15 March 2014

14 things we learned — and the Abbott government didn’t

by Giles Parkinson, via RenewEconomy

It has been a busy few weeks. All sorts of things have become apparent: Climate change is real, and it man-made, Australia’s policies are a joke, renewable energy investment is leaving Australia, wind and solar do not add costs to the grid, they don’t need new back-up, and they have been reducing prices. And the world is changing while Australia stands still. So, what’s the problem? Clarke and Dawe have the answer.

Source: Climate Council
The planet is warming, and so is Australia
The latest survey compiled by the CSIRO and the Bureau of Meteorology – two institutions that the Abbott government has yet to remove or successfully muzzle – shows that Australia is almost a degree warmer, on average, than it was a century ago. And that is roughly in line with global rates of atmospheric warming. And, it is set to continue warming at a rate that depends on how fast greenhouse emissions can be reduced.
The report says seven of Australia’s 10 warmest years have happened since 1998; over the past 15 years, very warm months have occurred at five times the long-term average, while very cool months have declined by a third; and by 2070, temperatures will be anywhere between 1C and 5C warmer than the 1980-1999 average, depending on future emissions cuts. Note the link between rising temperatures and emissions.

Australia’s current emission reduction targets are completely inadequate
That’s broadly the conclusion of the Climate Change Authority, the independent body that Abbott is trying to scrap, but hasn’t succeeded in doing yet.  The CCA says Australia’s current target of reducing emissions by 5 per cent is not credible, and should be lifted to something like 19 per cent, just to do Australia’s fair share, and if excess credits from Kyoto are included. (Otherwise it should be a 15 per cent reduction target). The CCA also says Australia could strike a good deal by snapping up cheap overseas permits, but the Abbott government says it doesn’t do that sort of thing.

Australia’s new abatement mechanisms are a joke
In the past week, three economic lions, as the SMH described them – former Treasury head Ken Henry, former RBA chief Bernie Fraser, and eminent economist Ross Garnaut – have dismissed Abbott’s Direct Action policy as something of a farce – a view shared by nearly everyone (except for the man that Scott Ludlam describes as the minister for Solitaire), especially those bankers and analysts who describe it as “unfinanceable” because it is so short-term. The appraisals of the three lions have been damning enough, but none quite as that of Lord Deben, a former Tory minister and now head of the UK’s Independent Committee on Climate Change, who described the Abbott government’s approach to climate change as being “so unintellectual as to be unacceptable; I mean it is just amazing.”

Slashing renewable target will cost billions, push up prices, destabilise grid
A new report from IES found that the winding back or scrapping of Australia’s Renewable Energy Target – as so many conservatives want to happen – would set new-build energy generation back by 10 years, cost up to $10 billion in lost renewables investments – and, ironically, drive up power prices and destabilise the grid. Abbott’s appointees to his RET review panel include a climate change denier, a fossil fuel lobbyist, and the former head of a coal and gas generation company.

Investors are leaving Australia – just as they did a decade ago
The last time the Coalition brought the renewable energy industry to a halt, a decade ago, newly built manufacturing plants were closed, major international companies packed up shop, and even the locals moved their bulk of their operations overseas, and to greener pastures. That is playing out all over again.
“My members are looking at the United Kingdom, Ireland, the United States, France and some South American countries as having more stable investment environments for low-carbon opportunities,” said Nathan Fabian, the head of the Investor Group on Climate Change – citing the repeal of the carbon price and the likely demolition of the RET. Everyone agrees the large-scale renewable energy industry is at a standstill. The only bright light is the ACT’s 90 per cent renewables program, and the market for rooftop solar.

Wind and solar don’t need backup
The International Energy Agency stomped on a few old conservative chestnuts  with its investigation into variable renewable energy (VRE), its technical description for wind and solar. The first major furphy it demolished was about the need for new and expensive back-up to support wind and solar farms. Said the IEA: “No additional dispatchable capacity ever needs to be built because VRE (wind and solar) is in the system. On the contrary, to the extent of the capacity credit of VRE, its addition to the system reduces the need for other capacity.” German utilities RWE and E.ON can testify to that, because they are closing one quarter of their fossil fuel plants. So can Australian utilities, because they have already closed one tenth of their base load capacity.

