A Study by Energy Strategies for the Clean Energy Future Group Consisting of: Authors: Dr Hugh Saddler, Dr Mark Diesendorf, Richard Denniss A CLEAN ENERGY.

A Study by Energy Strategies for the Clean Energy Future Group

Consisting of:

Authors: Dr Hugh Saddler, Dr Mark Diesendorf, Richard Denniss

A CLEAN ENERGY FUTURE FOR AUSTRALIA

Australasian Energy Performance Contracting AssociationAustralasian Energy Performance Contracting Association Australian Business Council for Sustainable Energy Business Council for Sustainable Energy Australian Gas AssociationAustralian Gas Association Australian Wind Energy AssociationAustralian Wind Energy Association Bioenergy AustraliaBioenergy Australia Sustainable Energy Development Authority of NSWSustainable Energy Development Authority of NSW Renewable Energy Generators of AustraliaRenewable Energy Generators of Australia WWF AustraliaWWF Australia

Study Focus

• Reduce stationary energy emissions to 50% of 2001 level by 2040.Reduce stationary energy emissions to 50% of 2001 level by 2040.• Use existing technologies with marginal improvementUse existing technologies with marginal improvement• Continuing economic growthContinuing economic growth

Fore-casting:Fore-casting: Respect and understand economic Respect and understand economic driversdrivers of energy of energy demand growth. demand growth. Back-casting:Back-casting: Choose workable 2040 energy supply system to match Choose workable 2040 energy supply system to match projected demand, then work out how to get from present (2001 data) to projected demand, then work out how to get from present (2001 data) to 2040. 2040.

Fore-casting and back-casting

This method tells us what the future economy, energy use and This method tells us what the future economy, energy use and emissions emissions couldcould be like. be like.

• Dr Hugh Saddler, Energy Strategies Pty Ltd, - on future energy demand with and without efficiency

• Dr Mark Diesendorf, Sustainability Centre Pty Ltd, - on future energy supply

• Richard Denniss, The Australia Institute, - on present and future economic structure of Australia

Authors and RolesAuthors and Roles

2.302.30All other non-metallic mineral productsAll other non-metallic mineral products

2.202.20Cement, lime, plaster & concreteCement, lime, plaster & concrete

1.421.42Basic chemicalsBasic chemicals

1.211.21Sugar industrySugar industry

2.302.30Food, beverages, tobaccoFood, beverages, tobacco

1.421.42Iron & steelIron & steel

2.202.20Mining (non-energy)Mining (non-energy)

2.622.62LNG production for exportLNG production for export

1.551.55Coal mining for exportCoal mining for export

N/A**N/A**Domestic energy supply industriesDomestic energy supply industries

2.40*2.40*GDPGDP

Output ratioOutput ratioCategoryCategory

GDP AND SECTORAL VALUE-ADDED GROWTH RATIOS, 2001 TO 2040

*Intergenerational *Intergenerational ReportReport

** Endogenously ** Endogenously determineddetermined

Residential:Residential: Solar efficient design, solar Solar efficient design, solar hot water, insulation, space heating & hot water, insulation, space heating & cooling, lighting, taps & showerscooling, lighting, taps & showers

Commercial:Commercial: Design, heating & cooling, Design, heating & cooling, ‘sleep’ modes, refrigeration, lighting‘sleep’ modes, refrigeration, lighting

Industrial:Industrial: Cogeneration, electric motors, Cogeneration, electric motors, boilers, kilns, heat pumps, design of boilers, kilns, heat pumps, design of systems, industrial processessystems, industrial processes

MEDIUM ENERGY EFFICIENCYTechnological Options

With medium energy efficiency the increase in energy demand was reduced With medium energy efficiency the increase in energy demand was reduced

from 57% (Baseline/low efficiency) to 25% (Medium Efficiency)from 57% (Baseline/low efficiency) to 25% (Medium Efficiency)

0

200

400

600

800

1000

1200

Energy intensiveindustry

Non-energy intensiveindustry

Mining, Agriculture,construction

Commercial/Services Residential

Major Sector

)

