Archive for December, 2014
The sale of Colongra power station by the New South Wales government in the dying days of 2014 provides an interesting flag in both the electricity and domestic gas maps.
The 660 megawatt, gas-fired peaking plant was built between 2007 and 2009 by the State Labor government via Delta Electricity when the outlook for the fuel in power generation was at its peak of local optimism.
As Colongra was commissioned, one of five substantial gas plants built in Australia in this period, the energy industry was projecting that national demand for the fuel would double in 15 years, helped along by a tripling in its consumption by generators.
The Labor government approved $500 million being spent on Colongra — John Robertson was the energy minister who launched it in 2009 — and this week Snowy Hydro paid the Baird Coalition government $234 million for it, reflecting the over-supplied state of the east coast electricity market and the fact that peak power demand has not followed the trajectory expected at the start of this decade.
Meanwhile today’s generation demand for gas is 80 per cent of actual consumption in 2009 and the 15-year outlook is not much better than a quarter of what it was in 2009.
All of which goes to underscore why registrations are flowing in steadily for the third Quest Events Australian Domestic Gas Outlook conference, which I am co-chairing, to be held in Sydney from 24 to 26 March, just days before the Baird government goes to the polls while Labor will be stretching to build up a new leader, Robertson having been swept away in the aftermath of the Lindt Cafe siege.
As the Australian Energy Regulator says in its new “State of the Energy Market” review, the domestic gas scene is “volatile.”
Weakening demand for gas for electricity production, the AER notes, is a factor in the Australian Energy Market Operator scaling back its earlier projections of gas supply shortfalls in eastern Australia in the next few years.
Among the “various contingencies” the AER identifies as affecting forecasting are (1) the timing of each of the LNG trains’ commissioning at Gladstone, (2) consumption of electricity (and the gas share of production), (3) the availability of gas storage and (4) the effects of climate change policies.
To which, as the regulator notes, can be added the fate of the mooted pipeline linking the Northern Territory to eastern gas markets — and, of course, how Santos and AGL Energy fare in their efforts to develop gas fields within the NSW borders.
The AER also observes that the potential to develop unconventional gas in the Cooper Basin in central Australia is “significant” — but it reminds readers that it may take a decade for production to be commercially viable, and this was written before the oil price drama burst on the global scene.
As for AEMO, the operator — in a 17 December statement — foresees gas consumption by power generators on the east coast declining at an average annual rate of 16.8 per cent between now and 2019 with industrial demand plunging too. The (slightly) brighter side is that population growth will provide 1.1 per cent annual average growth in residential and commercial demand.
For 2010 to 2013, AEMO reports, overall east coast domestic gas consumption fell back to 685 petajoules, 15 PJ less than at the start of the review period.
And it expects eastern Australian demand to tumble further to 523 PJ in 2019.
When you consider that the 2019 demand outlook for the east coast at the point Colongra was commissioned (2009) was around 1,200 PJ, this is an almighty turnaround.
The ADGO conference in March will canvass all this and much more, kicking off with a tour of the energy horizon by federal Industry Minister Ian Macfarlane with NSW Energy Minister Anthony Roberts tagged to follow him and then Martin Ferguson, wearing his BG Group director’s hat, making for a vibrant opening morning!
One of the critical issues from a federal and southern State perspective is how to preserve as much as possible of the east coast manufacturing base during a period in which fuel prices rise sharply in order to take advantage of the mooted better supply conditions in the next decade. Just how big this problem is can be seen by looking at how the outlook for manufacturing’s demand for gas has changed in just the period since Colongra was built: the expectation was that factory consumption would hit 500 PJ around 2024-25 and now that forecast lies around 245 PJ.
Manufacturers to a large extent have hung their hat on trying to drive policymakers to adopt gas reservation as a supposed cure. Governments have shown, most recently at the CoAG Energy Council meeting in early December, that they won’t have a bar of this “solution.”
The outlook conference offers an important opportunity for stakeholders to canvass realistic alternatives.
The ADGO opening day also includes Richard Cottee, now MD of Central Petroleum, on the future of east coast gas development and “a bigger vision” for this market, Queensland Energy Minister Mark McArdle, Energy Supply Association CEO Matthew Warren (essaying a look at the outlook for east coast gas prices, supply and demand) and the new CEO of the Plastics & Chemicals Industries Association, Samantha Read.
Day two, to be chaired by Thomson Reuters’ Clyde Russell, will include federal Labor’s energy spokesman, Gary Gray, David Byers, chief executive of the Australian Petroleum Production & Exploration Association, senior public servants from Victoria and South Australia on their States’ plans for gas development,a study in contrasts you could say, and Jemena’s CEO, Paul Adams,on the pipeline scene.
I’m particularly looking forward to listening to Mark Textor, managing director of Crosby Textor, doing a forensic analysis of what polling really tells us about the public’s perceptions of the gas industry and how they can be improved.
There’s even more on the ADGO agenda (you can find it all at www.questevents.com.au) and I reckon the program lives up to the motto Quest MD Jamie Turmanis and I adopted for these “energy outlook” forums a bit more than three years ago: “Not your ordinary energy conference.”