Wind and solar can comfortably provide 45% of generation at little no extra cost
Furthermore, the IEA also said the established grids can comfortably absorb 45 per cent of wind and solar with little extra cost. In fact, it suggested, given that wind and solar costs were coming down so quickly, it would probably end up as a net benefit. An updated report from Stanford University’s Mark Jacobsen pointed to how the US could relatively smoothly transition to 100 per cent renewable energy.

Wind power has been lowering costs
A survey conducted by SKM on behalf of New Zealand-based renewable power giant Meridian and its new Australian green energy retailer PowerShop, found that wind contributed to 6 per cent of overall  supply in Victoria and South Australia during the January heat-wave, and as a result of that reduced average prices over the 7-day period by more than 40 per cent.
This fits in with previous estimates by energy consultants Pitt & Sherry which found that in 2012/13, the average South Australian paid generators $88 a year less for the electricity he or she consumed than they did in 2009-10. And emissions have fallen too. In the US, General Electric CEO Jeff Immelt says new build wind costs 5c/kWh – that’s cheaper than coal.

And solar has been lowering costs too
Spark Infrastructure, which runs the electricity distribution networks in South Australia, said not only had rooftop solar PV – which amounts to 540MW now in the state – shifted the peak of demand by several hours into the early evening, it had also “helped reduce stress on the network during the heatwave.” And the actual cost of solar is falling too. In the US, SunEdison contracted to sell the output of a 150MW solar PV plant to a Texas utility for less than 5c/kWh. Add back in a tax credit and that is still an impressively low 8c/kWh, and most major module manufacturers say manufacturing costs are still falling by at least 20 per cent a year.

Gas is pricing itself out of the market
As renewable energy costs fall, fossil fuel costs are rising. Quickly. In Australia, the surge in gas prices ahead of the start of LNG exports has been breathtaking – with gas prices trebling in little more than a year. This has forced gas generators out of the market - almost all base load gas generators are either being mothballed or turned into peaking plants. The value of some has been written down. This means that coal-fired generation, which has fallen sharply since the introduction of the carbon price and the now-stalled surge in renewables, is likely to make a rebound.

The decline in fossil fuels is irreversible
Or so said RWE, the biggest utility in Germany, which is closing down fossil fuel plants and focusing on renewables, and distributed generation. The other  major utilities in Germany agree, and E.ON announced overnight it is closing one quarter of its fossil fuel capacity. In the US, the biggest utilities predict the same result. China, once the great hope of the coal industry, is likely to put a cap on consumption and cease being an importer. In India, the likely new prime minister – a big supporter of solar – is promising to reduce the share of coal, and some suggest he may increase India’s solar plan 10-fold to more than 220GW.

Essentially, Abbott is pandering to vested interests
More than a year ago, Bernie Fraser warned that an Abbott government was more likely to pander to the fossil fuel lobby. It turns out he was right. Fraser’s assessment of six months of an Abbott government decision making is that “the longer term community interests are being overwhelmed” by short-term business interests. Protection of incumbent utilities – many of them owned by state conservative governments – seems to be one driving factor.

But Abbott is under intense pressure from major economies
Abbott first horrified the international community on his position on climate policies during the climate change conference in Warsaw last November. Even then, delegates were aghast that climate change was not likely to be included in the upcoming G20 summit. Some suggested Australia may succeed in making the G20 completely irrelevant, particularly if it is used for little more than a grandstand for domestic rhetoric, which Abbott did in person at CHOGM and through proxy at Warsaw. Now it appears, the US, is putting intense pressure on Australia to rethink its G20 agenda and include important stuff like climate change. The chances are growing that G20 leaders will not want to bother with a trip to BrisVegas to sign a one page form letter on tax avoidance (Abbott says he wants to keep it “simple”) and to hear Abbott repeat his three-word domestic sloganeering.

One day, this will translate into domestic pressure
The biggest danger for Abbott is democracy – not so much in the political sense (after all, he wants the ABC to be nothing more than a 1930s-style political cheerleader) but in the democratisation of energy. This is the rollout of rooftop solar, the emergence of energy storage, and the options that will be chosen as they try and shield themselves from rising grid costs. The first test may come in Western Australia, possibly the most unsustainable grid of them all, and where the upcoming senate recount may test – for the first time – the political potency of the solar constituency. After all, there are several million of them.