Issue 22  October 2006

The odd State out

Question: which State owns the largest capacity in coal-fired generation? Answer: New South Wales. Question: which State burns the most coal to make electricity? Answer: New South Wales. Question: which State government is making the least contribution towards clean coal technology research and development?  Answer: New South Wales.

Government and industry funding commitment to greenhouse gas abatement R&D now exceeds $1.1 billion. The national government is contributing $500 million through the Low Emission Technology Development Fund, while the Queensland Government is spending $300 million, the Victorian Government $80 million and the coal miners $300 million through the Coal21 project.  In New South Wales, where more than 27 million tonnes of a coal are burned annually by power stations owned by the State government, the Iemma administration is a non-contributor.

Perhaps the most alarming aspect of the NSW Government inactivity is that, in a State where establishing carbon dioxide capture and disposal operations will become a priority once national and international requirements are introduced for sequestration, very little is known about local deep geology and nothing is being done to build an information bank. This is not work that can be undertaken in a short time frame and the issue of stranding power stations not able to pursue CCS actions in an acceptable period starts to become a real question for NSW.

The inactivity of the Iemma administration is the more puzzling because it is in the forefront of State governments pushing the Australian Government to introduce emissions trading from 2010.

A greener shade of black

Ignoring the economic and social realities of climate change policy are as dangerous as ignoring the scientific ones, Colin Whyte, general manager, sustainable development of Xstrata Coal, has told a conference in Sydney.

He points out that, in any discussion about the role of coal in an environmentally cleaner world, some "basic realities" have to be recognised:

All major coal industry players, Whyte says, agree that this is a transition period to a low or near-zero emissions future. "The transition is moving away from the manner in which coal is used now to produce energy, first towards near-zero technologies and ultimately to hydrogen with coal as an essential element of its production."

The inevitability of more strict regulation of emissions has intensified the search for clean coal technologies, Whyte adds. "Power generation companies are saying generators are willing to pay a premium to avoid future liabilities associated with tougher regulations, but which technology and how much and who should bear the extra costs?"

NETS poses more carbon charge questions

There is a new acronym on Australia's already crowded energy policy debating platform. It is "NETS" for the National Emissions Trading task force set up by the State premiers and Territory chief ministers.

Chaired by Roger Wilkins, the former senior NSW bureaucrat, NETS has brought down a 230-page report and is calling for responses to it by 22 December.

The report proposes a possible design for a national emissions trading scheme, to be introduced in 2010 and to start with the stationary energy sector. Constraints on greenhouse gas emissions are "widely" regarded as inevitable, it argues, and not knowing when they will be applied or in what form is seen by "many" stakeholders as inhibiting decisionmaking.

The report adds that the State and Territory governments are "particularly concerned" about the effects of investment uncertainty in the electricity industry. "Lead times for major new investments in baseload plant typically run to several years," it says. "Not knowing what rules will apply to emissions significantly increases the risk for investors (in) very expensive, long-lived assets."

The report also argues that, in the absence of a price on emissions, there is little or no incentive for investors to deploy existing or new technologies to reduce greenhouse gases.

The NETS task force proposes two alternatives for a cap on power station emissions by 2030:

The task force acknowledges that unilateral action in Australia to introduce a carbon charge ahead of a global scheme "could affect the competitiveness" of trade-exposed industry. (This a rather mealy-mouthed version of what The Allen Consulting Group told another promoter of emissions trading, the Australian Business Roundtable on Climate Change, in March. Allen Consulting said unilateral imposition of emissions trading in Australia "would constitute bad policy in that it would impose significant cost while having a negligible effect on climate change.")

The task force goes on to concede: "In the extreme, the impact on competitiveness could mean that existing companies in energy-intensive industries move offshore or that Australia misses out on major new investment."  It proposes that these industries evade the flow-through cost of carbon charges by being given free allocation of permits. It also proposes provision of some free permits to black and brown coal generators and auctioning of the rest, with the revenue flowing to the State and Territory governments.

The task force also proposes introduction of a new regulator to run the scheme with a ministerial forum to make policy decisions.

A carbon bob each way

The Federal Opposition resources spokesman Martin Ferguson says the ALP supports a carbon tax but at the same time wants to protect the tradeable goods sector. Speaking to Channel 10's Meet the Press program, Ferguson has said the ALP's immediate energy priorities are promotion of renewable energy and driving investment in clean coal technology. "We have to very clearly work through this carbon tax issue."

In March this year, in a statement on energy policy, Opposition Leader Kim Beazley committed the federal party to consulting with the States and business on development of a national emissions trading scheme, acknowledging that Australia's high energy intensity in the transport and energy intensive export sectors raised "specific issues to be resolved" in designing it.

Powering the city

EnergyAustralia is seeking regulatory approval to upgrade Sydney central business district network assets to meet higher security standards imposed by its owner, the NSW Government.

In its analysis, EnergyAustralia reports that power demand in the three square kilometre CBD, the commercial heart of Sydney, with 45 per cent of the city's office space and 38,000 residents, will rise by more than 24 per cent between 1997 and the coming summer. It predicts that there will be a further 17.7 per cent increase in demand between 2006 and the summer of 2013-14. 

The utility attributes the increased consumption over the past decade to a substantial rise in residential dwellings and moderate growth in commercial floor space, a trend it sees continuing over the next decade.


Time and cost are the two large bugbears for energy development and the pace of policy and regulatory improvement is an issue that has been raised many times since the current push for energy reform got under way in the early 1990s.

Big business, which was in the forefront of arguing for reform 15 years ago, is now telling Australian governments that much more urgency is needed to complete the job of fixing bottlenecks in the national power network.

In a rather late submission to the Council of Australian Governments' energy reform implementation group -- the deadline for submissions was the first week of August and this was despatched in the first week of October -- the Business Council of Australia complains that the biggest barrier to achieving the benefits of reform remains the "inadequate and overloaded" electricity transmission network (which was the first target for reform back in the early 1990s).

The BCA says energy-intensive industries are concerned about:

The BCA says it is essential for the current "fragmented" transmission planning system to be replaced by a national arrangement.

It also wants "major" changes to the regulatory benefits tests applied to transmission investment, reform of State-owned entities to increase competition, removal of State government policies and practices that impact negatively on generation investment and reforms to power pricing policy.

The core of the BCA approach is an argument that Australia needs to manage its infrastructure better to support future economic growth.

The arguments it is putting forward do not, of course, apply only to electricity supply. Policy management affecting the road, rail and water systems is of equal concern to business stakeholders -- and flows on to a far from satisfactory situation for the community as a whole.

The BCA has claimed that each year's delay in implementing infrastructure reform costs about $10 billion in lost economic growth. That's a burden borne not just by business managers and their shareholders, but by everyone in the Australian community.

It is a message that the business community, in its own interest, should try much harder to get across to ordinary Australians so that they understand when they go to the polls in Federal, State and Territory elections  what they have lost and will continue to lose if reform remains mired in an impasse between governments.

Keith Orchison

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