Archive for May, 2013
The coal seam gas industry has received some down-to-earth advice as the APPEA Conference starts to wind up in Brisbane after four days in which there has been an understandable amount of handwringing about the “social contract.”
John Cotter, who chairs the GasFields Commission set up by the Queensland government a year ago to be the “honest broker” between the CSG industry and the community, told delegates that business needs to engage more meaningfully with everyday consumers.
“Perceptions of the industry don’t rate too favourably in conversations between family and friends around the barbeque,” Cotter said. “It provides 95 per cent of domestic gas needs in south-east Queensland, for example, but private polling shows a large majority of consumers there have little empathy with CSG suppliers or understanding or trust.”
He is urging the industry in Queensland and more nationally to establish a “credible, ongoing, two-way conversation” about the gas they use.
This is not about “shoving messages down people’s throats,” but about having “an interesting and engaging two-way conversation.”
Agriculture and the food industry face the same barbeque test, he pointed out, but farmers and the CSG people have to find a way to co-exist because the former takes up 83 per cent of the State’s land area and the resource companies want to exploit the s reserves under this ground.
The sheer pace and scale of the current, export-driven onshore gas boom, he adds, makes it the largest industrial development ever to hit the Bush and affected landowners have found it very challenging and time-consuming.
A priority for the commission is to make negotiations less stressful for farmers — and another is to encourage and foster better research on CSG impacts and sharing of the information created.
Cotter gave an interesting example of how benefits can flow to the Bush community from the advent of CSG industry providing governments can get their act together.
Areas that have suffered black spots and poor or non-existent telecommunications for mobile phones and the Internet are now seeing new towers being constructed for the use of the industry.
CSG companies are investing $100 million in telecom infrastructure in south-west Queensland alone, Cotter said.
“However,” he went on, “what frustrates me and the people living out there is why this very welcome investment is not being piggy-backed or co-ordinated to enhance telecommunications for the regional communities.”
Cotter, who is also a grazier, notes that the new communications systems can offer benefits to local communities, including improved online education for children and and a useful service for the thousands of “grey nomads” who travel through these areas each year.
It seems to me that Cotter has a salutary message for the embattled coal seam gas fraternity as a whole and not least in New South Wales.
As does the Queensland Deputy Premier Jeff Seeney, who spoke ahead of Cotter, and declared his government is committed to finding solutions based on the best available information and then making difficult decisions that are right for the future of the State notwithstanding “emotive, philosophically-driven, scare campaigns.”
The flip side, Seeney told the industry, is that “you have to achieve world’s best practice — and we will accept nothing less.”
New South Wales Energy Minister Chris Hartcher came to the APPEA conference in Brisbane today (Tuesday, 28 May) to eyeball some of his most trenchant critics on the O’Farrell government’s handling of the coal seam gas issue and departed again leaving them feeling roughly equal measures of sympathy and frustration, I suspect.
What he did not do is take to opportunity to tell 3,470 delegates (the latest tally) how the State government plans to create an environment to avoid a potentially serious supply problem later this decade. (Discussions I have had at APPEA this week suggest that, apart from expectations of much higher gas prices on the east coast, NSW could be confronted somewhere around 2017-18 with an actual shortage of the fuel under certain circumstances.)
The latter point relates to the fact that time is a huge issue in the upstream petroleum business, as much as costs and risks.
Supposing the State government can enable coal seam gas development within its borders, how long will it take companies to commission projects?
Supposing that it could be four or five years, firing the new project starting gun in, say, 2014, could lead to a “damned near-run thing,” as the Duke of Wellington described the outcome of the battle of Waterloo.
Moreover, the impact of such a situation could well be felt quite some time before the gap period as large-scale users start to escape to less stressful locales.
Hence the sense of frustration in Hartcher’s audience.
It would be interesting to know what many of them were thinking when he declared “We believe we are working hard towards meeting NSW needs.”
Well, a number of listeners said to me after he spoke — the APPEA exhibition, with 200 corporate exhibitors over 12,000 squares metres of space is a helluva arena for conversations — that he had made a reasonable case for the O’Farrell government being something of a victim, too.
Hartcher told delegates that the Coalition inherited a lot of baggage from the defenestrated Labor regime.
There is “an enormous lack of confidence” about government processess in NSW today as a result of community experience with the final several years of Labor, he said, not least because of the stench of corruption, an area constantly in the community’s view at present as past behaviour is forensically and publicly examined.
There is also a continuing community backlash to what he sees as Labor giving the early CSG exploiters an “open go” and the feeling that some companies “took communities for a ride.”
Achieving better understanding now, he complained, is not helped by the past failure of the industry to engage in effective debate with concerned communities, especially where CSG developments are proposed for prime farming land.
Not least, he added, there is the ongoing activity of diehard campaigners against fossil fuels — people whose mindset allows no common ground to be found in debate and who simply ignore studies that don’t fit their view of the world.
The media, he said, often don’t help, complaining in particular about the ABC Television “Four Corners” report on CSG that he sees as “unfair and biased” — as does the federal Coalition energy spokesman, Ian Macfarlane, whose trenchant views yesterday about the limitations of the O’Farrell government’s handling of the issue gained rather a lot of newspaper attention this morning.
Hartcher was also preceded yesterday by federal Resources & Energy Minister Gary Gray, who, as I predicted in an earlier post on this site, used the APPEA conference to announce a new study of the east coast gas market (in a media statement headlined “Lifting the lid on Australia’s gas markets.”)
Gray said the review would be undertaken by the Bureau of Resources & Energy Economics, which has been told to report by the year’s end.
