCS Institute on to the world stage ahead of the much-hyped and failed Copenhagen climate change summit.

As the institute adds, integration of capture with transport and storage introduces a high degree of complexity for CCS projects.

The commercial business models for such integration has yet to be developed.

As it also says, insufficient information about global storage options for carbon dioxide is another important barrier – not least in NSW, I’d add.

However, the institute says the east of Australia is estimated to have aquifer storage capacity for carbon dioxide for 70 to 450 years at an injection rate of 200 million tonnes annually – while Western Australia has capacity for 1,000 years at an injection rate of 100Mt annually.

Like the Gillard government, the International Energy Agency sees a significant role for CCS, but this assumes the availability of commercial plants using the technology in the second half of this decade.

The agency says the next 10 years are “critical” for the future of CCS.

According to the Global CCS Institute, there are 74 large-scale projects at various stages of planning and implementation around the world, of which just eight are in operation.

There are a raft of factors impacting on this technology’s development – not the least of which is how politicians choose to play the energy game.

I thought the draft energy white paper, released by Martin Ferguson in mid-December, made a good point in saying that the pace and shape of Australia’s future electricity supply system will depend on the trajectory and predictability of carbon prices (here and overseas), gas prices, improvements in the costs and risks associated with new technologies and investor confidence.

The paper’s comment about the broad picture can be equally well applied to the specific carbon capture and storage situation: “Efforts by governments, the research community and business to accelerate commercialisation will play an important part in providing the market with earlier and lower-cost deployment options.”

The two Valentine’s Day events serve to remind us – via the ABC’s focus on the rather lame current approach to CCS here and the White House conversation about how the technology can be driven by big players in partnership – that there’s a lot to be gained if policymakers can get their act together.

The Gillard government’s problem is that its leader has it running in a three-legged race with the Greens, who have no interest in seeing CCS achieving the prominence the administration believes it should have down the track and on which it is basing a lot of its “clean energy future” selling proposition to voters.

The nation’s problem is that, given the opinion polls, there is every likelihood there will be a different federal government pursuing a “not invented here” agenda by the end of 2013, costing us another two years at least of focussed action.

Meanwhile the Rudd versus Gillard situation has reached such intensity in the past few weeks that I would not be surprised to see the Prime Minister call a leadership spill to “clear the air.”

Should she do so and lose, the national political outlook will twist again, creating even more uncertainty over carbon policies.

Where will it all end?

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