The attendances we have been attracting, and the early rush of registrations for the 2015 gas event, suggests this is not just our own opinion.
Boxing Day in my neck of the woods is a time for recovery and relaxation, not deep reflection.
One may watch the cricket from Melbourne, leaf through the book gifts (I have three of quality this year), pick among the leftovers, polish off what’s left of a bottle of wine that somehow survived the festive carnage or even idly scan the media — although you know that the second team, may be even the third team is at the helm there; this period is not known to media watchers as the “silly season” for nothing.
Imagine my surprise, then, in clicking my way through the Web edition of “The Australian,” at finding a thought that really does need elevating to a higher plane.
One could describe it as the Boxing Day test for the body politic.
Writing an op-ed about the state of federal politics, Greg Craven, vice-chancellor of the Australian Catholic University,calls on Labor and the Liberals to take a good, hard look at themselves and each other.
For almost a half decade, he comments, the two parties have allowed their determination to deny each other the slightest advantage to hand control of policies to tiny constituencies.
In the process, he adds, they have “frittered away their gravitas, authority and legitimacy.”
Is it now time, he asks, for them to broker the necessary compromises on key policies?
Craven cites health and higher education (well, he would, wouldn’t he?) — but you won’t be surprised to know that my reaction is “Yes!” and “Why not start with energy?”
The “real adults in the room” (as Craven calls them) need to appreciate that (a) one of them will always be in government and (b) there is a critical need to fix in place a long-term strategy for energy supply and carbon abatement to replace the present piecemeal, disjointed approach.
The latter could hardly be more obvious after the goings on of 2011, 2012, 2013 and 2014 (especially not destined to be of blessed memory).
Craven is right: the only way to achieve (b) is if the “real adults” in politics come to a landing together, however grudgingly.
Something, for example, they have been quite unable to do to date with the renewable energy target, although this is only a part of the energy strategy picture.
Which leads on to the thought, sobering for industry lobbyists, that ensuring Labor and the Liberals land in the right place is critical because, under a bipartisan approach, once they have done so, the chances of further change, except in a crisis, would be slim.
I am struck in this context by a quote (from earlier in December but read on Boxing Day) from a British lawyer that “There is no such thing as objective truth in energy policy. Truth is the first casualty of the debate. Everyone has a position.”
This is broadly true and the challenge for Labor and the Liberals, therefore, is to land together on an energy path that cuts through the thickets of confusion thrown up by ideologues and meretricious players — while the challenge for industry lobbyists is to help them do this rather than to continue to barrage them with their own, sometimes conflicting and not infrequently confusing, opinions.
Thinking about all this reminded me to visit the International Energy Agency website.
I knew from my American contacts just before Christmas that the agency had put out a commentary on US energy policy but there had been too much going on, professionally and domestically, for me to even take a cursory glance until Boxing Day.
What the IEA published on 18 December was its in-depth review of US energy policies, part of a series looking at each of its member countries in turn.
If reading the whole (long) document is a bridge too far, the Washington DC launch speech of IEA executive director Maria van der Hoeven (on the agency website) covers the essential points, a tour of the American energy horizon that has some resonance for Australia even though we operate on a very different domestic supply scale.
The big similarity, of course, is the poisonous relationship between the American Democrats and Republicans, working on a much larger canvas than our Lib/Lab dissension.
Van der Hoeven notes: “Emissions policy remains an unsettled and disputed area of energy policy between the (US) executive and legislative branches of government.”
On electricity, the IEA chief executive says: “Long-term development of a sustainable sector requires clarity. This means predictable, effective, national policies to encourage investment, greater co-ordination to encourage the integration of renewables and a common understanding on the future of nuclear power.” In particular, she points to the large share of aged plant that America will need to replace.
Coming back to the Craven test for Labor and the Liberals, the dominant role of the two parties is well illustrated in the final data on the Victorian election last month in which the State see-saw tilted back to Labor.
The Electoral Commission reports that, first, of the 3.8 million enrolled voters, only 3.35 million cast a formal vote in the Legislative Assembly (lower house) poll — that’s 5.2 per cent who, in one way or another, declined to participate. (By comparison, the Nationals won 5.5 per cent of the formal vote.)
The main point, however, is that Labor won 1.27 million of the votes cast (38.1 per cent) and the Liberals 1.22 million (36.4 per cent). The Greens picked up 385,190 votes (or 11.4 per cent). Even allowing for the fringe dwellers on the left and right, Labor and the Liberals strongly hold the middle ground of about two-thirds of voters.
Now the Victorian Legislative Council, like the Senate, is a bear garden because there the Labor/Liberal share of the vote (with the Nationals thrown in on the Coalition side) was only 68 per cent.
This guarantees a messy life for this parliament exactly like the Senate shambles — but Labor and the Liberals could easily pass core legislation in the interests of the vast majority of the population.
There is a lot of wistful chatter, especially in business, about the need for a bipartisan approach to energy issues (and other stuff, too).