He listed the downside issues for consideration — uncertainty in the timing of production,increasing exposure to international competition and concerns about the availability and cost of gas for domestic users — and said the study was also being asked to focus on how Australia could take advantage of the available opportunities.
The risk for Hartcher and O’Farrell inherent in the BREE study is that it may well shine a spotlight on the NSW gas situation — how could it not do so? — and ratchet up the pressure in a key period before it again faces the electorate in March 2015.
Gray also used the conference, although not his speech, to give Christine Milne and the Greens both barrels over their “absurd” federal election pose calling for a blanket ban on all new CSG projects.
“It would be silly and counter-productive,” Gray told the five dozen journalists following the APPEA conference, “to price our clean gas out of the market by embracing green tape and pursuing wrong priorities and bans on exploration and production.”
True of more than the Greens, don’t you think?
If you want to get to the heart of the energy ailment of New South Wales, you need go no further than to read the article EnergyQuest chief executive Graeme Bethune has contributed to the special report on “Australia’s energy future,” published in the “Australian Financial Review” today (Monday, 27 May).
The whole special report is a credit to “The Fin” in providing focus on LNG and domestic gas issues for Australia, especially in an edition of the paper that has a high level of coverage of the Australian Petroleum Production & Exploration Association annual conference.
But it is Bethune’s commentary that will clench stomach muscles in the cabinet of Premier Barry O’Farrell, whose Energy Minister, Chris Hartcher,gets to address the conference (which has attracted 3,400 delegates after a last-minute rush to attend) on Tuesday.
Peeled down to basics, Bethune’s diagnosis is that NSW can produce up to 140 petajoules a year from its coal seam gas resources if it can overcome the current hiatus in exploitation — but, if efforts to reach an understanding on the triangle that is gas producers, government and rural communities are unsuccessful, then it may only be able to produce around 600 PJ over the next two decades, far short of its needs.
I don’t include the environmental movement in this triangle of resolution because nothing will persuade the green side of the equation to agree to CSG development. The more the activists are criticised — and Nikki Williams, CEO of the Australian Coal Association, had a red-hot go at them at a Sydney Institute forum last week — the more intransigent they become.
Up until now the O’Farrell government, apart from shifting the goal posts on the regulatory field only weeks after announcing a new approach, and without any consultation the second time round, has been pushing the line that the issue needs to be resolved by the gas people — it is their “social licence” to operate that is at stake.
This, however, is true only up to a point. APPEA members with NSW interests certainly have the job in front of them still to reach a rapprochement with the NSW rural and regional community, but, at the end of the day, the responsibility for ensuring the energy needs of the State are met falls to government.
The Bethune perspective is a bugle call to Premier O’Farrell and his ministers.
Significant stuff-ups in energy supply cannot be fixed overnight.
Ask the Californians, who are still wrestling a decade later with the fall-out of their turn-of-the-century electricity crisis.
Remember the awful problems in NSW itself at the end of the 1970s when Labor’s Neville Wran, inheriting a power generation mess from a dilatory Liberal government, so over-invested that the generation issues he created linger in the “NEM” to this day.
Bethune’s view is that, contrary to the optimism that was being expressed only four years ago at APPEA’s 50th conference, also in Brisbane, the domestic outlook for gas is for a fall in demand of as much as 15 per cent by 2020 (not least because a fleet of base load gas generators will now not be built) while wholesale costs are likely to push towards $9 per gigajoule (where they are $5 on average today).
This has implications for the east coast as a whole, but especially so for NSW, where there are more than a million gas customers and more than 450 large businesses using the fuel.
On Bethune’s numbers, gas production in NSW could reach 140 PJ if the supply situation is properly managed and governed but, on the present outlook, is more likely to sit at about 30 PJ annually, an economically disastrous outlook when one considers that the supplies from interstate on which NSW has relied for 95 per cent of its needs over a quarter century will be not available.
There is an expectation at the APPEA conference that the new federal government Energy Minister, Gary Gray, will announce a study of the east coast gas market when he speaks today (Monday). Bluntly, this is an election-year sop to Cerberus and can’t provide a timely response to a major problem that is already on the doorstep in NSW.
The O’Farrell government needs to take charge of this issue, needs to convene a dialogue with the other arms of the triangle (rural communities and the gas producers) as a priority and needs to drive a workable outcome in the interest of the State’s consumers and, not in a small way,in the national interest because of NSW’s role as the largest sub-economy in the country.
In the speech he will deliver to the APPEA conference today, David Knox, CEO of Santos and chairman of the association, will say that Australia cannot let the future of the gas industry be “captured by the extreme.”
For NSW, the point is that the O’Farrell government cannot let the energy supply future of the State be “captured by the extreme.”
The risk of this happening is now far too close for comfort.
As more than 3,100 delegates from 850 companies plus 100 speakers and 200 exhibitors gather in Brisbane for the 2013 annual conference of the Australian Petroleum Production & Exploration Association,which kicks off in Brisbane’s Convention Centre with a giant party on Sunday night and formally on Monday with presentations from the industry, the International Energy Agency’s Fatih Birol, federal Energy Minister Gary Gray and his Coalition opponent, Ian Macfarlane, the focus will be on gas, gas and gas — but it’s possible that oil may get a mention somewhere.
This is such a far cry from the 11 APPEA conferences during my 1980s term as the association’s CEO — then debate was about oil, tax,tax and oil, with the gas industry lucky if it got a word in edgewise.
The emergence of Australia as an exporter of LNG changed all this, of course, and even more so when we embarked on the coal seam gas revolution — and now we have the industry and east coast governments struggling to deal with the counter-revolution from concerned rural communities and environmental radicals on the make in their world war against the fossil fuels industry.
