Saturday, November 14, 2009

Earth, wind or fire

Sunday Age, November 15, 2009
MARGARET Thatcher was an unlikely hero for a climate change movement that's sometimes accused of left-wing, quasi-religious crusading.
The day before the Berlin Wall fell in 1989, the Tory British prime minister stood in the United Nations General Assembly and, acknowledging that Cold War hostilities were receding, declared a new war against ''another insidious danger'' - global warming.
Fine words, but her more practical contribution was to spend a bloody year grinding Britain's coal mining union into history. The result is that the UK left hundreds of years' supply of coal lying in the ground and turned instead to natural gas.
Britain's power is now relatively clean. Per head, Britons produce half the CO2 emissions of Australians. Could Australia achieve the same? Could we simply shut down coal-fired power generation and replace it with something else?
It would be a monumental shift. Australia exports four-fifths of the coal we dig up, but what's left over has made ours one of the most coal-addicted societies on the planet. Nationally, 81 per cent of our electricity comes from coal. Victoria is even more dependent - 90 per cent coal, and brown coal at that, which puts out more greenhouse gas per unit of electricity than any other fuel on the planet.
Most of the capital cost of coal generation is well in the past, and coal is cheap to mine, so electricity is abundant and low-cost - Victoria's is the cheapest in the world. The renewable alternatives are technically unproven, expensive and difficult by comparison. This is the case even though Australia is abundant in sunshine, hot rocks, coastline (for tidal and wave power), biomass (the burning of crops or wood) and wind power. There is also plenty of gas and uranium, though nuclear power is politically difficult and expensive.
''If you stopped coal, the economy would fall in a heap,'' says Australian Coal Association chief Ralph Hillman. ''You'd never be able to build a new power-generating structure quickly enough to accommodate the stoppage … Steel production would stop in Australia; cement production, that would go too.''
It's more than just a financial calculation though. Coal has assumed a central place in our psyche. Author Guy Pearse accuses Australians of having ''Quarry Vision''. A consultant to the Garnaut report on climate change said Australia was ''locked in'' to coal - both economically and psychologically.
Coal works, and replacing it with other technologies represents change, insecurity and expense. So, while the Rudd Government might boast that Australia will hit its Kyoto targets, it's in no way thanks to a reduction in coal combustion - it's because we put an end to large-scale land clearing. In fact, we have added 50 per cent to our emissions from electricity since 1990. The hard graft of climate abatement has not even begun.
All but the most ardent denialists now agree that Australia must cut emissions. Whether it's via carbon capture and storage of coal-generated emissions, or gas, nuclear or renewables, our electricity mix must change to relying on a suite of different power sources instead of just one, inevitably making power more expensive and more geographically dispersed. The questions are how best to achieve this; at what cost, human and economic; and how quickly it can be done.

The green position

''GIVEN the right government policies, it would take about 20 years to totally replace coal,'' says author and University of NSW academic Dr Mark Diesendorf. ''It's a mix of demand-side reductions and energy efficiency, with supply-side - renewables, mostly wind, and gas.''
Under Diesendorf's model, natural gas does the bulk of the early work. It's still a fossil fuel, but gas produces about half the carbon dioxide of black coal, and about one-quarter that of brown coal. It's cheap to transport and plentiful - from coal seam methane in Queensland, to the north-west shelf of Western Australia, to Bass Strait in Victoria.
Gas, he says, is a ''transitional fuel'', helping wean us off coal and allowing more time for the technology and cost of renewable power to improve. As that starts happening, he believes solar thermal - a technology that concentrates the sun's energy with mirrors and uses it to heat water to run electrical turbines - will take off. ''It could be very big from the 2020s or 2030s - it could supply half our demand,'' he says. Gas phases out over the next 15 years.
A 2030 target date is now the mainstream environmentalists' position for the end of coal - it has been adopted by Al Gore confidant James Hansen in the US, and by Greenpeace, which says it is possible to achieve if our demand for power falls by 16 per cent.
But Greenpeace is working on an even more radical scenario - the ''war footing''. According to climate campaigner Julien Vincent, this will involve political parties and the whole population accepting that climate change is such a catastrophe that it becomes the top national priority. Under this scenario, every public institution and much of the nation's private investment is bent to the task through grants and subsidies, and educational institutions are co-opted to train people as engineers.
''There will be a spike in spending [as the new generation plants are built],'' Vincent says, ''but once you've kicked coal out of the system, you should have far less energy cost than now, because renewables produce electricity for essentially nothing.''
The war footing scenario is gaining traction with some climate activists. But Diesendorf, for one, is sceptical. ''It's not as simple as they make out. For a start, we don't have enough engineers … We don't have the workers yet and we can't import them because there's a worldwide shortage.'' Even his own 2030 date is ''not easy'', he admits, and requires big spending, diverting resources from other areas of the economy. ''But when we look at the alternatives, we know that doing nothing will be incredibly expensive.''

