WATCH submission on the Energy White Paper

The government called for submissions on its ‘Energy White Paper’, which looks at Australia’s prospects and plans for Energy resources and use for ‘the future’ – the next 20 – 30 years.

 As might be expected, the general direction of this government is towards increasing use of fossil fuel resources, and expanded economic growth, with apparently little vision of a more constrained future or of the huge potential for renewable energy.

 WATCH prepared a submission without considering this ‘direction’, but on filling in the submission form, I was forced to consider a different focus, and respond to its proposals. The form is split into 8 sections, under headings such as “The Security of Energy Supplies”, but the responses they seek are delineated with a number of points that ‘The Government seeks comment on’.  In this first case, to illustrate the nature of this ‘submission’ these points include:

“The value of developing fuel reserves to meet Australia’s international Oil Security agreements, and augment domestic security.”

and: ” Ways to increase new gas sources to meet demand and measures to enhance transparency in market conditions.”

My ‘unsought comment’ on this section was:

The security of energy supply is a key focus of our submission, but there is no such security possible as long as we continue to exploit fossil fuel reserves. 

It is clear from the suggested points above that our views and remarks on this are better suited to the ‘general comment’ section, and will be found there.

The other sections for comment, with my comments below were:

2 Regulatory Reform and role of Government

We see the government as having both an obligation and need to regulate and provide incentives such that the rapid development of renewable sources of energy can be encouraged.

A focus on the needs and the security of energy supply is a key focus of our submission, but there is no such security possible as long as we continue to exploit fossil fuel reserves. 

It is clear from the suggested points above that our views and remarks on this are better suited to the ‘general comment’ section, and will be found there. interests of the extractive energy industry clearly works counter to this. At the same time a continued drive for privatisation of assets reduces the ability of government to move development in the most desirable direction for the community and the environment, as can be clearly seen from developments to date.

3 Growth and Investment

We are opposed to any further growth in the energy and resources sector that will result in ongoing and increased carbon emissions. The cutting of ‘green tape’ – ‘streamlining of approvals processes’ – is the antithesis of environmental and social ‘safeguards’ when those processes involve actions directly threatening community and global health. ( This was directly counter to the ‘suggested comments’ which were all about the need to ‘streamline approval’ and ‘reduce regulatory burdens’.)

4 Trade and International Relations

As pointed out in our submission in ‘General comments’, there is a great potential export market for Australia’s abundant renewable energy, directly into our northern markets.

The export of fossil fuels, under any guise, goes directly against this, as well as endangering the global climate. By contrast the enormous market for imported PV panels, mostly from China, should be encouraged until such time as incentives are provided for Australia to manufacture its own infrastructure.

Also relevant here is the likelihood of punitive tariffs imposed on Australian exports because of its failure to restrict carbon emissions. Increasingly Australia will be viewed as a global pariah, and its presence at international fora will not be welcomed.

5 Workforce Productivity  –  I didn’t make any specific comments on this section, as I don’t see what it has to do with the important issues of Energy policy. But the suggested comments include a mention of ‘long-term’ training workers for the alternative energy industry.

6 Driving Energy Productivity

We welcome any government programs and incentives that will genuinely improve energy efficiency, but the focus must always be on the reduction of energy consumption that can be achieved. If the only effect of such ‘efficiencies’ is that we do more with the same amount of energy then this object has not been achieved.

One of the first and most basic measures that must be taken to improve efficiency of transport fuel use is the removal of the Diesel fuel rebate. This question is discussed in the general comments below.

7 Alternative and Emerging Energy sources and Technology

The suggested comments here are relevant, and include:-  Ways to encourage a lower emissions energy supply that avoids market distortion or increases energy prices; additional ‘cost effective’ means to encourage further development of renewable and alternative energy sources; reducing barriers to uptake of LPG or CNG in transport, and of electric and bio-fuels for vehicles.

Given the special emphasis of our submission on the necessity of Renewable Energy development, this section is mostly addressed in general comments below. Here it is only necessary to observe that there is an apparent and unreasonable prejudice expressed in the suggested points above, whereby this development is seen as only desirable if it has no negative effects on the existing fossil fuel based industry.

 For instance, a desire for ‘additional cost-effective means, beyond current mandatory targets and grants’ is in the current reality a desire for these ‘cost-effective’ means to be alternatives to the mandatory targets, the removal of which is being discussed.