APPEA has always been careful to include State and Northern Territory leaders and energy ministers as speakers as it shifts the conference around the nation’s capitals — this year’s conference will feature Queensland Deputy Premier Jeff Seeney — but it is not usual for a minister from another State to also be a speaker; this year, however, the plenary sessions’ agenda includes Chris Hartcher from New South Wales for the very good reasons that (a) his State is between a rock and hard place over gas supply and (b) his government has not endeared itself to the petroleum industry with regulatory hops, skips and jumps in recent times.
The consequences for NSW, and by extension for the national economy, of the State’s gas supply situation going pear shaped are not minor and the industry from its opening go — a keynote address by the APPEA chairman David Knox (CEO of Santos) on Monday morning — will include a lot of attention to the hurdles in the way of salvation for the area that used to dub itself “the premier State.”
Altogether, there will be a lot that will be said at APPEA 2013 about coal seam gas, a lot more about the issues confronting the LNG industry, which sees some bothersome clouds over its sunlit uplands, and more than a bit about the prospects for exploitation of shale deposits.
None of this is surprising — the many billions of dollars, tens of thousands of jobs and the economic consequences at stake are mind-stretching — but somewhere long the line I expect to hear at least some comment about the fact that, as the Australian dollar falls from its giddy heights of the past 2-3 years towards (perhaps) 75 cents American again, the cost of bringing transport fuels once more needs attention.
Martin Ferguson told the 50th APPEA Conference in Brisbane four years ago that Australia faced a transport fuel import bill pushing towards $30 billion a year by the second half of this decade (up from about $12 billion in 2008) and then the point was lost in the $Oz climbing way above parity with the $Yank.
According to APPEA’s federal Budget submission, the most recent annual deficit was $10 billion — demand here has fallen since 2010 in another manifestation of the impacts of the global financial crisis — but the association warns that the figure could be $25 billion in 2020. I must remember to ask this week what exchange rate was used to reach this number.
I can’t see Gary Gray harping on this issue on Monday, but the cost of importing some 30 gigalitres of crude oil and other refinery feedstock — even balanced by liquid fuel exports of 17.5 gigalitres (it makes far more sense to export condensate from remote gas fields than to process it here) — must be exercising some back room attention in Canberra and the future cost of importing a lot more surely can’t be being ignored.
There are many factors that contribute to this situation — and the Greens, no doubt, will hop in and argue for a wholesale shift to electric vehicles (fuelled by wind, solar, wave and geothermal power, of course) — and APPEA can be relied on to enumerate them more than once over the next 3-4 days.
On the morning after two days of the “Power Pricing 2013″ I have a kaleidoscope of thoughts about what emerged from a strong agenda focussed on the key facets of electricity supply as we look towards a seminal election in September and a year of change beyond it.
In terms of high politics,the strongest points to emerge came via Coalition resources and energy spokesman Ian Macfarlane, who laid out the plan for scrapping the carbon price legislation and reviewing the renewable energy target.
Macfarlane, who will be a centre of attention in Brisbane on Monday morning when he appears on the APPEA conference platform head-to-head with federal Minister for Resources & Energy, Gary Gray, said legislation to effect the change will be put to the Senate by October and a Coalition government will pursue its resolution by Christmas.
While the media attention is on the prospects for a double dissolution if the Senate baulks at repealing the carbon price, Macfarlane said he expected the ALP under new leadership — which he added in an aside Bill Shorten wouldn’t want if faced with a mountainous deficit of seats — will “roll over.”
Now he would say that, wouldn’t he, but it is a fact that, apart from huge task of lifting Labor off its knees if the election delivers the massive defeat the polls predict, the next ALP leader (Greg Combet suggests Macfarlane) will be under immediate pressure to acknowledge the “will of the people.”
Macfarlane said he expects the legislative process to set the scene for a double dissolution in the event that the Senate baulks the recision legislation could be completed by next April.
On the renewable energy target, Macfarlane said the Coalition could start a new review immediately after taking office. A question for the supply industry, he added, is “how fast do you want it?”
In the strongest hint yet of his approach, Macfarlane said “a 20 per cent target has always been my target.”
The implication of this is that the 2020 goals for renewable generation (almost all wind) output will become about 27,000 GWh rather than 41,000 GWh.
In answer to a question, Macfarlane took a hard line on the future of the Clean Energy Finance Corporation, warning the CEFC directors that a Coalition government will abolish it and telling them not to proceed to allocate the first $2 billion in funds becoming available from 1 July, His comments coincide with a media statement from the CEFC that it is “open for business” and engaged in “active discussion” with proponents seeking grants.
Macfarlane indicated his support for an east coast shift to time-of-use tariffs — with the Australian Energy Market Commission draft report on the competition state-of-play in New South Wales being published this week.
The NSW Energy Minister, Chris Hartcher, speaking at the conference, said he is “keen to carefully examine” the review. The challenge for government, he added, is to carry the community with it on retail deregulation, ssmart metering and time-of-use charges.
Meanwhile, Macfarlane also raised the issue of when the Gillard government will release the Productivity Commission report on network benchmarking — which has been in its hands since 9 April.
The Prime Minister used the draft report to support a claim that market reform under her government will cut household bills $250 a year, a contention not borne out by reading of the PC comments.
With few parliamentary sitting days left, will the government avoid any focus on this point by simply not tabling the report?
In conversation, I have suggested to Macfarlane that the issue should be raised in question time when parliament resumes sitting for the final time before the election.
While the politicians were always going to be centre stage for “Power Pricing 2013,” the contributions from industry managers and other stakeholders were important, too.
By design, the conference agenda focussed quite strongly on the issues for vulnerable customers and I will write a separate post on this.
