Issue 50, April 2009
One substantial city centre power blackout is a misfortune. Two in the space of a week, the critics have been shouting furiously in Sydney, smacks of something else.
The March 30 failure of EnergyAustralia’s supply came in a Monday afternoon rush hour and blacked out 70,000 homes and businesses in the Sydney CBD and suburbs as far away as Coogee on the coast. The blackout lasted two hours. It was followed on Saturday April 4 with another mid-morning, cutting power to 50,000 customers and causing the Harbor Tunnel to be closed.
Deemed “unacceptable” by Energy Minister Ian Macdonald and Premier Nathan Rees, the failures sparked a high-level meeting between the State government and the government-owned network service provider. “I was told the first time that the chances of this happening were one in a million,” snarled Rees, whose government stumbles from one PR disaster to another. “I am seriously unhappy.”
Macdonald has signalled that he wants to be briefed about the age of the system where the failures have occurred. He told ABC Radio he understood that the main supply cables to the Sydney CBD are 40 years old and not due for replacement for another five to 10 years.
The second blackout occurred while fire protection work was being carried out on a substation in the CBD. EnergyAustralia said a fault occurred on a transformer. It was automatically shut down – and then three of the four cables supplying the CBD also shut down. The fourth was out of action, having been the source of the earlier blackout. the network.
In a statement, EnergyAustralia attributed the first problem to weakening of insulation on a high voltage cable as a result of soil settlement compression. The land around the failure area, it says, has been redeveloped.
The distributor added that it was continuing to investigate why one cable failure led to the automatic shutdown of three others.
EnergyAustralia is currently completing a $3 billion, five-year capital outlay on refurbishing and expanding its network and is awaiting a final decision by the Australian Energy Regulator on a program to spend $8.6 billion in today’s dollar values – estimated by the organisation to probably be worth $10 billion in projected 2014 money values. It spent $1.3 billion last financial year on capital works and $951 million the previous year as part of its efforts to cope with an average 3.7 percent annual increase in demand for power.
EnergyAustralia says that between 2008 and 2020 it will need to invest $16 billion to meet power demand and to enhance reliable supply.
Environmental activists got an unwanted Easter present from “We, the leaders of the Group of Twenty,” as the presidents and prime ministers, including Barack Obama and Kevin Rudd, styled themselves in the communique from the London talks on global recovery and reform.
The 29-segment communique got round to global warming policy – but only right at the end – and, to quote the chagrined Greenpeace executive director John Sauven, provided “no money, just vague aspirations.”
In a $US1 trillion economic rescue package the 20 leaders avoided assigning environmental targets, although analysts estimate that that international recovery plans could see about 15 percent of the total spent on green initiatives. China, the US, South Korea and the EU have already committed to using part of the recovery funds on projects intended to assist decarbonisation.
The summit “reaffirmed the commitment” of the 20 governments to reach agreement on a new global warming treaty at Copenhagen in December.
Australian debaters of global warming policy would do well to read some Stern comments.
No, not the peripatetic Lord (Nicholas) Stern – the Ross Garnaut of Europe – but Todd Stern, Barack Obama’s special envoy for climate change.
The US State Department has now placed on its website (www.state.gov) the transcript of his media briefing as he arrived in Bonn for the latest United Nations talkfest on the road to Copenhagen in December.
This Stern minced no words. Expectations of what the Obama administration could achieve are unrealistic, he said. No-one should believe Obama could “ride in on a white horse and make it work” because he can’t. “We don’t have a magic wand.”
Leaving aside the mixed metaphors, Todd Stern was keen to do two things: one was to say all the right stuff about the new Washington’s regime good intentions and the other was to bury false impressions of what Obama is setting out to do.
The administration, he emphasized, will be guided by “science and pragmatism.”
The president’s proposals, said Stern, were aimed at a 2020 level of US emissions that “are a 16 to 17 percent reduction from where we are right now.”
Hello? So Obama’s friend Kevin Rudd’s “soft” policy – so derided here by the activists – is in line with new US plans, then?
Todd Stern was also intent on calling for realism about 2020. “We really do not think, and we don’t think the science thinks,” he said, “that the best way to look at this is simply by focusing on 2020. What (Obama) is talking about is a pathway to 2050.”
