The true cost of keeping the Liddell power plant open


Frank Jotzo, Australian National University and Zeba Anjum, Australian National University

For a long time, Australian governments have believed that the private sector should run the electricity sector. And successive governments have used market instruments to incentivise reducing emissions, by supporting renewables, discouraging coal use, or both.

Now things seem inside out: uncertainty about energy policy mechanisms is pervasive, and the federal government is attempting to broker a deal for the ageing Liddell coal plant to stay open past its planned decommissioning date. It’s possible the plan will require government payments – amounting to a carbon subsidy.


Read more: AGL rejects Turnbull call to keep operating Liddell coal-fired power station


Fear of supply shortages and an appetite for coal have combined with an inability to resolve the political side of energy and climate policy.

Power companies see coal as a technology of the past, but the government seems unready to accept that wind and solar technologies (already the cheapest option for new capacity in Australia) are the future of Australia’s power.


Read more: The day Australia was put on blackout alert


The latest suggestion amounts to deferring serious investment in renewables for a while, fixing up some of the old coal plants up so they can run a few more years, and buying time in the hope of keeping power prices down. Chief Scientist Alan Finkel has backed the idea, at least in principle.

The cost of delaying the inevitable

Commissioned in 1972, the Liddell power plant is the oldest of Australia’s large coal-fired stations (after the closure of the Hazelwood station). The New South Wales government sold it to AGL in 2014, at an effective price of zero dollars.

AGL announced some time ago that it will close the plant in 2022 and has considerable financial incentive to do so. This week AGL reiterated this. The latest suggestion is that Delta Electricity might buy and continue to operate Liddell.

What might be the benefits and costs of keeping Liddell running for, say, another decade? We do not know the plant-level technical and economic parameters, but let’s look at the principles and rough magnitudes.

Keeping the plant running longer will require refurbishments, defer the investment costs in renewables, and result in additional emissions, both in carbon dioxide and local air pollutants.

Refurbishment is costly. Finkel put refurbishment costs at A$500-600 million for a 10-year extension. Such refurbishment might achieve an increase in efficiency – as GE, a maker of power station equipment, recently argued – but perhaps not by much for a very old plant like Liddell.


Read more: Coal and the Coalition: the policy knot that still won’t untie


And refurbishment might not work so well, as the experience with the Muja plant in Western Australia shows: A$300 million was spent on refurbishment that ultimately failed. Spending big money on outdated equipment is not a particularly attractive option for energy companies, as AGL’s CEO recently pointed out.

Liddell’s power output during 2015-16 was around 8 terawatt hours – about 10% of present NSW power supply (it was more in 2016-17, and less in previous years). It might well be lower as the plant ages.

Ironically, the reduction in the Renewable Energy Target, from 41 to 33 terawatt hours per year, almost exactly matches Liddell’s present power output. With the original RET target, new renewables would have covered Liddell’s output by 2020.

Liddell emitted around 7.5 million tonnes of carbon dioxide per year in 2015-2016. With the assumed reduction in output and some improvement in CO₂ emissions intensity, the carbon dioxide output might be in the order of 5-6 million tonnes per year, or 50-60 million tonnes over ten years.

If the government were to pay for the refurbishment, as has been suggested, this would equate to subsidising CO₂ emissions at a rate of perhaps $10 per tonne, compared to the alternative of replacing Liddell with renewable power.


Read more: FactCheck Q&A: is coal still cheaper than renewables as an energy source?


At the same time, the government is paying for projects to reduce emissions, at average prices of around $12 per tonne of carbon dioxide, under the Emissions Reduction Fund. The contradiction is self-evident. Furthermore, keeping more coal plants operational deters commercial investment in any kind of new plants.

Of course this needs to be seen in the context of supply security, any subsidies that might be paid in future to renewable energy generators, and the possibility that a Clean Energy Target will determine overall emissions from electricity production irrespective of whether Liddell operates or not. It’s complicated. But the fundamental point is clear: paying for an old coal plant to operate for longer means spending money to lock things in, and delay the needed transition to clean power.

A possible compromise might be to mothball the Liddell plant, to use if supply shortages loom, for example, on hot summer days. But such a “reserve” model could mean very high costs per unit of electricity produced.

It is not clear that it would be cheaper than a combination of energy storage and flexible demand-side responses. And it may be unreliable, especially as the plant ages further. During the NSW heatwave last summer Liddell was not able to run full tilt because of technical problems.