A not unreasonable summary of many of the industry contributions would be that these are days of complete uncertainty for the power sector.
Two thoughts that caught my attention with respect to this uncertainty were (a) the presence of a “ghost fleet” of mothballed generation units in the NEM with unclear consequences for both supply and future investment, and (b) the proposition put forward by Port Jackson Partners’ Edwin O’Young that a credible scenario is available for a second power price shock later this decade.
The latter point doesn’t resonate with the mainstream industry — and Energy Supply Association CEO Matthew Warren, another speaker, was quick to make clear that he couldn’t see another shock emerging — but O’Young’s case is that, looking towards 2020, there is a possible “high case scenario” where end-user prices could rise a further 70 per cent.
O’Young’s point is that, while it has been network charges that have driven the retail price rises of 50 per cent in NSW over the past five years, another round of increases could flow from higher retail costs and margins, higher renewable energy costs, further network charges and a spike in wholesale prices.
It is important, of course, to emphasise that this projection is a scenario and not a forecast — and it assumes the retention of the carbon price and the higher level of RET among other things.
Its value, I think, is that it provides a head’s up for all power supply stakeholders that assuming electricity prices are now “off the boil” as a major issue may not be entirely clever.
O’Young comes up with a set of steps needed to avoid our reaching the “high scenario” stage.
They are: (1) acting to reduce the decline in the NEM’s capacity factor, (2) dealing with the gas crisis that looms over NSW, (3) limiting the cost of renewables, (4) continuing the privatisation of government-owned entities to improve supply efficiency, (5) deregulating retail prices and (6) overall, addressing the issue of supply uncertainty.
It would take a lot more than one post here to do justice to the raft of issues floated over two days of the conference, but a fair amount of what was said can be be summed up in the point made by Tim Nelson of AGL Energy: “Demand-side reform is unfinished business.”
My own take on the presentations and discussions is that neither suppliers nor governments can afford to lose sight of the fact that “moderating” price increases do not mean reductions in bills for householders, small businesses and large manufacturers — and that a continuing rise in energy costs (including now gas) will feed in to the community unrest over price pressures, exacerbated by continuing closures of important pieces of the manufacturing base.
Chris Hartcher, in his presentation, made the point that an integrated approach to cost pressures is critical, bearing in mind that business is also dealing with high transport costs and high labour costs.
Both government and the supply sector managed to be surprised over the past five years by the impact of major network capex on end-user prices. The reform process now being pursued may not be too little but it is certainly rather late.
I went in to this conference convinced that power prices are still a big ticket issue for users, suppliers,regulators and governments and have come out of it with my view reinforced.
“Not happy,Wayne” would be the easiest shorthand for the renewable energy sector’s reaction to the 2013 federal Budget, with sauce being added to the debate by a slanging match between the Energy Supply Association and the Clean Energy Council over the costs of rooftop solar power.
On the Budget, the central theme of the green end of the power supply chain is that, despite the government’s commitment to sustain the renewable energy target at 41,000 GWh in 2020, well more than the original 20 per cent goal, many millions of investment dollars are being put at risk by the uncertainty created by Wayne Swan’s sixth (and last?) Budget.
The Greens leader, Christine Milne, accuses the government of reneging on its commitment to her party on “clean energy.”
WWF Australia and others on the forefront of the environmental movement are outraged that Swan didn’t retain the renewables subsidies and slash the $5.9 billion fuel tax credits program that subsidises industy diesel costs and is seen by the mining industry as critical support.
Environment Victoria finds it “astonishing” that the government hasn’t cut carbon tax compensation to power generators (mostly Victoria’s brown coal plants) rather than renewables aid.
Central to the unhappiness of the environmental movement and the renewables sector is the government’s decision to push out subsidies of $370 million promised via the Australian Renewable Energy Agency until the end of the decade.
One of the sub-sectors relying on ARENA largesse to gain some traction in the electricity market after a decade of technological struggle and near-abandonment by investors in shares is the “hot rocks” geothermal industry.
The Gillard government’s “clean energy future” plans rely on geothermal companies being able to deliver 17,000 gigawatt hours of electricity a year in the ‘Thirties and 29,000 GWh annually by mid-century (roughly the same as and then double the amount of power from the hydro-electric system).
Australian Geothermal Energy Association CEO Susan Jeanes says ARENA is less than a year old and now faces a big cut in available funds.
“Ongoing policy changes that dampen the carbon price, funding programs that don’t deliver funds and continuing changes in government agencies (are taking) a toll (on renewables) and especially (on) solar thermal and geothermal,” says Jeanes.
The Solar Council’s John Grimes adds that deferment of ARENA funding is “a direct attack on its independence.” He argues that the move can only be implemented by amending the legislation establishing ARENA and is calling on the Coalition and the Greens to prevent this from happening.
One of the cuts inflicted by the Budget swallows $159 million that was originally allocated to the Solar Dawn utility-scale project.
(Back in 2011 Julia Gillard launched it with this fanfare: “Solar Dawn will bring Australia closer to a cleaner energy future. It will be one of the largest power plants of its kind in the world.” The project went belly up after the new Newman government last year took back the $75 million Anna Bligh had promised to add to Gillard’s contribution.)
The Clean Energy Council frets that the process to “put ARENA money back on the table” is unclear and could see “cutting-edge technology investors take their business elsewhere.”
The Energy Supply Association accuses the government of “dropping the ball” on support for research aimed at driving greenhouse gas emissions abatement, criticising the ARENA funds deferral and the decision to cut $662 million from carbon capture and storage and low-emission coal projects.