He also was not going to predict what the US Congress might do when presented with Obama’s emissions trading legislation. It is “extremely far-reaching and ambitious,” he said. “I am hopeful the legislation can get done this year before Copenhagen, but I have no idea whether it will. It is going to be a very challenging, very difficult exercise. There is going to be a lot of negotiation. This is not just partisan. It’s regional.”
What’s more, he pointed out, it was not realistic to think that, post-Copenhagen, if a higher emissions target was negotiated there, Obama could return to the Congress and get the legislative agreement changed.
Stern, a Washington DC lawyer who was the chief negotiator for the US at the 1997 Kyoto talks, was equally blunt about that treaty. “We do not want a repeat of the Kyoto experience, where we signed an agreement that was dead on arrival when we brought it back home.”
Stern seems in his comments to have set out five central principles of the Obama approach to climate policy:
In a statement that should be heard here by a large number of participants in the debate, Stern pointed out “We will get much further if we do not cling to arbitrary numbers or inflexible dogma.”
One challenge for the Rudd government that emerges from Todd Stern’s comments is the American level of support for innovation. Even allowing for the different size of the economies, what Obama is proposing for the US is streets ahead of what is under way in Australia.
Stern pointed out that the massive presidential economic stimulus package being put forward includes some $US80 billion in funding and loans for clean energy development and an R&D component of $US15 billion annually for 10 years, triple the Bush regime support.
The Academy of Technological Science & Engineering in this country in its review of energy issues in a decarbonising environment, published earlier this year, pushed for Australian government R&D support to be lifted to $6 billion between now and 2020.
Energy Minister Martin Ferguson has released three papers to fuel debate on development of Australia’s long-term energy needs.
The project is the third attempted nationally in 20 years, starting with the “Energy 2000” review held by Gareth Evans in the 1980s and followed by the “Securing Australia’s future energy security” exercise pursued by the Howard government earlier this decade.
Ferguson is looking for responses to to the trio of papers – a national energy security assessment, a liquid fuels vulnerability assessment and an energy white paper strategic directions commentary – by the end of May.
There are five key influences on the future of gas supplies for Australia, the Resources & Energy Department assessment asserts – general market conditions, carbon pricing, international LNG demand, infrastructure resilience and energy market reforms.
Domestic gas supply has been tightening in Western Australia and on the eastern seaboard, says DRET. The dominant factor has been the struggle to expand the gas supply chain to keep pace with demand growth. Supply adequacy in WA is now assessed as “low” and the eastern seaboard adequacy is “moderate.” Any substantial increase in eastern Australian demand – which could result from the impact of carbon charges on coal-fired power supply – would shift the rating to “low.”
The department argues that gas prices will remain competitive in the next five years, but affordability is predicted to change post-2013 under increased pressure of competition between domestic and export LNG markets.
The Resources & Energy Department sees six influences on the security of electricity supplies over the next 15 years – carbon pricing, the renewable energy target, the market reform process, gas supply availability, the pace of infrastructure development and reduced water availability.
The impact of emissions trading will be felt in wholesale power prices, the despatch merit order of differently-fuelled generators and on the technology mix of generation investment. DRET does not expect adoption of carbon capture and storage by fossil-fuelled plant until “at least 2020.”
The department argues that electricity demand will fall initially with the introduction of emissions trading.
Under the enlarged RET, it expects wind power to be a large initial contributor and predicts that geothermal generation will begin making a contribution from 2015.
It also does not expect water storage to return to normal levels until 2018, a potentially important issue for large, coal-fired power plant already stressed by the impacts of emissions trading.
Looking at gas supply issues for generators, DRET observes that the greater uptake of gas-fired generation “could result in increased vulnerability in electricity supply due to limited production and transmission infrastructure – which means a significant share of supply could be interrupted in the event of fire, explosions or other incidents.” It notes that higher gas prices could also affect power affordability.
While acknowledging market management concerns that power supply in Victoria and South Australia could be “uncomfortably tight” in 2009-10, the department believes that the economic downturn will decrease the prospect that another surge in peak demand on the southern seaboard could cause problems.
It warns, however, that adequacy of power supply in 2013 could be in question if economic recovery tightens market conditions and recent uncertainty over carbon policy directions hampers timely generation investment.