A market model to pay for reserve capacity would surely do better than government direction.

Australia’s energy companies have been calling for a mechanism to support new clean investment, such as the Clean Energy Target. And many would no doubt be content to simply see a broad-based, long-term carbon price, which remains the best economic option. If the policy framework was stable, private companies would go ahead with required investment in new capacity.


Read more: Finkel’s Clean Energy Target plan ‘better than nothing’: economists poll


The ConversationMeanwhile, federal and state governments are intervening ad-hoc in the market – making a deal to keep an old plant open here, building and owning new equipment there. It is the worst of all worlds: a market-based system but with extensive and unpredictable intervention by governments that tend to undermine investor confidence.

Frank Jotzo, Director, Centre for Climate Economics and Policy, Australian National University and Zeba Anjum, PhD student, Australian National University

This article was originally published on The Conversation. Read the original article.

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How hard will Tony Abbott run against the Finkel plan?



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The government faces a hard internal sell on the Finkel plan, not least to Tony Abbott.
Mick Tsikas/AAP

Michelle Grattan, University of Canberra

Bedding down an energy security policy based broadly on the Finkel model is now crucial for Malcolm Turnbull. But the issue will also test Tony Abbott’s judgement and influence, in what has long been a marquee area of difference between the two men.

Abbott is poking and prodding at the Finkel plan, raising questions and doubts about it.

He told 2GB’s Ray Hadley on Monday that two criteria were essential when judging the chief scientist’s proposal for a clean energy target (CET) that, his report says, “will encourage new low emissions generation [below a threshold level of carbon dioxide per megawatt hour] into the market in a technology neutral fashion”.

Abbott’s criteria were:

  • Did Finkel’s scheme take the pressure off power prices?

  • Did it allow coal to continue?

“My anxiety, listening to reports of the report and this statement that they’re going to reward clean or low emissions fuels while not punishing high emissions fuels, is that it’s going to be a magic pudding,” Abbott said.

“Now we all know that there is no such thing as a magic pudding. And if you are rewarding one type of energy, inevitably that money has got to come from somewhere – either from consumers or taxpayers”.

“And if it’s from consumers, well it’s effectively a tax on coal and that’s the last thing we want”.

For Abbott, the magic word “tax” conjures up his glory days of fighting the Labor government’s “carbon tax”.

Labels can make a lot of difference. As Abbott’s former chief-of-staff Peta Credlin said earlier this year of the carbon tax: “It wasn’t a carbon tax, as you know – it was many other things in nomenclature terms. We made it a carbon tax. We made it a fight about the hip pocket and not about the environment. That was brutal retail politics.”

The CET is not a “tax”, and Finkel argues that consumers will be better off than if the status quo continues – a status quo that businesses and most other stakeholders consider not to be an option.

But the scheme would disadvantage coal relative to renewables – and the extent of the disadvantage will be crucial in the debate within Coalition ranks.

In a softening up exercise, Energy Minister Josh Frydenberg lobbied backbenchers individually about the Finkel plan before Friday’s release. Government sources say the feedback is good and believe there is a strong majority that believes Finkel offers a potential way forward.

But the chairman of the government’s backbench environment and energy committee, Craig Kelly, a hardliner, wants more work done “by a couple of other independent organisations”.

In the end, the argument may come down to how “Finkel” is interpreted and the precise form in which it would be translated into practice.

Tuesday’s Coalition meeting is set to provide the first indication of whether the government’s optimism about the positive reception of the plan is solidly based.

The Nationals are vital, given their passion for coal and their original role in mobilising Coalition feeling against an emissions trading scheme. Their general position is they can live with the Finkel framework but it will be a matter of the detail, notably the threshold, with its implications for coal.

Deputy Prime Minister Barnaby Joyce is on board, based on his pragmatic assessment that this is better than possible future alternatives. He said on Friday: “I think that if we don’t bed this down, you can see what’s happening in England or anywhere else. If you lose the election, you’re going to get a worse outcome.

“So I’d rather bed down an outcome that secures coal miners, that secures coal-fired power, because I strongly believe in its capacity to provide baseload power that fulfils our obligations in international treaties.

“If we can do that and make sure Mr and Mrs Smith get cheaper power, then of course I’m going to consider that.”