“Industry needs stable policy settings,” says ESAA chief executive Matthew Warren. “We need to keep up the momentum on new technology development.”
Meanwhile the Clean Energy Council is snarling at ESAA over publication of a discussion paper, played up in the News Limited tabloids as ‘revealing the hidden costs of solar panels.”
“Solar panels are costing those without them more than $1 billion a year,” is the tabloids’ line.
ESAA says $340 million of the cost relates to avoided network charges and the feed-in tariffs add another $680 million annually to the power bills of those not taking up PVs.
“Old school power companies clutching at straws” is the riposte from the CEC, arguing that asserting solar PV users should pay more of their network costs is “like saying 20 years ago that people using email should chip in for stamps.”
(I’m afraid as a metaphor it doesn’t work for me but then I am one of the New South Wales householders shelling out an extra $210 million a year to pay for the over-the-top solar subsidies launched by the now-despatched State Labor government.)
The CEC’s rant includes this: “Suggesting that people responding to government incentives to install more efficient appliances or generate their own clean energy are somehow cheating the system is a self-interested grab from old energy businesses looking to turn back the clock to preserve their outdated business models.”
The association then goes on to call for less finger-pointing between segments of the supply chain!
Coming back to the Budget, while the green lobby is unhappy with the GillardGovernment over the cuts to renewable programs, it is already working itself in to a froth over what it fears from a Coalition government after 14 September, with one commentator reporting “increasing concern that the RET will be diluted under pressure from State government, utilities and generators worried about sliding profits.”
There will be a lot more of this as election day looms.
Read most newspapers, listen to the radio, watch most televison stations and the message about coal that you get is that it is on the way out.
It is part of a broader message for Australians that the renewables revolution has arrived and fossil fuels are on the road to perdition.
The “true facts,” as some scribblers would have it (as opposed I guess to concocted facts) are somewhat different, here and in many other parts of the world.
The picture in Australia for electricity supply, as set out in the latest energy review published by the Bureau of Resources & Economics, contrary to the impression you may gather from listening to the likes of Greg Combet, is that, over the past three years, the fossil-fuelled generators’ share of power production has “slumped” just one per cent.
Yes, so were a half dozen people in my neighbourhood on whom I dropped this statistic in the past week.
What’s happened, you see, is that the use of coal for power generation nationally has fallen – down from 75 per cent in 2009-10 to 69 per cent in 2011-12 (the latest official data) – but the use of gas has risen from 15 per cent to 20 per cent.
Yes, there has been an increase in supply of renewable energy – up from eight per cent to 10 per cent in this time frame – and the output of wind farms has risen about 20 per cent since 2009-10, but the mainstay of green power is hydro-electric generation, accounting for more than 60 per cent of this form of production.
(The numbers will have changed again for 2012-13, a financial year we are still in, but let’s stick to the official figures.)
If you want to look at the picture another way, the BREE data show that, since the ALP (led first by Rudd then by Gillard) came to office, using the five financial years from 2007-08 to 2011-12, coal-fired power production has moved from 184.3 terawatt hours annually across Australia to 177.3 TWh while gas-fired electricity output has gone up from 35 TWh to 50 TWh.
The contribution of wind and solar power (jncluding rooftop PVs) has shifted from about 4 TWh to almost 9 TWh.
Brown coal generation, which it now seems impossible for the media to mention without the adjective “dirty” or “filthy,” has risen marginally from 54 TWh to 57 TWh.
Black coal generation, which is still the dominant supply system in the two States with the largest demand levels, New South Wales and Queensland, has shifted from 129.6 TWh in 2007-08 to 120.3 TWh in 2011-12.
In this timeframe, gas generation has gone up almost 43 per cent and stood at 50 TWh in 2011-12 – versus 6.1 TWh for wind power.
What’s more the BREE long-term generation projections, published last December, while asserting that brown coal generation will collapse between now and 2034-35 (falling from an expected 44 TWh in 2012-13 to just 5 TWh over the almost-quarter century), claim that black coal power production will still be at 100 TWh at that point.
Wind power, claims BREE, will increase more than four-fold from today’s levels to 64 TWh in 2034-35.
Most controversially, the federal agency argues that we will see the strong emergence of geothermal energy and utility-scale solar power, the two contributing 42 TWh in 2034-35 versus just one TWh in 2012-13.
Implicit in the energy white paper perspective is that, if they don’t do so, we will start building nuclear power stations.
Old faithful, the existing hydro systems, will keep putting out 17 TWh annually throughout the two decades, BREE adds. (This implies, I guess, non-acceptance of a Flannery-esque view of a never-ending Big Dry.)
Another way of making the point about black coal that this outlook throws up is that Australia will continue to burn about 40 million tonnes a year of the fuel down the two decades that Combet & Co assert will deliver the abatement vision splendid resulting from their policies.
That’s pushing towards a billion tonnes in aggregate.
(In passing, the BREE projections still see almost 60 per cent of power output occurring in NSW and Queensland, so it is possible also to comment that, north of the Murray, black coal will maintain its role as a major fuel for an essential service as far forward as anyone can sensibly look. As readers of this blog know, I dismiss the idea that realistic forecasts can be made for mid-century, citing in evidence the absence of the CSG and shale gas revolutions from forecasts even 15 years ago.)
In a greener world resulting from the Gillard government’s far-seeing program, its own agency expects a third of Australia’s electricity in 2034-35 to still come from today’s coal-fired generators (‘cos how would you get financial backers to build any new ones in this environment?)
Lifting our eyes from our own navels, and looking beyond the propaganda masquerading as news in the media (per favour to a significant extent “churnalists” repeating what interested parties feed them), the most salient fact today (as provided by the International Energy Agency) is that growth in coal-fired generation in the first decade of this century far outpaced the rise in renewable production of power: 45 per cent versus 25 per cent.