Perhaps 2015 should be the year in which Labor and Liberals hands are held to the fire.
As the final fling in the domestic energy debate for 2014, the Climate Change Authority review of the renewable energy target has left the mainstream supply sector unimpressed.
The Energy Supply Association has reacted to the report in this vein: “The review fails to acknowledge that the scheme as designed is no longer working and that a more strategic review of energy policy is needed if we are to deliver an efficient reduction in greenhouse gas emissions.”
The CCA report brings to mind Tonto’s response to the Lone Ranger, when the pair find themselves surrounded by bloodthirsty Indians on the prairie and the hero observes “It looks like we are in trouble this time.” Tonto: “Who is this we, white man?”
The overtly political media statement released by CCA chairman Bernie Fraser to go with the review and another of the federal government’s carbon farming initiative makes it clear that the authority sees itself on the side of the green Indians.
Even so, the CCA has to acknowledge the unlikelihood that the RET’s 41,000 gigawatt hours by 2020 goal can be attained. It suggests the answer could be to push the target date out by a further three years and extend the further horizon for the measure (2030) by the same distance.
To me, at least, this raises an obvious point: there is no magic in an extra three years so why not make it five or eight years?
The CCA’s three-year proposal, it is being suggested, would see the 2020 target reduced to 33,000 GWh. An extension to, say, 2025 would see the decade-end level at pretty well what the “true 20 per cent” advocates have been proposing.
The other factor to be borne in mind is the prospect that emissions-intensive, trade-exposed industries (vilified through the years of the Rudd-Gillard-Rudd government as being among the “big polluters”) may now be given a full exemption from the RET (because they are big employers and their health is of national concern), a step estimated to cut the target by about 3,000 GWh.
Bearing in mind the ranting that has gone on for months from green ideologues, the Greens. merchant wind farmers and solar boosters to the effect that any RET reduction whatsoever would be a first order disaster, the silence on the CCA deferment proposal is rather loud.
The Clean Energy Council, for example, has put out a four-paragraph statement which harps on about the wickedness of the Abbott government wanting to “slash” the RET but never mentions the CCA proposal. It says only that the new review offers “further impetus” for “a more reasonable agreement on the future of the scheme.”
WWF, in a statement, notes the CCA proposal but chooses also not to comment on it, harping instead on the need to have a 50 per cent RET by 2030 (which would be three times the currently-legislated level or perhaps more).
In its reaction to the CCA review, the Energy Supply Association jibs at the authority’s perspective, as it interprets it, that investor confidence could be restored “simply by returning to bipartisan support for the policy.”
ESAA chief executive Matthew Warren says the problems are much more substantial, “with the entire generation sector left unbankable as a result of constant policy changes and distortions from interference by successive governments.”
“The RET,” Warren adds, “was developed to complement the introduction of a price on emissions. Removing the price and expecting supporting policy to work is like removing the foundations of a house an expecting the walls not to fall over.”
Banks, Warren says, are now “simply unwilling” to invest in any new generation projects of any type because chronic over-supply and weak wholesale prices means these developments will only lose money. He notes that the CCA spoke to financiers as part of its review but “is unable to report that banks believe the current loss of investor confidence will be resolved by tinkering with the RET.”
The critical, over-arching need, as ESAA sees it and numerous industry managers have said to me in recent months, requires a move to a credible, long-term energy strategy that reduces emissions and does not cruel the balance sheets of the businesses that have to implement the desired transition to a lower carbon economy.
Going in to the new year, an important issue is whether the Coalition and Labor can pick through the rubble of the two 2014 RET reviews (the Warburton panel and the CCA) and, perhaps more importantly, come to terms with what the key energy players have been saying in submissions to these inquiries and other over the past 12 months.
As ESAA says, tinkering with the RET is not a solution to what ails the market, but it could be the beginning of a solution.
Whether the political players have what it takes to pursue this initial step remains an open question as the festive season kicks in.
Wading through yet another round of submissions about the renewable energy target surely counts as a cruel and unusual punishment.
This time it is the input to the new Climate Change Authority review, an activity required by statute even though we have just had the inquiry by the panel chaired by Dick Warburton.
The CCA has to complete its task by 31 December. It seems to have received a relative few submissions but it says it is also drawing on those sent to the Warburton review and that panel’s report.
The CCA seems to be wearing its heart on its sleeve. True to its 2012 report, it argues in the announcement of its work that “in the absence of alternative policies to decarbonise electricity supply, severely curtailing the RET would risk stalling (abatement) progress (here).” It promises to make a “constructive contribution” to the ongoing debate which sees the Coalition government and Labor deadlocked on a way forward.
Origin Energy says in its submission that re-setting the target to a “true 20 per cent” remains the sustainable, balanced and cost-effective way to go.
Australia right now, it adds, has achieved about 16 per cent renewables and would need just 1,500 megawatts of wind generation and a further 3,000 MW of solar PV to reach 20 per cent.
(The Energy Supply Association estimates that leaving the RET as it is will deliver around 29 per cent renewable power at the decade’s end, contributing still more problems for the “unbalanced,” over-supplied wholesale electricity market on the east coast.)
