The finkel report
Meanwhile, prior to the political turmoil which occurred in mid 2019 leading up to the deposition of Malcolm Turnbull as Australian Prime Minister. at the Council of Australian Governments meeting in Hobart on 9 June 2017, Chief Scientist Professor Alan Finkel published his own review of the electricity sector which informed a policy review due by the end of that year[1]. Despite the fact that it was superseded by subsequently superseded by other events, it is still worth considering because it represented chief scientist Alan Finkel's plan for the future of the National Electricity Market at the time it was proposed.
That market is how most states - Queensland, New South Wales (including the Australian Capital Territory), Victoria, South Australia, and Tasmania - get their power. Right then and indeed up to the present, 87 per cent of the electricity going into that market came from fossil fuels - a percentage that scientists say needs to fall a lot if the planet is to avoid dangerous climate change. It is mostly high-emission brown and black coal (77 per cent) with gas making up the remainder (10 per cent). The other 13 per cent of the total comes from renewable energy.
The Finkel report suggested basically a clean energy target (CET) (effectively an LET under another name) that forced companies selling electricity to us to provide a set percentage of power from low emissions technology, like renewables or efficient gas. Coal power can be considered too — but only if it is coupled with carbon capture. Carbon capture and storage is the process of capturing waste carbon dioxide from large point sources, such as fossil fuel power plants, transporting it to a storage site, and depositing it where it will not enter the atmosphere, normally an underground geological formation[2]. Right now that is very expensive and unlikely to be seen in the short term. The cost is likely to be passed on to us as consumers - “think of it as opting for a percentage of green energy on your power bill”.
Dr Finkel did not actually recommend a baseline but modelled a scenario in which a low emissions source would be defined as producing a maximum 600kg of CO2 per megawatt hour of electricity. (He also said it does not really matter whether the benchmark is set at 600kg of CO2 equivalent of every megawatt-hour, or 700, or even 800 or higher. That will depend on what the actual carbon intensity target of the government is, and this will relate to the government’s climate policy and abatement targets)[3].
If a generator produces electricity that emits less than 600kg of carbon dioxide per unit of electricity (measured in megawatt hours: MWh) they get part of a credit, which they can then sell to retailers. One of the dirtiest power stations in the nation — EnergyAustralia's brown coal Yallourn plant in Victoria — emits 1,272kg per MWh and even a brand new ultra-supercritical black coal plant emits 760kg per MWh. So this effectively rules coal out. That leaves credits going to the most efficient gas turbines — which produce around 400kg/MWh — and renewables, which emit no carbon.
An LET falls in line with a recommendation in a Climate Change Authority report as a second-best policy option, the Federal government having ruled ruled out an Emissions Intensity Scheme (EIS), on the basis that is a form of carbon pricing. Recall also that a low emissions target (LET) operates in a similar way to the Renewables Energy Target and would require more electricity be supplied from renewables, carbon capture and storage, coal fired power and highly efficient gas plants[4].
Ancient coal-fired power stations are being closed, while investment in new coal-fired stations unlikely to be used for 30 to 50 years of much of their 30 to 50 year working lives would obviously be considered a bad option. Businesses are reluctant to invest in large-scale renewable energy when in this country their future is shrouded in uncertainty. Against this background, a LET (CET) represents a compromise, the objective being to regulate the transition from fossil fuels to renewables in such a way that reduces emissions while providing certainty to energy providers[5].
All this sounds very reasonable, but it's the definition of a "low emissions" power source that was bedevilling a solution to the problem from the ideological standpoints of the main two political party protagonists. Peter Hartcher explains[6]:
Finkel's report says that all the existing power sources – including coal-fired plants – be allowed to continue as they are. But for new investment after 2020, the panel suggests that "low emissions" power plant should be classed as those that produce a maximum of 600kg of carbon emissions for every megawatt hour of electricity they produce. If a power plant pumps out lower levels of emission, it would receive a share in a tradeable certificate – a financial instrument with a dollar value. The lower the emissions, the bigger the share of the certificate. In other words, the bigger the implied subsidy. A plant with zero emissions would be given a full certificate. But here's the rub. At that level, new coal plants would miss out. Even cutting-edge, new, ultra-supercritical coal-fired plants put out 700-750kg of carbon per megawatt hour. So a critical mass of Coalition MPs want the definition of low emissions to be around this level, say 700-800kg of carbon, not the 600kg as Finkel suggested. This would allow any new coal-fired plant to enjoy at least a partial implicit subsidy. It would only be a tiny fraction of a certificate – one-fifteenth of a certificate if the level is set at 750kg, according to Bloomberg New Energy Finance – but it would still represent an implicit subsidy, no matter how small. Such new ultra-supercritical coal plants are being built in Germany and Japan, for instance, but building one is slow and expensive compared to solar and wind. It's unlikely any will ever be built in Australia as the cost of renewables continues to fall. Finkel proposes that renewables be made more reliable, incidentally, by requiring solar and wind plants to provide substantial battery storage to protect against the vagaries of sun and wind. So you'd think there's room for a sensible compromise here. Set the level around 700 or 750, knowing that it's a partial concession to future coal-fired power, yet understanding that there's unlikely to ever be any new coal-fired plants built in Australia. |
But no, so pending the ramifications of the Finkel report being sorted out - amidst much opposition from a vocal hard-right conservative minority from the Government’s back bench, and Labor’s intransigence as regards the 600 kgs limit and not 1 kg more - at that moment the Government, and indeed Australia, effectively had no energy policy at a time when it has reaffirmed its commitment to achieve a 26 to 28% reduction in emissions on 2005 levels by 2030, a limit perceived in many quarters to be inadequate anyway, but without any credible policy as to how that objective is to be achieved.[7] One might argue that not much has changed in the time since.
Indeed, as at November 2017, Australia appeared unlikely to meet the target. Using updated estimates of Antarctic ice sheet melting, sea level rises by the end of this century are now anticipated to be 55% higher than the forecast by the last assessment of the Intergovernmental Panel on Climate Change (IPCC), and the WMO says that CO2 levels are now 45% higher than the rate in 1750 and the 3.3ppm increase last year was about 50% faster than the average rate of 2.2 ppm over the past decade. Further, the UNEP Environment Program’s Emissions Gap 2017 Report noted that government projections pointed to Australian emissions reaching 592 million tonnes of CO2 equivalent a year by 2030, compared with the targeted range of 429-440 MT (metric tonnes of) CO2 needed by then[8].
[1] This review from http://www.abc.net.au/news/2017-06-09/finkel-energy-report-explained/8602524 Peter Martin’s potted summary of the report may be found at http://www.smh.com.au/comment/how-finkel-would-keep-the-electricity-on-20170614-gwqwqo.html
[2] https://en.wikipedia.org/wiki/Carbon_capture_and_storage
[3] Giles Parkinson, “Finkel decoded: the good, the bad and the very disappointing” at http://johnmenadue.com/giles-parkinson-finkel-decoded-the-good-the-bad-and-the-very-disappointing/
[4] James Massola, “Minister tells climate sceptics to calm their farm”, SMH, 6 June 2017, 1, 5.
[5] Ross Gittins, “Trump’s true to his views on climate”, SMH 7 June 2017.
[6] “Playing petty games as the lights go out”, SMH, 17-18 June 2017: http://www.smh.com.au/comment/parties-to-blame-when-the-lights-go-out-20170616-gwsti4.html
[7] Ibid.
[8] “Australia likely to miss 2030 Paris pledge: UN”; “’Inhospitable’: global record CO2 surges”, SMH, 1 November 2017.
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