“An unremitting rise in global coal demand for power generation continued in 2012,” says the IEA.
Its data show that, in the recent time frame examined by BREE (above) during which Australian coal-fired generation fell by seven terawatt hours annually, global use of the fuel rose seven per cent to 8,700 TWh a year.
To put it another way, world-wide use of coal to make electricity is 49 times the local production level from the fuel.
With coal power accounting for about 40 per cent of global emissions, closing down the local coal-powered supply system would have a a barely noticeable impact on the overall level of greenhouse gases in the atmosphere – but it would have a significant impact on the cost of electricity for Australian consumers.
Recent flummery here about opting for 100 per cent renewable energy sought to make a lot out of the gross investment (set at a contestably low level) needed to replace 45,570 MW of thermal generation capacity – but said nothing at all about the carbon tax that would be needed to drive this coal and gas generation out of the competitive east coast market.
My guess is that at least $80 a tonne would be needed – and what would we have left in the way of manufacturing and services for factory owners when that happened? What would our household power bills be?
As I pointed out to someone seduced by green thoughts the other day, why do you think the Gillard government, in its “clean energy future” spinning, has opted to place the scenario of cutting fossil-fuelled electricty to around 40 per cent of supply way out there in 2050?
It wasn’t even prepared to consider 100 per cent renewable electricity.
The recent Australian Energy Market Operator’s study was forced on the government as part of its deal with the Greens for parliamentary support – and a month since the report was released by his own department, Combet has still not uttered a single syllable about it.
Meanwhile, the Greens’ poster child, Germany, is wrestling with the awkward fact, to quote a Reuters report, that its forced closure of nuclear power and attempt to replace the capacity with renewable energy is “proving surprisingly good for brown coal.”
German brown coal power stations produced six per cent more electricity in 2012, says the news agency.
In short, the coal hard facts don’t justify any of what you might be reading or hearing from your media of choose at this time.
Energy issues have sometimes been a sideshow in federal elections over the past 20-30 years, but not in 2013.
This time they are front and centre of the debate, with the election falling just as millions of households and small businesses are starting to receive their (higher) electricity and gas bills at the end of winter.
Which is why there will be quite a lot of political interest in the 2013 Australian Petroleum Production & Exploration Association conference taking place in Brisbane at the end of the month.
And some four dozen journalists will be on hand over three days to convey the debate to national newspaper, radio and television audiences.
There’s no doubting the continuing pulling power of this event: with a week to go, it has attracted 3,000 delegates from 30 countries and 850 companies – plus 200 service and supply companies and agencies participating in an exhibition covering 12,000 square metres at the Brisbane Convention Centre.
The attendees will be crowding in to attend an opening morning that has the federal government’s and Coalition’s energy spokesmen going head to head.
The first session features APPEA’s feisty chairman, David Knox, MD of Santos, followed by the new federal Minister for Resources & Energy, Gary Gray, who worked as a Woodside executive for a time, and the Coalition’s energy spokesman, Ian Macfarlane, the last holder of the portfolio in the Howard government.
The Tuesday plenary session kicks off with a presentation from the New South Wales Resources & Energy Minister, Chris Hartcher, whose government is wallowing in a swamp of problems relating to development of coal seam gas in the State as existing conventional gas contracts from interstate start to roll off, rural and green activist opposition to CSG development continues at a high pace and the first of what is expected to be a series of gas price hikes is set to be introduced by the State regulator.
On the final day, proceedings start with a presentation from the Queensland Deputy Premier, Jeff Seeney, whose government is wrestling with rolling issues related to the major CSG-fuelled LNG export projects at Gladstone while also dealing with ongoing power pricing pressures: the State regulator proposes to increase electricity bills by a whopping 21 per cent for 2013-14.
The Newman government in Queensland has a lot at stake in ensuring the success of the LNG developments it inherited from the Bligh Labor regime.
The first cab off the rank in the export game, British-owned QGC, recently told a Senate committee that, at peak production, it expects to be contributing a billion dollars a year in taxes and royalties – enough, it pointed out, to fund 20 primary schools or 1,000 hospital beds annually.
The other two LNG developments will be shelling out similar sums to federal and State coffers. The trio are employing some 27,000 people on the projects.
QGC’s Australian operations managing director, Derek Fisher, will be speaking right after Seeney – as will John Cotter, chairman of the GasFields Commission the State government has set up to deal with rural community concerns.
The Brisbane conference is ideally placed for the upstream petroleum industry to ram home messages between last week’s federal budget and the forthcoming election.
APPEA’s media statement reacting to the budget Wayne Swan delivered on Tuesday took this route.
The oil and gas industry, pointed out association CEO David Byers,is responsible for more than 30 cents of every dollar of national private sector investment at present, highlighting the expectation of Treasury that (to quote the budget papers) “a substantial pick-up in LNG exports in the second half of the decade will support economic growth for years to come.”
The contribution, APPEA adds, includes up to $12 billion a year in tax revenue to Australian governments by 2025 if all the proposed developments go ahead.
This being the case, the association wants to know, why is the Gillard government pursuing “short-sighted” measures hampering gas developments by increasing the industry’s development costs?
The sector, says Byers, “faces challenges in competing in both the domestic and global markets” and decisions to put “further lead in the industry’s saddle-bags” will erode investor confidence.
This is a theme the association and its members can be expected to pursue allegro con brio (“fast and with spirit”) at the Brisbane conference.
They will not be dealing with a shrinking violet in Gary Gray, new to the portfolio but not the business.
