The ABC’s “7.30 Report” of all programs has run a segment querying whether the Gillard government’s $10 billion Clean Energy Finance Corporation is worthwhile or “just a half-baked scheme.”
Some will see the debate as moot because Tony Abbott and the Liberal/National federal coalition have every intention of killing the CEFC when (as seems increasingly likely, viewing the opinion polls) they seize power some time in 2013.
For the moment the debate about the CEFC is veering all over the political paddock, engaging some strange grazers as it goes.
One such is New South Wales Premier Barry O’Farrell, who was delighted to welcome Julia Gillard’s announcement that the CEFC’s offices will be in Sydney.
O’Farrell was promptly branded a hypocrite by the State Labor Party, who pointed out, not unreasonably, that he is committed to seeing the “clean energy future” package crushed under an Abbott government.
Former federal Liberal finance minister Nick Minchin came to the rescue with the quirky observation that, if the Gillard government wanted to waste taxpayers’ money, O’Farrell was wise to allow them to waste it in Sydney!
The national mining industry is on the other side of the fence.
In a joint submission to Martin Ferguson on the draft energy white paper, a coalition of nine national and State industry associations, including the Minerals Council of Australia, the Australian Coal Association and the Australian Uranium Council, has called on the federal government to “reconsider” the CEFC, pointing out that its establishment contradicts the principle that energy investments should be made on a technology neutral basis.
The group want the renewable energy target “reconsidered” as well, but this, of course, is a policy to which the Coalition is as committed as the government.
Meanwhile the Clean Energy Council, which has yet to appoint a new chief executive following Matthew Warren’s move to the Energy Supply Association, where he has been since 16 January, insists that the CEFC “makes good sense” and says the Australian finance sector agrees the corporation “can be a catalyst to give renewable technologies the leg-up they need.”
This is in addition to the leg-up provided by the carbon price and a mandatory sourcing requirement for renewables in 2020 (and on to 2030) of a fifth of power consumption plus the “solar flagships” program and so forth.
The CEC claims the corporation “can drive some $30 billion in to clean energy investment over the next decade” and asserts that “no new energy technology has ever been developed (here) without the support of governments.”
This, of course, is a complete misunderstanding of the past.
The technology used here in coal-fired plants and hydro-electric projects over 50 years was not developed by our governments, but by international engineering companies – and the renewable generation that is being pursued here (eg wind farms) is being built under the umbrella of the RET by the private sector and not with “government-supported” technology.
The main thing holding up the bigger roll-out of wind is not a lack of investment funds but the fact that the federal government’s small-scale RET (for solar PVs) has glutted the REC market until 2014.
And, if we take the CEFC rationale at its face value, one of its biggest flaws is the fact that Julia Gillard caved in to the Greens and excluded support for local demonstration of carbon capture and sequestration technology from its purview.
Given that the 2050 “clean energy future” Gillard has been spruiking requires between a quarter and a third of mid-century generation output to be coal-fired and gas-fired using CCS, this is quirky too, to put it mildly.
The cave-in to the Greens sits oddly with the advice her government has just received advice from CSIRO that research the agency has undertaken at Munmorah (NSW) and Tarong (Queensland) power stations demonstrates that CCS technically could capture more than 85 per cent of carbon dioxide emissions from coal plants.
(Abbott incidentally was down in the Latrobe Valley in the last days of March vowing that his government would not close down its brown coal power stations and being just a little delphic when asked by local journalists if he would commit significant funds to support CCS development. “Certainly in government we were committed to clean coal technologies,” he said, pointing to “Bob Brown’s bank” excluding them.)
The federal government might like to cast an eye over the EU attempt to boost Europe’s wave and tidal power technologies. The politicians there have an ambition for $US11.3 billion worth of investment and 3,600 MW of capacity by 2020.
The technologies, to quote Britain’s Carbon Trust, “need government financing help to reach commercial scale and then subsidies to grow to be cost efficient.”
Now the Trust is conceding that, at most, because of pressures on Europe’s government and investor budgets as a result of the GFC and development costs that are far higher than initial optimistic predictions, wave and tidal generation will be lucky to reach a few hundred megawatts at the end of the decade.
The Trust says that wave energy needs more than four times as much income per unit of energy than nuclear or offshore wind generation to break even and tidal energy about three times as much.
One of the biggest targets for the technologies is Portugal – but they would need about $US4 billion to $US5 billion in subsidies by Lisbon to achieve 3,000 MW of capacity by 2020. The cash-strapped Portuguese are in no position to oblige.
Meanwhile, the cost to British consumers of the subsidy for renewable energy has doubled in five years and the (additional) feed-in tariff costs will treble in the next three years. The number of British customers having trouble paying their power bills has trebled in recent years, too.
Perhaps most seriously in the longer term for the EU, the huge splurge on subsidised renewable energy is shrinking the contestable wholesale power market and with it the incentive for investors to build gas power with its uncertain returns rather than just ride along on the gravy train.
The implications for consumer power bills down the track are not minor.
A further very interesting statistic (to me) is an estimate by the European Network of Transmission System Operators that $US137 billion will be needed to add 48,000 kilometres of high-voltage lines to meet the EU target for 20 per cent renewable energy in 2020.
Here in Australia we now have a number of independent reports castigating governments for embarking on energy schemes in pursuit of green votes without adequate cost-benefit analysis or exit strategies for situations that go bad (like the NSW “solar bonus scheme”.)
As the surprisingly acerbic ABC “7.30 Report” feature (the transcript is up on their website under the heading “Clean energy finance faces a murky future”)
comments, the “hastily hatched” Clean Energy Finance Corporation has yet to demonstrate whether it is “a recipe for success or just a half-baked scheme.”
Greg Combet wouldn’t come on air to discuss the issue but volunteered through one of his staff that the CEFC will “maximise the long-term benefits of a clean energy economy, overcome market failures and drive innovation.”