The longer-term focus, Origin argues, should then be on retiring highly emissions-intensive coal-fired generation to make room for new low-emissions and renewable capacity.
The core issue here are the barriers to market exit of unwanted existing thermal plant — and there is no signal in sight that federal and state governments appreciate the urgency of addressing this problem or are willing to launch an adequate assessment of what needs to be done (and by whom) to rebalance the NEM.
One of the most fundamental issues requiring strategic attention is that 75 per cent of existing thermal power plants will be more than35 years old by 2025.
As Hydro Tasmania’s chief executive, Stephen Davy, says in a letter to the CCA, “there needs to be a clear and long-term policy framework that can guide investment in replacement generation.
To which a growing number of serious commentators will add that any such framework needs to be technology neutral, allowing for all forms of generation, including nuclear power.
How long it will take to nut out this approach is an obvious question — the problems of producing a fit for purpose strategy have been bedevilling both Labor and the Coalition since the middle of the past decade — but there are a number of remedial activities that need not wait.
One such relates to solar power.
In its CCA submission, Origin points out that the authority guessed in 2012 that small-scale solar systems would contribute about 11 terawatt hours of electricity by 2020 — and this contribution is already beyond 8 TWh now and heading towards 13 TWh in 2020.
It adds: “The average size of solar installations has increased significantly and is now about four kilowatts. The trend towards larger systems further mitigates the need for up-front subsidies as it shows that customers are looking for larger, longer-term systems as a potential hedge against (high) electricity prices. Origin’s view is that solar PV will continue to be popular with consumers even without generous subsidies.”
Origin also notes that the other factor to be weighed is how the commercial sector will take up solar power — “an area with significant growth prospects as new leasing models are rolled out.”
The second of the “big three” energy retailers, AGL Energy, argues in its submission that household solar PV just doesn’t need subsidising any more and it continues to recommend closure of the small-scale RET scheme.
This, of course, is not the large retailers “intensifying their attack on rooftop solar subsidies,” as one green commentator will have it, but reinforcement for the mainstream body politic, if it is prepared to listen, that the past seven years have seen it make an absolute botch of this area of energy policy at State and federal levels and that it is incumbent on both the Coalition and Labor to settle a strategy for rectifying the mess and providing a clear path for future development of a technology many Australians obviously like and have one of the world’s best physical opportunities to pursue.
This, naturally, should include resolving the network tariff issue that does not solely relate to PVs but certainly needs to be part of the overall strategy.
The SRES mess and the overall problems with the RET justify the Minerals Council of Australia’s condemnation it its submission of “poor design and a series of inchoate policy shifts.”
One can take two views of the CCA inquiry: one is that it is a nonsense to have three reviews in three years (which it is) and the other is that authority chairman Bernie Fraser and his depleted board — four members resigned earlier in 2014 and the Abbott government has yet to replace them — can help the Coalition and Labor resolve the current wholly unsatisfactory situation by producing a measured, balanced new approach that takes in to account the views of all key stakeholders rather than the piece of green cheer-leading they rolled out in 2012 for the Gillard government.
This really would be a “constructive contribution.”
In a cut to the chase moment at a breakfast in Sydney this week, Santos senior executive James Baulderstone, answering a question, said three key things about New South Wales forward gas supply.
First, that there is probably enough contracted supply available to prevent 2016 being the first year of winter gas shortfalls for the State.
Second, that the problem, without new supply, is likely to start manifesting itself in winter 2017.
Third, without new supplies, it will be a substantial issue in winter 2018.
In a nutshell, given the implications for the State’s manufacturers, who will bear the brunt of rationing and employ 300,000 people, this is a major challenge facing Mike Baird and his Coalition government going in to the March 2015 election.
It may seem that 2018 is still far away, but, in terms of the time needed to provide new supplies, it isn’t – and, for large consumers needing to address business plans for the rest of this decade, it is a here and now issue.
How many jobs are at risk because the government has failed to resolve this issue since coming to office under Barry O’Farrell in March 2011?
The point has added weight in the context of the CoAG Energy Council meeting held in Adelaide on Thursday.
In part, this is how the ministerial committee sums up the situation on the east coast:
“The Council recognizes that Australian gas markets are experiencing a rapid transition as conventional gas reserves decline, unconventional gas resources become increasingly important, gas pipeline and storage infrastructure improves, and the eastern Australian gas market develops a strong international linkage.
“The transformation occurring in Australian gas markets presents unheralded economic opportunities for the Australian economy and timely reforms will ensure these opportunities are maximized for the good of all Australians.
“However, the Council recognizes the need to improve the availability of factual information, informed by robust science, which will ensure communities are engaged and have a high level of confidence in regulatory approaches relating to gas exploration.
“The Council rejects the need for national interventions such as national gas reservation as solutions to pressures in the eastern gas market, and considers there are opportunities to improve the function of the gas market and remove impediments to supply.”
I can’t find any coverage of this commentary in today’s media.