Gray, who was national secretary of the Labor Party when Paul Keating was PM, spent six years as director of corporate affairs at Woodside before going back to Canberra as the Member for Brand on the winning side in the 2007 election.
I have been reading a speech he made in Houston in mid-April – the week of the Boston marathon bombings, which swept all else from media coverage – and he had some straightforward advice for the petroleum industry.
(The event was the Global LNG Conference, which will next be held in Perth in 2016.)
You may excel in technical areas, Gray told the LNG companies, but there is a need for better focus on areas such as community engagement, especially when activists are “about spreading fear and confusion.”
His message – likely to be repeated in Brisbane, I imagine – is that the industry has to take a stronger role in “the community politics of energy” and to “stand aside from commercial rivalties (to pursue) the common good.”
Gray said in Houston that “without industry getting this message, fewer and fewer politicians like me will be able to prosecute sensible, logical, science-based policy and sustainable regulatory solutions.”
Given just how cross APPEA and its CSG sector members are about the politically-motivated intervention of Gray’s colleague, Environment Minister Tony Burke, in amending the Environmental Protection & Biodiversity Act ahead of the election to stymie NSW gas development, it will be interesting, shall we say, to see how this sentiment will go down with the Brisbane audience.
In Houston, Gray declared that he “stood in awe” of the intellectual capacity of the oil and gas industry – the engineering, commercial, financial and management skills – and of the excitement it generates.
“You make our world go round,” he told the LNG-ers,” and you make it go round safely and sustainably.”
This month, speaking in Adelaide at a resources and energy conference, he took the point a little further, telling the sector its contribution “is genuinely a sustainable contribution to our society” which can’t be achieved without “productive processing, a vibrant exploration environment and opportunities for global marketing.”
That’s not what Lock the Gate and its ilk, nor the federal government’s Green and independent props in parliament, think or want to hear.
How it will all go down in Brisbane at APPEA, given all the other stuff the federal government has been pursuing, will be fascinating to observe.
Treasurer Wayne Swan doesn’t need telling that two years is a very long time in political life – his 2013 Budget is a lengthy testament to this.
One example is he and his department’s attitude to carbon capture and storage.
Two years ago they were hanging their hats, in looking at long-term power supply, on some 40 per cent of generation being coal and gas with CCS by mid-century.
Treasury modelling then said 2050 national carbon emissions would be 25 million tonnes higher without the technology.
This was still the time when the federal government had a $1.68 billion program to support CCS research and development.
It was when Julia Gillard (in July 2011) was telling the media that she believed CCS “will be a big part of the way we deal with energy in the future.”
She said her government would “continue to invest billions of dollars in working with firms to develop the technology of capturing carbon pollution and then storing it” even though at this point, under pressure from the Greens, she was excluding support for the technology from the $10 billion Clean Energy Finance Corporation agenda.
Come forward to tonight’s Budget and Swan, in a joint statement with Combet lauding the government’s “clean energy future” policies, gets round – 50 lines in to the spin – to announcing that $662 million of CCS funding will be “returned to the Budget.”
The Greens will cheer this but the resources sector is unamused.
In a Budget night statement the Minerals Council of Australia’s acting chief executive John Kunkel observes: “The government’s decision to slash funding for CCS is a worrying sign.
“With coal-fired power remaining the mainstay of Australia’s electricity generation, CCS will be a critical emissions reduction technology.
“Now is not the time to be reducing expenditure on the technology if you are serious about addressing the climate change challenge,” he tells a Treasurer, who has just informed Parliament that “You can’t be a first-world economy in the 21st century if you are not on the path to a clean energy future.”
The grab for CCS funds actually came as no surprise to the resources sector.
Anticipating it six days ago, Nikki Williams, CEO of the Australian Coal Association, warned that the move is “short-sighted and illogical.”
She pointed out that three-quarters of grid-connected power supply is coal-fired and the industry receives less than a billion dollars – and now a lot less – to address R&D for emissions abatement.
“Compare this,” she added, “to wind and solar technologies, which generate just three per cent of Australia’s electricity but receive $13 billion in direct subsidies and up to $50 billion in effective industry assistance through the renewable energy target.”
Hitting back at the Greens, who successfully urged Swan to target CCS in cutting clean energy research in this Budget, Williams also noted that less than six months ago an international group of leading environmental organisations, the ENGO Network, had urged governments to back CCS as “a vital technology for dramatically reducing emissions.”
The miners are not the only ones tonight to accuse Swan and the federal government of being short-sighted.
The upstream petroleum industry has used the same epithet to decry tax changes in the Budget affecting exploration costs.
The resources boom, says David Byers, CEO of the Australian Petroleum Production & Exploration Association, has been providing Canberra with windfall tax revenues for the past decade, totalling around $160 billion – and now Swan is hacking further in to investor confidence.
While acknowledging that the Budget has not moved on farm-in tax arrangements as had been feared in some quarters, Byers complains that, overall, steps affecting the industry will make it harder for explorers to invest here at a time when they are finding raising money on global markets increasingly difficult.
To which MCA’s Kunkel adds that changes to exploration tax arrangements “strike at the high-risk nursery of mining” and fly in the face of recommendations of the “Business Tax Working Group” the Gillard government set up last year with the usual noises to show how committed it is to consultation.
Kunkel also takes the opportunity to point out that the Treasury in tonight’s Budget papers is predicting that the carbon price will be $12 per tonne when Australia (on the Gillard government’s schedule) moves to a floating market in 2015 – but Gillard and Swan aim to cling to a price double this for the next two years, imposing, he complains, “a deadweight on our economy.”
