targeting a less carbon intense energy future for australia

Peter Laver Vice-President

Academy of Technological Sciences and Engineering

Targeting a less carbon intense energy future for Australia

IEC 2011 Open Session Energy Efficiency and Renewable Technology

Thursday, 25th March 2010, 1.00pm

1. Australia faces a major challenge if it is to drastically reduce the carbon intensity of its energy sector.

2. Over 90% of electricity generation is hydrocarbon based, including nearly 80% from coal.

3. Currently government policy rules out nuclear power and hydro resources in a dry continent are already fully utilised.

4. Long distances between major consumers present an additional challenge for a distribution grid which includes intermittent generation sources.

Overview

Thursday, 25th March 2010, 1.00pm

• Australia consumes over 6,000 petajoules of energy annually.

• Australia produces over 18,000 petajoules which means allowing for oil imports nearly 70% of energy produced is exported.

• Energy exports are valued at around $80 billion per annum.

• Reducing CO2 emissions from coal is a national priority for the domestic power industry but also to maintain resources exports.

Energy Production, Consumption and Export

Thursday, 25th March 2010, 1.00pm

Carbon Capture & Storage

Image reference: CO2 CRC

PCC Pilot Plants

Thursday, 25th March 2010, 1.00pm

3.2. Sources of Geothermal Energy

Reference: Australian Geothermal Energy Association Inc. http://www.agea.org.au/geothermal-energy/about-geothermal-energy/

Thursday, 25th March 2010, 1.00pm

Department of Resources, Energy and Tourism Energy in Australia 2011 p13 http://www.ret.gov.au/energy/Documents/facts-stats-pubs/Energy-in-Australia-2011.pdf

Australian Energy Consumption by Source 1973 - 2009

Thursday, 25th March 2010, 1.00pm

Department of Resources, Energy and Tourism Energy in Australia 2011 p1 http://www.ret.gov.au/energy/Documents/facts-stats-pubs/Energy-in-Australia-2011.pdf

Australian Energy Production by Source 1978 - 2009

Thursday, 25th March 2010, 1.00pm

Department of Resources, Energy and Tourism Energy in Australia 2011 p1 http://www.ret.gov.au/energy/Documents/facts-stats-pubs/Energy-in-Australia-2011.pdf

Australian Energy Flows (Petajoules) 2008-09

Thursday, 25th March 2010, 1.00pm

Department of Resources, Energy and Tourism Energy in Australia 2011 p21 http://www.ret.gov.au/energy/Documents/facts-stats-pubs/Energy-in-Australia-2011.pdf

Australian Electricity Generation by fuel 2008-09

Thursday, 25th March 2010, 1.00pm

• Significant focus on renewable energy with target of 20% by 2020 through renewable energy certificate (REC) scheme.

• Carbon tax being introduced but is a matter of political contention. Initial price $23 per tonne.

• Plan is to move the tax to an emissions trading scheme within 3 years of commencement.

• Tax aims at inducing investment in low carbon technology and energy efficiency.

• Tax proceeds used to compensate disadvantaged and, to an extent, stimulate investment.

• Electricity prices will rise substantially.

Current Energy Policy Elements

Thursday, 25th March 2010, 1.00pm

ATSE (2010) Low Carbon Energy Figure 5 p12

Australian wholesale electricity prices to 2050

Thursday, 25th March 2010, 1.00pm

• In the short term there is likely to be a substitution of coal by gas while longer term solutions are sought.

• Wind and solar will continue to expand with some dispute as to maximum practical levels for grid security but probably no more than 30% without major investments in storage.

• Development efforts will continue for hot rock geothermal and carbon capture and storage

• Costs and learning curves can be debated but will see power costs increase by a factor of 2-3 by 2050.

Future Energy Supply Scenarios

Thursday, 25th March 2010, 1.00pm

ATSE (2010) Low Carbon Energy Figure 6 p13

Levelised cost of electricity - 2020, 2030 & 2040 (ranked for 2040)

Technology Leaning Curves

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0.2

0.4

0.6

0.8

1

1.2

2010 2015 2020 2025 2030

Capi

tal R

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PV

Wind

CST

Optimising the Energy Portfolio • ATSE has attempted to asses the future relative

attraction of different energy technologies given the wide variation in – – Levelised cost – Carbon price – REC value – Learning curves

• An Option Value can be calculated for each technology for a particular year, the higher values justifying more preliminary development expenditure.

Thursday, 25th March 2010, 1.00pm

Options Space Diagram

ATSE (2010) Low Carbon Energy Figure 11 p23

Thursday, 25th March 2010, 1.00pm

Options for different technologies - 2040

ATSE (2010) Low Carbon Energy Figure 12c p26

Thursday, 25th March 2010, 1.00pm

Options for gas based technologies showing trajectories from 2020 - 2040

ATSE (2010) Low Carbon Energy Figure 12c p26

Investing in Energy Technologies • The Option Value approach can only act as a guide to a

future technology portfolio. • The approach allows different assumptions and

scenarios to be compared. • Actual investment will be determined by site

considerations – location, transmission costs, environmental approvals, etc.

• Intermittent generation sources will need to factor in reserve spinning capacity and/or storage.

Conclusions • The challenge Australia faces in reducing its carbon

dioxide emissions is considerable, far greater than countries less reliant on fossil fuels and with nuclear power available.

• The historic competitive advantage the country has enjoyed from low energy costs will disappear.

• Large scale investment is required to develop and deploy the required new technologies.

• Ideally the proceeds from pricing carbon should be directed towards supporting the investment required to reduce emissions.