It is true there is an awful lot going on news-wise at the moment, not least the wide-ranging impacts of much lower global oil prices, but the east coast gas issue is not small potatoes locally.
The Energy Council communiqué lists “accelerating gas market transformation” as one of the six “emerging challenges” discussed at its Adelaide meeting.
This is fair enough as far as it goes, but I think “driving higher east coast gas supply” should not be just a sub-text.
In the “action plan” ministers have embraced, one of the steps is “pursue co-operation on the development of a gas supply strategy which informs communities and facilitates the responsible development of resources” and another is “facilitate major gas supply and infrastructure projects.”
Inevitably, the ministers have come up with another review.
This time they have tasked the Australian Energy Market Commission to consider the design, function and roles of gas markets and transportation, requiring a report for their next meeting.
No doubt this is a worthwhile exercise but, as with the crocodile pursuing Captain Hook, it is the tick-tocking of the clock that is hard to ignore: how can a significant event (winter gas shortfalls in 2017 and 2018 – and how far beyond that? – in NSW) be warded off?
As was pointed out at the Santos breakfast (the first of a series of “insight” forums the company is planning to hold), discovered gas resources in NSW can supply the State’s needs for 20 years.
The alternatives range from wishful thinking to expensive and none deal with the 2017-18 problem.
Indeed, it is a fair question as to whether development of the State’s own resources can be achieved in time to ward off the foreshadowed disruption given how much time has been lost in addressing the issue effectively since 2011?
At the very least, I think, the Baird government owes its community a statement (from the top) of what the situation now is, what the implications are, what the genuine options are to remedy the problem and how, if the 2017-18 disruption is unavoidable, the Coalition (assuming its re-election, which I do) intends to manage the emergency (because that is what it will be).
It’s a statement that should be made available before the March State election.
So should the State energy strategy that we were promised would be an outcome from the NSW energy summit recommendations of September 2013 – 14 months ago.
Australia’s power distribution service businesses are maintaining the pressure on policymakers to get on with the job of pursuing network tariff reform.
The Energy Networks Association has now published a position paper on the issue, asserting that a change could deliver $250 a year in average savings to householders and strip out cross-subsidies of up to $650 a year.
The bill saving for small to medium businesses is reckoned as up to $1,400 a year, a selling point that needs more emphasis, I reckon.
A study by Energia Analysis for the association broadly supports the recent work by the Australian Energy Market Commission, which has canvassed how current tariffs don’t reflect network costs drivers.
ENA’s chief executive, John Bradley, says the consultants’ modelling throws up a “world of haves and have nots” by 2034 if the tariff structures are not reformed with householders who have taken up solar and other technologies paying about 40 per cent less than those who have not and about half this “discount” being cross-subsidies.
This assumes that about seven million residential customers will have taken up PVs by the mid-Thirties with rooftop capacity rising 1,000 per cent, reaching 35,000 megawatts in 2034.
ENA proposes a two-step reform: (1) remove regulatory restrictions preventing efficient network costs being charged to retailers (and on to customers) and (2) develop an industry standard for implementing reform.
It argues that existing arrangements are “outdated, inefficient and unfair” and getting more so.
A major change of metering technology is inherent in the ENA proposals. “At present,” it says, “approximately 70 per cent of small customers have simple accumulation meters measuring only total consumption since the last reading.”
Also inherent to its approach is the commitment that reform will be revenue neutral overall — ie distributors won’t get any more money under regulatory determinations — but, of course, the political devil is that change will create winners and losers among customers.
A big ticket item in all this is the impact change will have on network capital investment, which has been the engine room of the end-user price hikes that have angered consumers and scared politicians over the past three years in particular.
ENA points out that, while it is true growth in peak demand has slowed, and fallen in some cases, in recent times, it rose between 20 and 37 per cent from 2001 to 2012, dragging behind it $11 billion in network infrastructure outlays to meet consumption one per cent of the time.
The association cites data from South Australia’s SA Power Networks showing that its customers’ average use of electricity in older homes is 35 per cent of their peak demand while the average for newer housing estates is 21 per cent.
Signalling the cost of peak demand is top of the pops with suppliers and industry watchdogs alike but resolving the issue in an age of rampant political populism and of mindless headbutting between the mainstream parties is not going to be easy.
The argument is straightforward: there is evidence here and overseas that cost-reflective tariffs provide consumers with a real incentive to reduce network use during peak demand periods. Work done locally by CSIRO suggests that peak demand management can lop about eight per cent off user bills by 2020.
However, tucked away in work done by the AEMC is the nub of the political issue: up to 81 per cent of customers would get lower network charges in the medium term if tariff reform can be achieved — which means 19 per cent won’t and that’s a large whinge problem. The other side of this coin is that research also shows 80 per cent of low-income householders are paying more under present tariff arrangements than they would via a reformed system.
One of the challenges for the network businesses is to get policymakers to agree to deal with this issue nationally rather than piecemeal by each jurisdictions (the problems of achieving east coast retail price deregulation are a good example of why the state-by-state approach sucks).
