The Energy White Paper released earlier this month
forecasts dramatic changes to Australia's electricity
generation sector as we move to a clean energy future. Achieving it
will be challenging given the significant role that CCS technology
is to play in that energy revolution. The White Paper also leaves
the door ajar on nuclear energy which future governments may need
to embrace to realise Australia's energy
Coal currently accounts for 75% and gas around 15% of
electricity generation in Australia. The White Paper projects a
significant reshaping of the energy mix with renewable energy to
account for at least 20% of electricity generation by 2020, rising
to around 40% by 2035 and potentially up to 85% by 2050.
While the White Paper emphasises that the later two projections
(which are based on recent modelling undertaken by the Bureau of
Resources and Energy Economics) are highly qualified, the magnitude
of the estimated change is immense. Achieving it will require more
than $200 billion in new generation investment between now and
2050, including $50-$60 billion in gas and $100 billion in
Australia's clean energy transformation will be driven by
the Government's Clean Energy Future Plan, the central elements
of which are a price on carbon (providing a price signal to drive
clean energy investment) and the Renewable Energy Target (providing
mandated market share for renewable energy).
There are three interesting implications of the transformation
to a clean energy economy which arise from the White Paper.
The first is that it will be very difficult to meet clean energy
targets without successfully commercialising carbon capture and
storage (CCS) technology. The White Paper notes that fossil fuel
fired generation with CCS could contribute 29% of Australia's
electricity generation under the "85% renewable energy at
2050" scenario noted above. That would make it the largest
"clean energy technology", with large scale solar the
next biggest with a 16% contribution.
Given there are no significant Australian CCS plants in
operation today, this will be an enormous challenge. To facilitate
the development of CCS technology, the Australian Government is
committing significant funds in support of large-scale
demonstration and small to medium scale CCS pilot projects and, by
June 2013, will have developed a CCS Roadmap for Australia to
Second, there may be a justification for nuclear energy
generation within Australia in the future. The White Paper confirms
that the Government does not support the use of nuclear energy in
Australia. However, it notes that future Australian governments
might not hold this view and that the strongest justification for
developing nuclear energy would be a failure to commercialise other
low-emissions technologies in time to meet long-term global and
national emission reduction objectives.
Given the significant role that CCS is earmarked to play in
Australia's clean energy future, it may be that nuclear energy
is the fallback if CCS technology is not successfully
commercialised. The White Paper suggests that a decision to adopt
nuclear energy would be required 10 to 15 years ahead of operation,
meaning that a decision would be needed in the later part of this
decade if deployment was required by 2030 or 2035.
Finally, the White Paper acknowledges that increasing the level
of renewable energy generation poses some challenges for the
electricity market itself. The growth in renewable generation may
make it harder to maintain efficient dispatch and effective price
signals for investment. The subsidy provided by the Renewable
Energy Target allows large-scale renewable energy generators to bid
into the market at lower marginal rates than might otherwise be the
case. This has the potential to alter bid stack and market clearing
price outcomes in ways the White Paper acknowledges are not well
High levels of intermittent generation from wind or solar energy
may also pose challenges in balancing supply and demand in the
system. While the White Paper concludes this is manageable at
current and projected levels, it notes in the longer term
additional backup capacity or innovative system management and
storage solutions may be needed.
In summary, the White Paper forecasts dramatic changes to
Australia's electricity generation sector over the next three
decades. That transformation is not without risk, particularly
given the reliance placed on CCS. It will be interesting to see
whether the ambitions of Australia's clean energy future are
realised in the manner contemplated by this White Paper.
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