The difficulties

WORKFORCE shortages are not the only problem. Few renewable energy sources are fully proven and none can yet meet all our energy needs. Debate rages about how quickly they might be on line, how much we should spend to research them and which ones to concentrate on first.
All are also more expensive than coal, so extending the life of a coal-fired power plant is cheaper than building new and risky generation capacity. In theory, an emissions trading scheme closes that gap by forcing up the price of coal and making renewables more competitive. Either way the cost of power rises.
Another problem with the Greenpeace scenario is the assumptions about energy efficiency. Cutting power use by 16 per cent by 2020 is a heroic aim.
Greenpeace says its prescription is based on ''intelligent use [of electricity], not abstinence''. It includes much-improved insulation and building design, ''super-efficient'' electrical machines and solar collectors replacing building heating. Vincent warns that curtailing some lifestyle factors, particularly excessive consumption, must also be part of it. But the national electricity market regulator is forecasting an increase in electricity demand by an average of 1.8 per cent per year until 2019.
According to coal mining union chief Tony Maher: ''The idea that we'll be using less energy by then is wrong - and particularly if you're getting into electric car use, the demand on the grid will be enormous.''
This analysis drives the union, the coal industry and governments to hope that carbon capture and storage will become a reality. Then, coal could continue to be the energy workhorse, without the climate downside. ''Coal only has a low-emissions future,'' concedes Maher, ''not a high-emissions future.''
A significant cost in the phase-out of coal is in transmission infrastructure - power lines. Australia's power system is heavily centralised in specific geographical locations, such as the Latrobe Valley, where the coal resource is. But that is not necessarily where the renewable resource is. Wind is on the coast; sun in sufficient quantities in Victoria is in the far north. New wires to the new resources are expensive, but Victorian Energy Minister Peter Batchelor confirmed to The Sunday Agethat he's committed to the change.
However, this also means social dislocation for regions like the Latrobe Valley which have built an economy around coal power. This problem is less easily fixed. There is also a big technical hitch with most renewables technology - consistency of electricity production. Power systems work by electricity being available in the wire in large quantities at the instant consumers want to suck it out. Fossil fuel power stations are good at delivering this ''base load'' power, constant and reliable enough to fuel industry and keep the lights on. By contrast, wind turbines only produce electricity when it's windy, solar when it's sunny.
Geothermal technology could solve this, but is a long way off.
So while the technological holy grail for coal is carbon capture and storage, for renewables it is efficient and large-scale storage to hold the energy and deploy it when needed. Without this, renewables need connectors to fossil fuel back-ups just to fulfil their obligations.
''Energy storage is potentially the game changer in terms of electricity supply,'' says electricity industry doyen Keith Orchison, former head of the Electricity Supply Association of Australia.
Diesendorf says there is hope here. Some Spanish solar thermal power stations use molten salts to hold power for seven hours. Australian researchers are experimenting with graphite blocks and ammonia. But even Bob Mathews, who runs solar thermal manufacturing company Ausra, hoses down expectations, saying, ''I believe it's a long way off.''
His large solar generators are ''ready to deploy now'' but, until there is reliable storage, he favours a ''co-generation'' model, where solar plants are built next to existing fossil fuel generators - the gas fires up as the sun goes down.