This is no small job and every contribution to explaining why it needs to happen helps.
Communicating the need persuasively to both the body politics and the community remains an uphill task, however.
The continuing fear among the network businesses is that what can, and should, be achieved in three to five years may drag on for a decade.
A not-small problem with the public debate on energy is the way it constantly gets skewed because of ideologically-bent or vested-interest folk getting more attention than they deserve or the media hopping on bandwagons rather than actually delivering a community service through analysis and explanation of issues.
It is fair to say, I think, that, on the media front, there has been some improvement in the past 12 months, although this is patchy at best and tends to be poor where it matters in terms of helping the community at large to better understand things.
A case in point in the past week has been the publication by the Australian Bureau of Statistics of new data on energy use and conservation.
The bureau chose to kick off its media statement headlined “One in five households now use solar energy.”
True to form, the mass media picked up the statement and ran with it. Boosting solar is popular and illustrations for the story easily come by.
My problem with this is that the ABS research contains something really important which has just been glossed over, both by the bureau and by the cut-and-paste mob who masquerade as journalists.
The real story buried in the ABS material — and it is of significance in both the debate on the cost of energy energy for mass consumers and the issue of carbon abatement — is that there is an awful lot of ground still to be made up by Australians in energy efficiency.
As coverage of the ABS story symbolises, the mainstream media tend to find the energy efficiency issue boring — and yet, as the International Energy Agency, never tires of telling us, this is one of the most important areas of attacking carbon emissions as well as power bills.
It is also an area in which Australia is a laggard.
The secret of how the Germans cope with the huge imposition of renewable energy subsidies, giving them some of the world’s highest electricity tariffs, is that the country has long made energy efficiency a top priority.
German electricity tariffs are way higher than American ones, even those in California, but German household bills are way lower — that’s the energy efficiency factor. (The high tariffs are slowly killing German manufacturing where low US ones are attracting investment, but that’s another story.)
The 2014 scorecard produced by the American Council for an Energy-Efficient Economy has Germany number one in the world — and Australia number 10. The council uses a 100-point system to evaluate national levels of efficiency — Germany gets 65 points, Australia 49. The EU as a whole gets 63. China, interestingly, gets 61, Japan and the Brits each get 57 and the US 42. (America ranks 13th on this list while Canada, with 50, is one place above us on this ladder.)
Now energy efficiency is a huge and complex area — and Germany’s comprehensive strategy includes a tough building code, retrofit policies and tax credit and loan programs — but a significant aspect is the national mindset.
Which brings us back to what the ABS research portrays; it could serve as a wake-up call to Australians but neither the bureau nor the media see this as important.
The bureau tells us that barely half the community pays attention to the energy star rating of appliances when buying them — only 45 per cent for a fridge, one of the big power guzzlers in any home, 45 per cent for a washing machine and so on. (While my focus here is energy, it is worth noting that, in a country obsessed by the problems of drought, under 40 per cent of Australians consider water efficiency when buying washing machines and dishwashers, according to the ABS study.)
A critical factor in household energy efficiency is insulation: 68 per cent of our homes have some form of it, 14 per cent do not have any — and 18 per cent of the ABS respondents didn’t know whether or not their home had insulation! In Queensland, where electricity prices have been a white-hot political issue, 21 per cent of homes are not insulated.
There’s a lot more one can dig out of the ABS research — with respect to gas use on the east coast, for example, as we slide seemingly inexorably to a significant supply and price problem over the rest of this decade — but the point that bugs me about the bureau’s statement and the way it has been reported is that the use of solar power gets pop star treatment when it is still a trivial part of domestic supply even if you only take in to account household demand while an issue of national importance gets treated with ignore.
“Energy illiterate” is a term that gets bandied about a bit in supply circles, usually as a bitter response to public perceptions and media and political carrying-on about network “gold-plating” and so forth, but it seems to me to have particular force in the energy efficiency area and it is not a coincidence that the media by-and-large finds the issue of little interest.
In keeping with the Jim Hacker (“Yes Minister”) theory of politics — “I am the people’s leader, I must follow them” — our body politic has been almost entirely uninterested in running hard with the energy efficiency cause. There are programs in place to promote efficiency but they don’t get a tenth of the attention focused on renewable energy and they tend to be vulnerable to the financial toe-cutters at budget times.
In its energy white paper submission, the Energy Efficiency Council reminds the federal government that it’s focus on “the long-term interests of consumers” needs to enfold energy management not just prices.
In the case of the ABS report, this is a missed opportunity to kick-start a new discussion on how Australia is handling this issue. The bureau could and should have had the acumen to draw top-billing attention to what its research has thrown up. If it had, we might actually have got some media focus on the issue and this could have enabled a political discussion.
But, no, the agency found it easier to ride the shiny solar pony, helping once again to skew the energy debate.
By the way, just for the record, 86 per cent of Australian homes across the nation don’t have rooftop solar panels for electricity production. Virtually every house is connected to a power grid and two-thirds of those in capital cities are connected to gas mains. The one-in-five line the bureau ran with takes in solar hot water systems and here, as its report indicates, 56 per cent of houses use electricity and 38 per cent use gas.