 We do not need to look at ways to ‘progress ‘low emissions’ electricity generation until we have fully developed Zero-emissions generation.

 There must also be severe reservations about the further development of ‘advanced’ biofuels, as all such fuels have some negative aspects for the environment and for agricultural production. We should welcome the passing of the draft horse from agriculture, and not wish to see the land that grew oats to feed it used to grow food for our modern ‘draft horses’ – as long as sensible alternatives are available.

8 General Comments.

 WATCH main submission, prepared by Lauriston Muirhead, and myself David Macilwain, follows:

The issues paper appears to prioritise the security of energy supplies and regulatory reform (and the role of government).  Therefore this submission will also focus on these areas with some comments on the other parts of the issues paper.

 Basic economic theory makes it clear that finite fuel resources which are burnt, such as the fossil fuels of coal, oil and gas, will tend to increase in price over time.  From a global perspective, not only is the supply of fossil fuels dwindling but the demand is rising as the world population is expected to increase from approximately seven to ten billion by 2050.  In addition to simple population growth, the trend of increasing energy use per capita is expected to continue.  Declining supply and increasing demand of fossil fuels means that their price will rise exponentially over the medium term – the next thirty years, and the period for which this energy planning is relevant.

 The generally rising price of fossil fuels is overlaid by short term variability, caused by the geopolitical stability or otherwise, of the principal fossil fuel producers and consumers.  Australia, being a net importer of oil and exporter of coal, is particularly vulnerable to this unpredictable variation.  For example war in the Middle East creates sudden and extreme increases in the price of oil whereas economic stagnation in China and/or India creates sudden and extreme falls in the price of coal creating very high investment risks as assets become stranded.

 Being a net exporter of a fossil fuel does not necessarily protect the producer from price variation.  Australia is a net exporter of gas but local consumers are experiencing rapid price rises as it is difficult to insulate the domestic price from the increasing international price .

 Fossil fuel generation relies on large quantities of high quality water to drive steam turbines, and for cooling, thus further adding to costs.  During dry periods generators have already had to compete on the open market against other industries, such as agriculture, to purchase water at times of peak demand creating further price variability.

 The trading of fossil fuels, and their extremely sensitive link to geopolitical and economic pressures, make a boom and bust cycle inevitable.

 For economic reasons alone the concept of “sustainable growth” based on finite resources such as fossil fuels is clearly an impossibility.  However there is an even more pressing reason to move away from fossil fuels, which does not appear to have been mentioned in the issues paper, and that is pollution.

 Basic physics theory makes it clear that releasing additional greenhouse gases, such as carbon dioxide and methane, warms the planet.  It is not possible to mine and burn fossil fuels on a practical scale without releasing large quantities of greenhouse gases.

 Fossil fuels are the captured and stored carbon from earth’s atmosphere of many tens of millions of years ago when the planet was hotter than humans have experienced in the history of their evolution.  By burning some of the captured and stored carbon in our current atmosphere since the beginning of the industrial era, humans have elevated carbon dioxide levels higher than at any time in the last 800,000 years. This process has led to an approximately one degree Centigrade (C) increase in global temperature within the last century.  Another one degree rise is calculated to be already in the system. Global warming of more than two degrees C is seen by most scientists as dangerous in terms of supporting the current, let alone the expected, population.

 While anthropogenic climate change, resulting from increasing carbon dioxide and methane levels, is the primary challenge we must address, other pollutants related to the burning of fossil fuels are also having real impacts on the health of Australians.

For example mercury from coal has already contributed to contamination of the food supply (fish) to the extent that pregnant women are advised by Australian government agencies to restrict their consumption of certain fish to reduce the risk of foetal abnormalities from mercury toxicity .

 The only rational risk based response to the above economic and environmental problems with fossil fuels is to move, as rapidly as is practical, away from fossil fuels to energy sources that do not have built-in cost increases and do not pollute on the scale of fossil fuels.

 The adoption of ‘low emissions technology’ is both unsustainable and ineffective. This particularly applies to ‘Carbon Capture and Storage’ which, even were it feasible on a sufficiently large scale, would be completely uneconomic without huge government subsidy.  Such money would be far better spent developing renewable power generation.  Besides, the simplest analysis will show that less energy would be used and fewer emissions generated by simply leaving coal in the ground. It is indeed ‘Nature’s carbon capture and storage’, buried tens of millions of years ago.