The reactions of supporters of the more radical approach to carbon policy for Australia bring to mind a quatrain from Rudyard Kipling: “The toad beneath the harrow knows/Exactly where each tooth-point goes./The butterfly upon the road/Preaches contentment to that toad.”
The advocates of a strong emissions trading regime, it seems, both want to achieve a radical reduction in greenhouse gases and to shy away continuously from the real consequences of that approach.
It is the intended aim of the Greens, the environmental movement and Climate Change Minister Wong that at least 250 million tonnes of greenhouse gases must be cut from Australian emissions in 10 years – only the more conservative members of federal cabinet have stood between them and a much higher target. This will require some coal-fired power to be shut down – and its closure has consequences for the price of electricity, possibly the price of natural gas and probably thousands of jobs in energy-intensive, trade-exposed industries.
To quote a wholly independent perspective – that of Jon Stanford, a former senior federal government public servant and now a partner in Deloitte Economics: “The Rudd government’s response to climate change will bring about a revolution in how we generate electricity. The difficulties of achieving a reduction of the magnitude proposed are predominantly concerned with the availability and cost of alternative low emissions technologies, together with the fact that some existing assets will need to be scrapped well before the end of their economic lives.
“Natural gas is widely regarded as being well-placed to provide the fuel for lower emission baseload generation. A number of questions have to be asked, however, regarding its future costs, emissions and availability.”
When Richard McIndoe, the TRUenergy CEO, and Tony Concannon, the International Power Australia CEO, warn that the government’s plans will involve a substantial closure of coal-fired power stations and McIndoe goes on to warn that the policy will also impact on consideration of the next stage of the Tallawarra gas-fired power station project in New South Wales, the reaction from the radical quarter is to immediately claim that they are crying wolf.
Another example of confirmation of the burden being proposed can be found in the comments of Kelvin Thomson, ALP chair of the joint parliamentary committee on treaties, which last month published a report on Australia’s commitment to the Kyoto agreement. The Rudd government’s goal of cutting emissions in 2050 to 60 percent of 1990 levels is, he says, “rather onerous.” The majority ALP membership of the committee believes that, instead, the goal should be a two percent reduction each year from 2010 to 2050.
(Interestingly, Wong reacted by stating that the government would seek an explicit mandate for a 2050 target at the next federal election – apparently she does not believe that the 2007 poll provided such a mandate.)
The bottom line here could not be more simple, no matter how much some don’t want to look at it. Even the “soft” emissions trading plan of the Rudd government will impact heavily on coal-fired generation and, down the supply chain, on manufacturing in particular. Because of the emissions levels of brown coal generation, and the age of several Latrobe Valley plants, Victoria is ground zero in Australia for the Rudd/Wong policy.
What McIndoe did in interviews last month is to identify more clearly how that impact will be felt. If he is right, then there are cost implications for southern NEM wholesale power prices and consequently Victorian manufacturing, which has 350,000 people employed in EITE factories.
Having helped to drive the government up to the “cliff’s edge,” why do some commentators now wish to avert their gaze from what is to follow?
Speaking at a NSW Minerals Council forum on carbon policy this month, Australian Workers’ Union national secretary Paul Howes said the AWU monthly bank statement informed him of the local impact of the global financial crisis on employment.
“The drop in member subscriptions tells me that there has been a job loss of about 15 percent in our membership the past few months,” says Howes. A lot of it, he adds, is in regional Australia, out of sight of the bulk of the population living in the capital cities.
The AWU has 135,000 members and Howes has been engaged for more than a year in arguing for recognition of their needs – and those of their families – in regional Australia as a decarbonisation policy is legislated.
“As a union with most of its members living and working in the energy and resource-rich regions of Australia, we consider that our members are on the front line of this debate,” he says.
Howes is eager for stakeholders in the carbon debate to better understand what green jobs are. “Policymakers are yet to define what constitutes a green job,” he argues. “Is it a maintenance engineer who repairs and services a wind turbine? Or is it a maintenance engineer working in a steel plant, making a product that plays an important role in renewable energy technologies?”
Howes points out that wind farms have many steel components – in the turbine tower, gears and casings – and steel is also a vital component in wave, tidal and solar power generation sources. Steel, he adds, is also 100 percent recycable. “Steel made a century ago can be used in new products today.”