It’s a toss-up whether green ideologues are more enamored of dissing fracking, carbon capture and storage or nuclear energy in the Australian context.
All, of course, are key prospects for national efforts to reduce greenhouse gas emissions beyond 2020 as well as being important in delivering a resilient energy supply system.
All are ritually bad-mouthed, not only in the streets and by “social media” but also in major media outlets such as the ABC and the Fairfax “compacts.”
Why this is a problem is well-illustrated by some of the key submissions to the federal government’s energy white paper task force.
If one had to pick a theme running through much of this input, it is that the green paper does not do nearly enough to promote innovation and investment in efficient technologies that are of low emissions intensity so that this country can replace the older, emissions-intensive fossil-fuelled power generation.
The general criticism is that the language of the green paper just isn’t strong enough and that its focus is insufficiently on the longer term.
I have already written here and elsewhere about the arguments being put forward for a shift towards nuclear power in Australia, a theme that has been kick-started politically by Foreign Minister Julie Bishop.
As it happens, CCS is not just a target for the aforementioned ideologues, boosters of nuclear energy are dismissive of its prospects, too.
I have been reading the white paper submission from engineering giant Alstom as part of my work in the past 10 days on December newsletters for both Coolibah and OnPower websites (both newsletters are now published).
Alstom has been in the front row of CCS technology development internationally and it notes that one of the lingering impacts of the tight funding approach that has followed the global financial crisis has been to reduce and delay R,D&D efforts in this area.
The starting point of its submission is that energy policy and greenhouse gas emissions must be addressed in a “coherent, whole of government fashion,” a statement of the obvious that is more often than not ignored in the febrile media debate.
However, having said it, Alstom promptly launches in to a piece of special pleading for the renewable energy target as it is and goes on to suggest that consideration should be given to an additional national version of the Labor Queensland government program to drive investment in gas-fired generation, drawing attention to the “perverse” NEM situation where owners of some of the newest, most efficient and lowest-emitting plants (combined cycle gas turbines) are reducing output, slashing maintenance and considering mothballing while some of the oldest, least efficient and highest emitting units are increasing production.
Alstom also calls for “serious attention” to be given to a complementary program similar to the RET to deliver upgrades to the existing coal-fired power fleet.
An alternative, it suggests, could be to introduce a scheme of efficiency standards and/or emissions intensity limits as generation operating licence conditions. The submission stresses the cost-effective nature of improving existing plant efficiency versus other options (such as solar power).
“Such programs,” it says, “usually require smaller capital investments and can yield results in a relatively short time frame.”
On CCS, Alstom notes that the Australian policy focus is to pursue identification of local storage prospects and to leave development of carbon capture technology to overseas industry and government.
“However,” it argues, “given that Australia’s national interest is as much about expanding, or at least maintaining, its seaborne export trade in coal, due consideration should be given to supporting full CCS demonstration plants here.”
It suggests that the “Direct Action” program can contribute to CCS development, that CCS projects could be eligible for ARENA funding and that the energy efficiency standards could encourage the technology.
Now I can imagine all sorts of people wanting to have a go at various aspects of the Alstom commentary from ideological corners as well as some (few?) hard-headed politicians demanding to know (a) how much government funding is involved and (b) what would all this do to end-user prices?
What the submission does do, I think, is underscore the degree of difficulty that lies behind the (correct) calls for a holistic approach to abatement and energy security.
It also highlights the issues raised by policymakers picking winners (European style) rather than laying a technologically-neutral ground and having the fortitude to tell voters that there is no low-cost way to pursue abatement so they will have to live with what investors develop on the basis that this will deliver the least expensive outcomes in a world of efficient regulation.
This is where support for market forces butts heads with the command-and-control attitude of the Greens and not a few on both sides of mainstream politics with vested interests running interference from all sides.
The situation isn’t helped by its federal (or should that be feral?) nature.
How long do you think it will take before the new Labor government in Victoria plunges in to the energy pool in pursuit of both trade union interests and those of the socialist left of politics?
The core issue is not just what a right-leaning Coalition government in Canberra wants to pursue but whether or not Australia can repair its fragmented energy policy landscape on a multi-jurisdictional, long-term and bipartisan basis?
The available vehicle for doing so is CoAG but its energy/climate change focus tends to be far too much on issues of the day and hosing down controversies – when ministers not issuing emollient statements in an approach that the Productivity Commission has labeled “tardy.”
While the recently-renamed Energy Council has carriage of the meat-and-potatoes stuff, it is the main body, chaired by the Prime Minister and peopled by State and Territory first ministers, that needs to do the heavy lifting on achieving the holistic approach for which Alstom and many others are pleading.
What grounds do we have for confidence that 2015 will see CoAG really come to grips with this issue, not least when we see Mark Latham in his latest “Australian Financial Review” op-ed today nailing mainstream policymakers for offering “marshmallow politics: small, soft offerings that a cynical electorate can digest”?