 The cost of the source of renewable energy (e.g. sun, wind, geothermal, wave, hydro etc.) is constant (at zero) and therefore, in contrast to fossil fuels, there is no medium or long term price variability from the cost of the fuel itself.  In practice, research and development leads to increasing efficiency in converting renewable sources of energy to useful forms (such as electricity) and so the long term cost trend is downwards.  For example the increase in efficiency in converting sunlight to electricity in a photovoltaic cell, as well as the scale of production, has led to a dramatic decrease in the cost of photovoltaic electricity within a decade.  Assuming rational market forces are at work, the cost of producing each unit of renewable energy will always be driven downwards, over time, by increasing efficiency of extraction.

 The relatively high capital cost of renewable energy generation is rapidly offset by its low maintenance and ongoing generation cost, and this equation can only become more favourable as the cost of fossil fuel based electricity generation rises and renewable energy extraction efficiencies increase.

 While the opportunities for further exploitation of Hydro-electricity are limited in Australia, the huge past investment in Hydro schemes continues to pay dividends in providing significant energy at peak demand, and also in its capacity to effectively store this energy. Its potential to combine with solar power through the use of ‘pumped storage’ should be investigated and capitalised upon.

 Unlike fossil fuels, the primary growth areas of renewable energy – photovoltaic and wind – require no water at all.

 A perceived drawback of renewable energy is short term variability of supply (e.g. sun not shining, or wind not blowing).  Australia is the 6th largest country  in the world with only the 57th largest population  giving it a population density ranking of 228th out of 235 inhabited countries .  The amount of sun, wind and other renewable energy resources available in a vast country to a relatively small population means that Australians could and should be leading the world in a move to 100% renewable energy. There is almost limitless export potential in selling electricity to south east Asia. The export of electricity obviously does not require rail, road, port, shipping infrastructure etc.  “The solar energy resource (annual solar radiation) in areas of flat topography within 25 km of existing transmission lines (excluding National Parks), is nearly 500 times greater than the annual energy consumption of Australia.”

 Germany, a heavily industrialised nation (not known for its sunny climate) with three times the population of Australia has reached a point where at some times it is running on 50% solar power .

 In light of the above, the role of Australian governments must be to set the regulatory environment to manage the transition from fossil to renewable energy safely, quickly and smoothly.  Regulatory carrots and sticks interacting with market forces can easily achieve this transition, given a commitment to it.

 As an example, readers need only consider the huge effect on the behaviour of consumers of variable pricing rates, previously based on the characteristics of coal-fired power generation.

 Long held practices, such as central power generation and cheap night use “base load” power, will have to be re-thought. Solar power can be more distributed in its production and is also better attuned to normal human daytime activity. Its effect on the power supply during peak summer demand periods is increasingly significant in reducing demand and wholesale costs.

 It cannot be claimed that such ‘energy policy’ should be left to market forces, with decreased regulatory constraints, while eight to twelve billion dollar annual subsidies  have been and are being used to drive the economy in a different direction. The enormous subsidies to the Mining and Transport sectors through the Diesel rebate and through various favourable tax concessions should be urgently reviewed, and policies developed, that will see them reduced to zero. 

 While stationary energy users – and use – will be relatively unaffected by the change in energy source, some changes will need to be made to the way the energy is used in some sectors – particularly transport.  Australia is extremely vulnerable to variation in supply in liquid fuels such as petrol, diesel, aviation fuel etc. so converting these modes of transport to use electricity (e.g. electric vehicles, very fast trains etc.) should be an important additional area of government involvement.

 Renewable energy production creates more jobs than the current energy production mix .  The availability of less expensive land for renewable infrastructure in regional Australia means that the jobs created are largely regional jobs helping to financially reinvigorate regional productivity.  Transporting the product (electricity) to urban centres requires no significant road, rail or other infrastructure as it is done with cable.

 An overall consideration of these two approaches to Australia’s energy future must suggest that planning for a steady change away from environmentally and socially unfriendly resource extraction and depletion, towards a sustainable and community focussed development of renewable energy infrastructure, is both economically and environmentally desirable. Given the current fears of stranded assets in the coal industry, and the likelihood of ‘greenhouse taxes’ being imposed by our trading partners as we fail to cut our carbon emissions, such a change will surely soon also become an economic necessity.

 6th February 2014

 

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