Issue 36 January 2008

Good year

Coolibah wishes Commentary readers a safe, healthy and successful 2008.

NEM surge forecast

The new Australian Bureau of Agricultural & Resource Economics energy review shows that generation to meet demand in the eastern seaboard’s national electricity market will have to rise by a third between now and 2020.

ABARE’s projections do not factor in the introduction of emissions trading nor the expansion of the mandatory renewable energy target following the November federal election, so its forecast of fuel sources to be used to meet this level of consumption, especially between 2015 and 2030, are open to discussion, but the new data underlines the challenge faced by the Rudd and State governments in meeting greenhouse gas emission targets.

The new scenario points to the rise of Queensland as a supply/demand force in the NEM -- shifting from third place behind New South Wales (including the ACT) and Victoria at this the start of this decade to a forecast first place by 2012. ABARE projects Queensland generation will rise from 70,500 gigawatt hours a year in 2005 to 87,600 GWh in 2012, to 104,400 GWh in 2020 and to124,300 GWh in 2030.

Under the ABARE scenario the resources boom in Western Australia will only slightly dent the dominance of Queensland, NSW and Victoria in national electricity consumption. The forecast sees total generation output to meet demand in the three States reaching 265,000 GWh by 2020 -- out of total Australian supply of 350,000 GWh. If this is achieved, the trio will account for 76 percent of total supply in 2020 compared with 80 percent today.

Coal contribution

The new ABARE energy projections highlight the challenge the Rudd Government faces in devising an emission trading scheme that will enable it to make inroads in to greenhouse gas emissions from stationary energy.

The agency makes it clear that it has not factored in new policies proposed by the incoming government, but the data it provides, based on existing trends and policies, shows that the contribution of black coal to power generation will rise to 205,500 GWh in 2030 from almost 140,000 GWh at present -- with brown coal-fuelled plants contributing 72,200 GWh compared with 54,100 GWh at present.

The contribution of natural gas, including coal seam gas, is forecast, under existing policies, to rise from 38,500 GWh at present to 98,600 GWh in 2030.

While both a large carbon charge and a much higher MRET can be expected to make sharp inroads in to the contributions of black and brown coal -- and perhaps cause a reduction in the growth of gas-fired supply -- the ABARE data show that just keeping emissions from these plants to their present levels, let alone cutting them back, will require measures that encourage extra renewable supply of more than 83,000 GWh annually by 2030.

An illustration of the challenge is that ABARE estimates that existing measures would encourage an increased annual renewable energy contribution of barely 23,000 GWh between 2005 and 2030. The current contribution of all renewable power is less than 20,000 GWh a year.

In the gun

“A substantial increase in the cost of electricity could gut the economy,” observed the Australian Financial Review in an editorial on carbon trading on 2 January. It is a potential threat that is underlined by projections from ABARE in its new energy review.

ABARE predicts that primary energy consumption by the mining industry will more than double between 2005 and 2020 and almost treble by 2030 under current policies. The agency forecasts that manufacturing and construction energy consumption will rise by 23 percent by 2020 and by a third by 2030.

It sees transport energy demand rising by 21 percent to 2020 and by more than 39 percent to 2030. Residential and commercial consumption together will grow by 22 percent by 2020 and 39 percent by 2030.

Today fossil fuels meet 95 percent of total energy consumption and, under existing policies, would contribute about the same over the next two decades, but as a share of substantially higher usage, according to the agency. “This,” observes the Financial Review in its editorial, “collides head-on with plans emerging from Bali for a sharp reduction in emissions by 2020.”

Wish list

The International Energy Agency used the Bali climate change summit last month to set out what was needed to deliver global electricity needs while meeting greenhouse gas emission abatement goals -- and it is a massive wish list.

Against the background that world electricity demand is projected to almost double between 2005 and 2030, Nobuo Tanaka, IEA executive director, said power infrastructure needs foreshadowed for the period 2013 to 2030, if they were not to add to greenhouse gas emissions, would require annual development of:

Meanwhile the Indian government has announced that it added 6,645 MW of coal-fired generation capacity in 2007, building its thermal electricity plant to almost 90,000 MW out of a total capacity of 138,000 MW. The government noted that the country needs to add a further 73,000 MW of generation capacity by 2012 to meet growing demand.