Dash for gas

THE British did it and, according to Carbon Market Economics director Bruce Mountain, gas could effectively replace coal generation in Australia within a decade, at a capital cost in Victoria of around $8 billion. ''In Britain, since 1990, the share of coal in the generation mix was halved and replaced by gas … It was a massive transformation, but the industry took it in its stride,'' says Mountain, a power economist who worked in the UK at the time.
Replacing brown coal with gas would have enormous greenhouse benefits. The most efficient gas baseload generators produce 350 kilograms of carbon dioxide for every megawatt hour of energy produced. The least efficient large Victorian brown coal generator, Hazelwood, emits about 1.5 tonnes of carbon dioxide. Substitution could remove 40 million tonnes of CO2 from Victoria's emissions each year. Gas generators could be built next to existing coal stations, using existing transmission lines and employing some of the same workforce.
''In Britain, 25,000 megawatts of gas was built between 1990 and 2000 - roughly the entire capacity of coal-fired generation in Australia,'' Mountain says.
Big energy users, represented by the Energy Users Association's Roman Domanski, acknowledge change is necessary, but are concerned about costs. And the coal lobby and the Victorian Government agree that gas is more expensive: ''Three times the price. That's a rough ball-park figure,'' says Energy Minister Peter Batchelor. He is also concerned that Victoria's Bass Strait gas fields are starting to run dry, though other analysts, including Deutsche Bank's John Hirjee, believe greater demand for gas will drive more exploration and therefore more discoveries.
That said, Batchelor agrees that gas will play a big role. He calls it the ''dominant change factor … much more important than renewables or new clean coal technology''. He believes that transformation will take 40 years.
Already gas is a growing factor in the energy market nationally. Keith Orchison says there are 15,500 megawatts of gas plant now proposed across Australia, and ''barely 2000 megawatts'' of coal - ''a very new experience for the coal industry''. Santos is considering a gas generator at Orford, western Victoria; and at Mortlake, 150 kilometres west of Melbourne, a 280-tonne gas turbine was delivered last week for Origin Energy's new $640 million, 600-megawatt power station.
Another Victorian generator, TRUenergy, is proposing to spend $2 billion on a 1000-megawatt gas-fired baseload power station next to its existing brown coal plant. But there's a catch - TRUenergy has threatened to act only if it gets compensation for the costs of the Federal Government's emissions trading scheme.
This nicely illustrates a point Bruce Mountain makes: ''The challenges in a transition to gas are economic and political rather than technical.''

Politics and economics

COMPENSATION for the loss of business by big coal-fired generators has emerged as one of the most thorny issues in the transition to cleaner power. Jim Kouts, a spokesman for International Power, the operator of Hazelwood, says his company is justified in demanding it. His company bought coal-fired power generators ''without climate change being even a 10th-order issue''. To change the rules now, to their detriment, risked deterring future investors.
The Rudd Government found this argument sufficiently persuasive to ignore its consultant, Ross Garnaut, who proposed there be no compensation, and to offer $3 billion in free permits in its Carbon Pollution Reduction Scheme. The Electricity Supply Association has asked for up to $10 billion.
Perhaps without this money, power generators will go on capital strike, as TRUenergy threatens, refusing to invest in cleaner plant. Perhaps taxpayers will pay their (mostly foreign) shareholders compensation. Whichever way you cut it, there needs to be huge new investment in power generation to move away from coal.
But to some, including Origin Energy's policy and sustainability manager Carl McCamish, all that governments need to do is to make carbon more expensive through an emissions trading scheme, then leave it to power companies to make sensible investments.
Energy economist Tony O'Dwyer says a $20 per tonne carbon price will force the dirtiest Victorian generator, Hazelwood, to close down, and $30 per tonne will start making the other brown coal generators look marginal compared to gas. Those prices are likely to be achieved within less than five years of the start of an emissions trading scheme. The more efficient coal generators, particularly those in Queensland and NSW, will take longer to shut down.
''I can guarantee there will still be coal in the system in 2030,'' says McCamish, ''but with the introduction of an ETS, it is unlikely there will be any new coal plants built.''
Others, though, believe governments should intervene much more radically. Economist Peter Brain would like the state to invite companies to build new, cleaner generation.
Through a public-private partnership, the State Government underwrote companies building a desalination plant when water ran short, so why not power infrastructure? ''We need to go back to planning. People say how wonderful China is, Germany, Singapore. The reason is because they plan.''
Another economist, Saul Eslake, agrees that ''we can't assume without further debate that price signals alone will solve the problem''.
Peter Batchelor, though, rejects the suggestion. Other than the CPRS, ''there aren't other levers'', he says. ''A PPP model is usually applied by governments for large infrastructure projects where the private sector wouldn't normally invest… those sorts of preconditions don't apply in the electricity generation industry in Victoria.''
The politics of this are delicately balanced between cleaning up our greenhouse act and keeping power affordable. But if we agree that Australia must act, then we are acknowledging that the role of coal in power generation will diminish - and, if clean coal technology does not deliver, eventually disappear. It can be done, but the cost of power, no matter how it's generated, will rise, and with it the cost of living.
This will take political will and a clear national direction, with or without a Margaret Thatcher to drive it.

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