The problem confronting policymakers, he says, is not just the potentially damaging impact of emissions trading and other measures on existing energy-intensive, trade-exposed plants, but also the threat to new plants and expansion and upgrading of current operations.
Howes says the AWU accepts the need to “prod” major employers of its members to find low-carbon solutions. “But we also know that, if they are forced offshore, they will too easily find homes in countries that, unlike Australia, are not committed to improving emissions standards. The risk of carbon leakage is real.”
Australian steel plants, for example, he adds, must be given the confidence to invest in future technologies to help tackle the climate change issue.
“The way forward is to encourage research to develop breakthrough technologies that will make a difference to the environment. Using advanced steel, we can build stronger, lighter, safer structures that offset the carbon footprint of its production.”
The AWU is campaigning for companies and industries that can demonstrate the capacity to reduce greenhouse gas emissions through energy efficiency improvements to be supported, not disadvantaged in favour of their rivals in countries where carbon costs are not being imposed.
The AWU uses research done for it by Per Capita consultants to point to the aluminium sector – a key part of Gladstone’s industrial development – to illustrate potential policy impacts. Per Capita analysis shows that an aluminium job generates a total community value of more than $89,000 a year – about $25,000 of which is in what the consultants call “social value,” such as reduced expenditure on health, welfare and justice services.
With 12,000 workers in the Australian upstream aluminium sector – refining and smelting – the total national value of these jobs is put at $1.2 billion a year.
Canberra power consumers have been warned that they face substantial prices increases because of the Rudd government’s emissions trading scheme and the ACT government’s solar feed-in tariff plan as well as higher network service charges.
The territory’s utilities regulator has passed on a lower price rise for 2009 than in 2007 or 2008, approving a 3.8 percent increase that will add about $50 to the annual residential bill.
The ACT price rise is way below those in Queensland and NSW for 2009-10 – the former 13.6 percent and NSW 18.9 percent for Integral Energy customers. (The EnergyAustralia increase will be 21.5 percent and Country Energy’s 18.5 percent.)
The Independent Competition& Regulatory Commission says the modest increase for the ACT follows the substantial rise in the previous two years necessitated by impact on input costs in 2007 of the drought and constrained supply arrangements, forcing retailers to pay prices up to three times higher than their previous costs.
The new conservative New Zealand government has announced a major review of the electricity sector because it is concerned about price rises. Tariffs have risen 72 percent over 10 years and went up seven percent last year. The review, to be chaired by Brent Layton, a senior fellow at the NZ Institute of Economic Research, will report in September.
The panel is required to scrutinise the operations of the Electricity Commission.
It is not asked to consider the ownership of the state-controlled power companies who dominate the NZ industry.
Following up on last issue’s comments, Australian green activists keen to promote Denmark as a great example for the Rudd government to follow should read the Copenhagen Post.
The paper reports that Denmark’s claimed cut in greenhouse gas emissions is made up of less than a quarter in abatement within its own borders. Most of the rest comes from climate projects in which Danish organisations participate overseas and from participation in the EU emissions trading market.
WWF, calling the domestic effort “pretty pathetic,” says Denmark needs to reduce its annual emissions to 54.8 million tonnes by 2012. The 2008 total was 66 million tonnes, down from 71 Mt in 2007.
Meanwhile the Danish trade union movement is telling the Copenhagen government that its new global warming package, which proposes a 15 percent increase in gas, oil and electricity charges, will cost up to 30,000 jobs. Iron works and chemicals production will be especially hurt, the unions complain. Cement, steel and paper production is also in the carbon firing line.
The unions say that the new plan will create significant difficulties for companies trying to compete in international markets. “Many companies will just move their production abroad,” says union leader Erik Skov Christensen.
For the past decade the world has been awash with new ideas to put the obvious power of marine energy to commercial use, but a breakthrough in technology development seems to remain frustratingly out of reach.
Now millions of dollars being spent on innovation projects as far apart as Britain, Ireland, Germany, the west coast of the United States and Australia offer hope that the next decade finally may turn out to be the one in which this zero-emission concept catches its wave.
It is estimated that about $US500 million has been outlayed around the world on various marine energy R,D&D projects since 2001. Analysts believe another $2 billion may be spent on research and development by 2015 and some claim that the next six years could also see another $2 billion invested in building commercial wave farms.