Can’t afford it

New South Wales Treasurer Michael Costa, writing in the Sydney Morning Herald in response to trenchant union criticism of the State power privatisation plans, says the government “is not in a position” to spend $2-3 billion needed for technology to enable its trio of retail businesses to be competitive in the market. Using public funds to meet the $15 billion outlay estimated by the Owen Report for retail technology, building new baseload generators and retrofitting existing coal plants to capture carbon emissions, adds Costa, would require the government to cut spending in other essential services.

Big spend
Annual investment in electricity networks is running at $3.7 billion, according to the ACCC -- while expansion of the gas transmission pipelines since 2000 has seen another $2.5 billion outlayed.

In a presentation to the E21C conference, the commission attributes the high levels of power network expenditure to strong peak demand growth, the need to replace ageing assets, shifting load locations and the need to accommodate new generation technologies.

As well, it says higher input costs are also increasing expenditure.

NEM value soars

The value of energy sent out through the national electricity market has doubled (in nominal terms) since 1999-2000.

The NEMMCo annual report says the 2006-07 value soared to $11.4 billion -- compared with $7.1 billion in 2005-06 and $5.6 billion in 2000.

The market company points to the impact of the drought in three States, of Hunter Valley flooding, an increase in demand and a change in generator bidding strategies as factors influencing the rise in the last financial year.

NEMMCo data shows the volume of power passing through the market rose only marginally in 2006-07 over the previous year -- reaching 196,668 GWh after totalling 194,781 GWh in 2005-06 -- but has increased by 30 percent since the inception of the system in 1999.


While it is demonstrated in widely differing ways, people who become prime ministers and premiers have to possess a high degree of chutzpah, using it in the now accepted English sense of audacity and bravura, rather than the original Yiddish of insolence and impertinence, although at least some of them could be accused of this,too.

It is not a trait that seems to wain when these leaders are consigned by voters to the history books -- and in some cases the dustbins of history -- as witness Whitlam, Fraser and Keating.

The point came to mind in reading a commentary by Bob Carr, the former NSW premier, in the Sydney Morning Herald in late December in which he condescended mightily to Howard and his recently-defeated government on the issue of greenhouse gas management.

Coming from Carr, this is chutzpah with bells on -- under this man black coal consumed in power stations, and therefore greenhouse gas emissions, in NSW from electricity supply alone, rose inexorably over a decade and he departed office with no genuinely meaningful plan to cut them, notwithstanding his rhetoric and that of his successor, Morris Iemma.

The facts are that when Carr came to office black coal burning in NSW power stations had exceeded 22 million tonnes a year, up from almost 20 million tonnes in 1990-91, the benchmark year used by global warming activists. By 2002 the total being burned had reached 26.7 million tonnes and in 2005-06 (the latest Energy Supply Association yearbook data) were moving towards 29 million annually. In addition, because Carr had not built any baseload power for a decade, some 10 percent of rising NSW electricity demand is now being sourced from Queensland, almost entirely by coal-fired plant.

In round terms, during the Carr/Iemma regime, burning coal to meet NSW power demand has risen by more than 40 percent, sustaining it, along with Victorian brown coal use, as the largest single sectoral source of greenhouse gas emissions in Australia.

In the same timeframe, consumption of electricity by the residential sector has risen by almost 38 percent while the number of householder accounts has risen by about 22 percent.

As well, anyone who drives in Sydney can bear testimony to the deterioration in traffic flow over the past 10-12 years and the lack of adequate public transport infrastructure to both ease this burden and cut the growth of greenhouse gas emissions. Given that Greater Sydney represents about a quarter of the Australian population, this is not a small policy failure in greenhouse gas emission terms, either.

Carr’s commentary in the Herald, and the rhetoric on greenhouse policy Iemma used at the last State election, are as good an illustration of that old rag trade joke -- “Never mind the quality, feel the width” -- as one could get.

If this defines “success” in greenhouse gas policy, and the platform for a condescending lecture on the failures of the Howard government, one wonders what Carr would consider to be failure?

Carr, Iemma and other ALP government leaders have had a free hit over the past decade in this area, duckshoving blame for perceived lack of progress in cutting Australian greenhouse gas emissions on to Howard; the current crew of State and Territory leaders can hardly expect Rudd to be prepared to bear this burden for them.

Keith Orchison
7 January 2008

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