The intervention of Foreign Minister Julie Bishop in favor of a national debate on use of nuclear power will be music to the ears of a number of stakeholders and jarring for others, including trade unionists, who don’t want a bar of the idea.
The minister’s comments — she says it is an obvious conclusion that bringing down carbon emissions here requires embracing nuclear energy — are in contrast to those of her colleague, Industry Minister Ian Macfarlane, who said when he released the energy green paper at the end of September that the government doesn’t want to initiate a national debate on nukes even while it talks about a technologically-neutral perspective on future power generation options.
There’s a fair bit of response on the nuclear issue in the latest round of submissions, which the government’s white paper task force is now scrutinizing, suggesting that it’s time for another serious discussion.
The last one was initiated by John Howard towards the end of his long stint as prime minister and took the form of a report from a task force chaired by Ziggy Switkowski – but the defeat of the Howard government in 2007 saw the debate kicked to the sidelines by Labor led by Kevin Rudd and Julia Gillard notwithstanding a positive personal attitude on the issue by Martin Ferguson.
Bishop has Abbott government portfolio responsibility for climate change negotiations and will lead the Australian participation in the UN talks starting in Lima, Peru, today and running for the next 12 days.
She and her department will be well aware that recourse to nuclear energy has a role in the poses Barack Obama and Xi Jinping are adopting on carbon abatement.
China is quite open about its intention to sharply increase nuclear power in its power supply mix between now and 2030. It has 26 reactors under construction and aims to have 150,000 gigawatts of nuclear capacity by 2030
Obama, as is the case so often, wants a bob each way, adopting his public stance on US abatement policies in the knowledge that nuclear energy will need to play a part – there are five reactors under construction in Georgia, South Carolina and Tennessee today and 19 per cent of current American power production is nuclear – but well aware that his constituency has a continuing, excessive fear of even low-level radiation.
Community consultation here in Australia is obviously a critical element in a shift towards allowing the use of nuclear power.
This would need to be done over a couple of years and the mainstream parties are leery of the scaremongering that will be resurrected when (if) it happens.
With three-year federal parliamentary terms and lots of marginal seats, the landscape is not exactly enticing for political courage in this area – and the prospect of bipartisan support, which Environment Minister Greg Hunt says is essential if his government is to make any nuclear move, is not high given the trade union attitude.
The Electrical Trades Union submission to the white paper task force is a mostly dispiriting read for anyone looking for a strong power sector reform agenda – and it includes a three-page rant against nuclear power, summed up as “It is simply not necessary to go down this path (when) we have an embarrassment of riches in safe alternatives, be they renewable or traditional fuels.”
By contrast The Warren Centre (the industry-linked engineering institute that operates from the University of Sydney) has put in a measured submission, one of several in similar vein, arguing for some serious thought about small modular reactors.
The centre wants the federal government as a first step to co-fund a study with industry to evaluate the prospects for SMRs in Australia.
The nuclear prospect is also being pushed by the Chamber of Minerals & Energy from Bishop’s home State of Western Australia. CME wants the federal government to task the Productivity Commission with an inquiry in to the economics and potential application of SMRs.
Adelaide-based Business SA, in a State with almost a quarter of the world’s uranium resources, is not surprisingly encouraged by the somewhat vague noises in the energy green paper about nuclear power but wants the Abbott government to be more specific about what it believes could be pursued.
This country, the lobby group says, is surely now mature enough to have an informed public debate about the broad issue of a nuclear industry.
One of the most interesting submissions to the white paper task force is a personal commentary provided by Barry Murphy, a veteran Australian business leader and former head of Caltex Australia.
Murphy is one of the most experienced and intelligent Australians on the energy scene and I recommend his contribution to readers for its overall perspective.
On nuclear power, he observes governments here may have real grounds for fearing an ignorant, ill-informed backlash to moving in this area “but there is no gainsaying that the issue must be tackled.”
He adds: “Not to put to fine a point on it, the current state of play with energy options (here) is confused.”
Paying lip service to nuclear prospects (which is what the green paper does) contributes nothing to prepare Australians for the possibility that it may have to be introduced if the world turns decisively against the unrestrained use of fossil fuels, he says.
Murphy is of the view that the unfolding story of SMR development in China, India, Russia and America holds promise for the technology’s use in Australia.
It is time, he says, to think outside the square here.
The Australian Nuclear Association, in its submission, proposes that the government uses the Australian Energy Market Operator to get a good handle on the NEM’s generation investment needs in 2023-24. It would like to see aged coal-burning power stations in the Latrobe and Hunter valleys giving way to 1,000 megawatt light water reactors with SMRs of between 100 and 300 MW also being progressively introduced.
Julie Bishop’s call for a “sensible debate” on the issue will no doubt get attacked by the usual suspects but some initial reaction has been positive about the idea.
It’s hard to believe that she will return from Lima without her perspective being reinforced.
The next question is whether the Prime Minister and federal cabinet have what it takes to pursue her proposal?
And even more so, can Bill Shorten find it in him to support a rational review despite the chatter from the inner-urban Left and the trade union movement?