A new ocean energy report released in the US by Greentech Media once again argues that wave and tidal power has a great future.
One of the authors, Travid Bedford, President of the Prometheus Institute for Sustainable Development in Cambridge, Massachusetts, claims that electricity generation from marine resources could rise from today’s tiny operations by to 1,000 MW being installed each year from 2015. Achieving a market this size would deliver the fledgling industry an annual income of about $US500 million.
Chile is seen in the marine power industry as being particularly attractive because of its oceanography. Research in to the South American country’s resources and requirements have suggested that a quarter of its power needs could be met from the sea – and the Chilean government has legislated to require five percent of power consumption to be sourced from renewable energy by next year and 10 percent by 2024.
In the shorter term, one of the attention-attracting projects could be a scheme to install 300 turbines in the tidal channel of New York City’s East River, starting with 30 in place next year. These will not be large installations – the first 30 will have a combined one megawatt capacity, enough to provide power to 800 houses. The company pursuing the idea, Verdant Power, reckons that the river system could eventually be home to as much as 1,000 MW.
Verdant is also interested in pursuing its idea in China and India as well as Canada’s St Lawrence River.
In South Korea, a British firm, Lunar Energy, is working with Korea Midland Power Company to establish 300 one megawatt turbines in the Wandon Hoengnan water way.
Despite all this, sceptics, including observers of the power industry and engineers, bored with decades of the technology’s inability to become commercially acceptable, point to continuing problems with too many turbine designs, major environmental approval problems in many developed countries, high construction costs and a harsh environment as reasons why the marine sector will still be full of promise, but essentially powerless, in 2020.
They just roll their eyes when academic boosters of the potential of renewable energy compare the state of marine energy development to that of aeronautics at the start of the last century – “when it took a long time to evolve from biplanes and triplanes,” says one professor.
The highly-regarded Electric Power Research Institute in Palo Alto, California, heavily funded by US investor-owned utilities, says through its ocean energy expert, Roger Bedard, that it may take until 2015 for large-scale deployment of marine power in European waters and as late as 2025 in America.
Not everyone is so conservative. The Triodos Bank of the Netherlands, a specialist investor in ethical banking, considers that the gap between wind and wave power is not as big as it seems. Matthew Clayton, Operations Director of Triodos Renewables, says it may only be a gap of five years.
One company that strongly believes marine energy is about to take off is the Perth-based Carnegie Corporation of Western Australia, which has just inked an agreement with the government of South Australia, a notable supporter of renewable energy, to investigate a suitable site for construction of a wave power project able to be connected to the country’s eastern seaboard electricity market – home to 85 percent of Australian electricity demand and required under federal legislation about to be introduced to have 20 percent of consumption coming from renewable energy by 2020.
This mandate will require the development of 35,000 gigawatt hours a year over the next decade, involving as much as $30 billion in capital outlays and providing, in its 10year phase-in period, access to at least $11 billion in subsidies. While wind farms are expected to capture a large part of the new market, proponents of hot rock geothermal energy and solar thermal power are also very hopeful of winning a share.
Carnegie Corporation Managing Director, Michael Ottaviano, says the licence to explore 17,000 hectares close to shore near the South Australian border with Victoria provides access to a world class resource.
Another company that has at least one eye on the small generation market is the Australian-conceived, but now Singapore-based Atlantis Resources Corporation, which is starting to move in to commercialisation mode after 10 years spent developing marine power resources large and small.
ARC Chief Executive Timonthy Cornelius points out that it already has a 150 kilowatt unit, soon to be upgraded to 400 kW and subsequently to 500 kW, linked to the electricity grid in Melbourne’s Westernport Bay.
Backed by global investment bank Morgan Stanley, Cornelius’s biggest ambition is to develop a $US600 million tidal installation of 150 MW in Scotland’s Pentland Firth, targetting its commissioning in 2011, but he is interested in smaller projects and is working on a 2MW turbine installation in King Sound in regional Western Australia.
Ultimately, ARC aims to be a builder of 100 MW projects around the world, but it is also happy to pursue smaller projects as part of its ambition to be a leader in what Cornelius describes as “an incredible growth sector.”