While the resources sector, and others in business, are no doubt telling themselves that, assuming the opinion polls are right, this is the last Budget Swan will inflict on them, the situation he and the Gillard government are bequeathing the Coalition must leave them wondering how much cheer they will get from Joe Hockey’s first Budget this time next year?
The froth and bubble in the green-tinged media commentariat this week over a measurement of carbon dioxide levels in the atmosphere “passing a milestone” of 400 parts per million begs one of my favourite questions: “And therefore what?”
Reading one local commentator jumping up and down on a “climate sceptic” this week like a Wigan football fan after the cup victory, one is inclined to also point out (yet again) that the most important Australian issue is the cost for end-users of any carbon-oriented transformation.
The two big electricity lessons of the past three years are that (1) there is a limit to the size of the power bill that householders (aka voters) will tolerate and (2) in an environment of high energy costs, high labor costs and an inflated dollar, the largest local user of electricity and a major employer, manufacturing, starts to go out backwards – with parallel bad impacts for the national economy and for power suppliers.
The Greens’ approach to the carbon issue for Australia – as overseas emissions continue to rise because major nations decline to go down this path – is to junk the existing fleet of fossil-fuelled generators.
This is a move that, no matter how the radicals wriggle and squirm, will require half a trillion dollars (at least) to be spent on moving to 100 per cent Australian renewable electricity supply.
In order to lay the ground for this move, the Greens must demonise the gas supply industry and thereby create another significant energy problem for householders and manufacturers.
And they must ensure that research support for carbon capture and storage – a crucial element in a future power supply system still largely using fossil fuels – is crippled and that an economically illogical ban on nuclear power is sustained by politicians scared of a voter backlash they expect the Greens to orchestrate against any backsliding.
The levels of hyperbole and misinformation needed to sustain this line of attack are not small – and at least to date the energy supply sector, including coal producers, gas explorers and producers and nuclear adherents, has not mounted an adequate public pushback against the green mafia.
The role of “our ABC” in overtly supporting the latter against the fossil fuel industry is but one example of how the communications struggle is not being won by energy suppliers.
Much the same can be said about the mass circulation newspapers in the Fairfax stable – while the News Limited tabloids largely just enjoy playing up a good stoush and making the most of the mafia’s stunts.
Sadly, the federal government energy white paper released last December has not provided a springboard for a much-improved public debate, not least because the government is conflicted by trying to simultaneously sustain a sensible energy supply system and to pander to the Greens and a handful of independents with their own axes to grind.
The federal political landscape seems certain to change on 14 September and a big part of the Greens’ approach at present is to maintain a blocking foothold in the Senate to counter a crushing defeat in the House of Representatives for Labor – hence the increased noise from their corner of the political ring.
There are many ways in which the energy industry can counter their attackers through more clever communication.
One useful way to address the longer-term situation is to mount information-rich public conferences where the issues can be thoroughly debated and ammunition collected for use in other media.
One such was the “Australian Domestic Gas Outlook” conference, staged by Quest Events and, as readers know, with which I was heavily involved. It attracted 170 delegates and a strong cast of speakers, who in turn attracted a quite high level of media attention at the time.
Another now being pursued, and at which I will chair a session, is the conference on “Nuclear Energy for Australia” being staged by the Academy of Technological Sciences & Engineering in Sydney’s Powerhouse Museum on 25-26 July.
The level of interest is indicated, I am told, by 120 registrations to attend already.
The conference will feature international and national speakers whose topics will include how the east coast grid could cope with nuclear energy, community acceptance of going nuclear, the regulatory requirements, the national uranium reserves picture and the issues of waste disposal.
One of the leading lights (sorry) among the speakers will be professor Peter Guthrie of Cambridge University, who will give a keynote talk on the energy alternatives in managing the global challenge of sustainability.
Guthrie is the co-author of a book about to be published on energy scenarios from now to 2050 for the UK – where muddle-headed political approaches to energy policy have Britons on the brink of crisis.
ATSE, in promoting the event, poses two of the key questions to be addressed: Where can nuclear power stations be located in Australia? Can they provide (relatively) low-cost power?
The academy also notes the white paper acknowledges that nuclear energy is a proven, low emissions technology but the present government is only prepared to consider it as a reserve option if other technologies (wind, solar, geothermal, cleaner coal) turn out not to be viable.
The flaws of this approach in terms of secure, reliable and affordable energy in the medium and long-term future hardly need extensive exposition here – and the Business Council has been vocal lately in arguing the importance of a technologically-neutral political stance on future power generation.
You can find all the details for the nuclear conference on the ATSE website (www.atse.org.au).
You would also find it interesting, in this context, I think to go on to the Brave New Climate website of professor Barry Brook of the University of Adelaide.
Brook has published the entire new Martin Nicholson book on energy issues – “The Power Makers’ Challenge” – on the site. (Nicholson is another speaker at the ATSE conference.)
In his foreword to the book, Brook urges us to carefully scrutinise the case for all of the alternative energy technologies available for a “fast-developing, energy-starved world.”
The reality of the energy situation in Australia today is that power users, householders, small businesses and industry in particular, are badly bruised by the pricing developments of the past decade and most are in no mood to be frogmarched in to any supply transformation that will make the pain worse.
The Greens and their fellow travellers – among whom must now be counted Labor leaders like Gillard, Combet and Swan although I take leave to doubt that others in the government ranks are at all comfortable with where it has landed – are engaged in a non-stop mardi gras that relies on color and movement, not substance, to distract voters.
A key facet of this is to keep the mainstream media engaged in the performance, supported by sustained use of social media.
Events like the ATSE conference (and the gas outlook forum last month) can help provide an antidote to the tarantella dance on energy that is the main feature of the radicals’ street theatre.