Outspoken Nationals George Christensen is waiting on more information. “I’ve got some mixed thoughts,” he says of Finkel’s plan, and wants to talk further to Frydenberg.

“I’m comfortable with measures to bring down electricity prices. But I’m not comfortable with anything like an emissions trading scheme, or a derivative thereof” – and he is not sure whether this proposal is a “derivative”.

The position of the Liberal critics will be much weakened if the Nationals get behind the Finkel plan.

Abbott will have to make a call about the mood of his colleagues and decide how hard to go on this issue in coming weeks. This area has been a signature one for him and his weakness would be highlighted if he could only attract a handful of naysayers.

The ConversationObviously, the stakes are a great deal higher for Turnbull. If things went badly for Turnbull in his pursuit of the Finkel option, it would be a major disaster for him and his government. When it comes to emissions policy, Turnbull is always walking on the edge of a sinkhole.

https://www.podbean.com/media/player/icjdu-6b9a25?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Time for China and Europe to lead, as Trump dumps the Paris climate deal


Christian Downie, Australian National University

President Donald Trump’s announcement overnight that he will withdraw the United States from the Paris climate agreement comes as no surprise. After all, this is the man who famously claimed that climate change was a hoax created by the Chinese.

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While it will take around four years for the US to withdraw, the prospect is complicated by Trump’s claim that he wants to renegotiate the agreement – a proposal that European leaders were quick to dismiss. But the question now is who will lead global climate action in the US’ absence?

As I have previously argued on The Conversation, there are good reasons for China and Europe to come together and form a powerful bloc to lead international efforts to reduce greenhouse gas emissions.

China is now the world’s number-one energy consumer and greenhouse gas emitter, and should it combine forces with Europe it has the potential to lead the world and prevent other nations from following the US down the path of inaction.

There are very early signs that this may be happening. Reports this week indicate that Beijing and Brussels have already agreed on measures to accelerate action on climate change, in line with Paris climate agreement.

According to a statement to be released today, China and Europe have agreed to forge ahead and lead a clean energy transition.

While it is too early to predict how Chinese and European leadership will manifest in practice, in the face of American obstruction they are arguably the world’s best hope, if not its only hope.

Decades of destruction

Trump’s announcement only reaffirms his antipathy towards climate action, and that of his Republican Party, which for decades has led attempts to scuttle efforts to reduce emissions at home and abroad. Let’s not forget that it was President George W. Bush who walked away from the Kyoto Protocol.

In just the few short months of his incumbency so far, Trump has halted a series of initiatives executed by President Barack Obama to address climate change. These include taking steps to:

  • Repeal the clean power plan

  • Lift the freeze on new coal leases on federal lands

  • End restrictions on oil drilling in Arctic waters

  • Reverse the previous decision against the Keystone XL pipeline

  • Review marine sanctuaries for possible oil and natural gas drilling.

And the list goes on.

This remains the real problem, regardless of whether the US is inside the Paris climate agreement or outside it. As the planet’s second-largest emitter of greenhouse gases, what the US does domestically on climate change matters a great deal.

As a result, if China and Europe are to lead the world in the US’ absence, not only will they have to ensure that other nations, such as Australia, do not follow the US – and some members of the government hope they do – but they are also going to have to think creatively about measures that could force the US to act differently at home. For example, some leaders have already mooted introducing a carbon tax on US imports, though such proposals remain complicated.

In the meantime, while these political battles play out around the world, climate scientists are left to count the rising cost of inaction, be it the bleaching of coral reefs or increasing droughts, fires and floods.

The ConversationIf only it were all a hoax.

Christian Downie, Fellow and Higher Degree Research Convener, Australian National University

This article was originally published on The Conversation. Read the original article.

Australian Politics: 17 November 2013 – More of the Same


The link below is to an article that takes a humorous look at the recent scandal concerning allowances in politics. It’s worth a read I think.

For more visit:
http://www.themonthly.com.au/issue/2013/november/1383224400/don-watson/tony-abbott-apologises

Man-Made Earthquakes Becoming Common


I guess it was only a matter if time before our meddling with the earth via fracking became a major problem, or perhaps better put, a bigger problem. Man-made earthquakes are now a reality, but this article suggests they have been around a lot longer than fracking.

For more visit:
http://www.geek.com/science/man-made-earthquakes-are-becoming-a-real-problem-1576464/

Australian Politics: 15 October 2013 – Denial Defiance