Climate Change Minister Penny Wong has said in a speech in America that, without recourse to emissions trading, the Rudd government’s renewable energy target and other complementary carbon measures would not be able to hold increases in Australian greenhouse gases to below 20 percent by 2020. The government has committed to reducing emissions to at least five percent below 2000 levels by 2020, using the emissions trading scheme plus other measures.
Speaking to journalists, Wong added that the government saw the transformation of the Australian energy sector as a key policy priority.
She acknowledged that this is a “challenging task,” with Australia facing rapid population growth, having a relatively large number of energy-intensive industries and a heavy reliance on fossil fuels.
Meanwhile consultant Ross Garnaut says the government should consider imposing a fixed carbon price for the first two years of the emission trading scheme rather than a floating value.
Coolibah’s Keith Orchison now has a blog, entitled PowerLine, on the Business Spectator website at www.businessspectator.com.au.
What a naughty lot, we are.
The media have been pointing this out to us in the past month through coverage of the Australian Bureau of Statistics report on household energy use.
We are consuming 50 percent more energy at home than we did 20 years ago.
This was excellent propaganda fodder for the environmental movement as it and some media groups sought to sell Australians merits of Earth Hour at the end of March.
Unfortunately, most Australians – the ones who actually read and listen to news – will not be provided with sufficient context to actually inform themselves about the issue at a time when their national government is seeking to foist on them a very large increase in energy costs.
The rise in residential use of electricity between 1988 and 2008 was the equivalent of adding two Tasmanias to the power grid. However, the increase in business demand for electricity in the same period was the equivalent of adding Queensland or Victoria plus Tasmania to the grid.
The rise in annual demand was 19,000 gigawatt hours for households and 54,000 GWh for industry and commerce. (It is an increase that has been met, by the way, through burning 20 million tonnes more of black coal and 18 million tonnes more brown coal plus a large increase in the use of natural gas to make electricity.)
The core point is that a 20-year improvement in the economy, even punctuated by downturns, has enabled Australians to buy more houses and other forms of accommodation and to fill them with the comforts of home earned through their contributions to overall national wealth.
Nor, in their hedonistic pursuits, have Australians ignored the environment.
The ABS has found that 59 percent of homes now have energy saving lighting and that energy star ratings are the main household consideration when buying or replacing fridges, freezes and clothes dryers.
There are just a lot more doing this. The number of Australian households connected to the power grid has risen by more than two million in 20 years – from 6.3 million to 8.4 million.
This is the equivalent of adding another New South Wales to the electricity supply system – and we are going to do it again in the next 20 years on current predictions.
Throw in now the wrenching transition of the energy economy proposed by the Rudd government – which its Green opponents insist is too “soft” – and a big political question arises about voter reaction.
The Rudd revolution will drive higher costs for petrol, power and gas. It will, if it works, drive electricity supply away from the low-cost coal-burning power stations to substantially higher-cost plants.em>
If it causes a substantial increase in the use of gas to make electricity, combined with the the emergence of an eastern seaboard LNG export industry, it will drive up wholesale gas prices towards the levels already seen in Western Australian (where it is a very sore point).
Apart from the controversial aspects of the impact of the Rudd revolution on business and on jobs, its substantial addition to Australian household costs is hardly likely to go unnoticed – and the compensation for the effects of emissions trading on offer are relatively limited.
Australian voter attitudes to higher energy costs are also thrown up in the new ABS study.
The agency reports that 817,000 households are now part of a “GreenPower” scheme – where they pay more to have renewable electricity added somewhere in the supply chain. An admirable number it might be thought -–until you contemplate the context.
At June last year, there were more than 10 times as many homes connected to the grid as took up “GreenPower” – and this despite a decade-long drumfire of publicity and advocacy about global warming. And despite more than 80 percent of Australians telling pollsters they are concerned or strongly concerned about global warming. And despite 52 percent of them telling the ABS that they knew about “GreenPower.”
Well, if they jib at paying a relatively tiny amount voluntarily for “GreenPower,” it is surely a legitimate political question to ask how they will react to discovering they are being forced to pay considerably more for all their energy requirements in the post-Great Financial Crisis world?
Some politicians perhaps should have been thinking about this during the recent Earth Hour.
5 April 2009
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