2001 2040 Baseline 2040 Medium efficiency

Final energy demand by major sector in 2001, compared with 2040 Baseline and 2040 Medium Efficiency (PJ)

En

erg

y d

eman

d (

PJ

)E

ner

gy

dem

and

(P

J)

FUEL SUBSTITUTION & EFFICIENT GENERATION

• Electricity supply shifted from mainly coal to natural Electricity supply shifted from mainly coal to natural gas plus renewablesgas plus renewables

• Widespread cogeneration (combined heat & power)Widespread cogeneration (combined heat & power)

• Solar thermal preheating in industrial & commercial Solar thermal preheating in industrial & commercial sectorssectors

• Substitution of natural gas for coal in most non-Substitution of natural gas for coal in most non-metallurgical applicationsmetallurgical applications

Emissions from stationary energy in AustraliaEmissions from stationary energy in Australia

0

50

100

150

200

250

300

350

1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038

Mt/

a C

O2 e

qu

iv.

Energy Efficiency

Renewable and gas fired generation

Baseline(lowefficiency)

Baselinewith

mediumefficiency

Clean EnergyFuture

50% reductionin CO2 emissions

The time path is a notional one, based on the assumption that policy recommendations are adopted

Electricity demand (TWh) and fuel mix with resulting CO2 emissions (Mt) in 2001, and in the 2040 Baseline and Clean Energy Future

Scenario

0

50

100

150

200

250

300

350

400

2001 2040 -Baseline

Scenario 1

2040 - CleanEnergy

Scenario 2

Te

raw

att

-ho

ur

(TW

h)

Reduced demanddue to mediumenergy eff iciencyPhotovoltaic

Hydro

Cogeneration

Wind

Biomass

Natural gas

Petroleum

Coal

262 million tonnes of

CO2

310 million tonnes of

CO2

131 million tonnes of

CO2

Coal 9%Petroleum 1%

Natural gas 17%

Biomass 26%

Wind 20%

Cogeneration 15%

Hydro7%

Photo voltaic 5%

BIOMASS RESIDUESBiomass supplies 26% (65 TWh) electricity plus process heat in 2040 Scenario 2

Burning sawmill & sugar cane Burning sawmill & sugar cane residues Rocky Point, Qldresidues Rocky Point, Qld

• Residues & wastes cheapest & Residues & wastes cheapest & fastest, but resource limited. fastest, but resource limited.

• Fuels include stubble from grain Fuels include stubble from grain crops, bagasse, plantation forest crops, bagasse, plantation forest residues, firewood, black liquor. residues, firewood, black liquor.

• Rural job creationRural job creation

• Electricity cost 5-6 c/kWhElectricity cost 5-6 c/kWh

WHEAT STUBBLE

• Kelleher (1997) estimated harvestable stubble residues from Australian grain crops 3.4 green t/ha over 20 M ha.

• Leaving 1.4 t/ha on land and combusting 2 t/ha @ 35% thermal efficiency generates 39 TWh/year.

BAGASSE & ‘TRASH’ FROM SUGAR CANE

• Dixon & Bullock (2003) find potential from sugar mills of 1.7 GWe and 9.8 TWh

• Allowing for increased conversion efficiency yields 15 TWh/yr in 2040

PLANTATION FORESTRY• Assumed 10 TWh/yr in Scenario 2 -- needs separate study.

TREE CROPS WITH MULTIPLE USES: e.g. OIL MALLEE

• Needed if sugar industry disappears, or greater emission reductions sought

• 3 products: electricity + activated charcoal + eucalyptus oil

• Reduces waterlogging, dryland salinity & erosion

• Creates rural jobs

• Improves landscape

• Electricity cost ~9.5 c/kWh (Enecon, 2002) minus value of other products & land improvement

• Land use for 18 TWh/yr electricity, assuming 10 dry t/ha/yr, is 0.81 Mha (half land currently under plantation).

SPECIFIC POLICIES PROPOSED FOR BIOENERGY

• Change MRET regulation to encourage dedicated tree crops for bioenergy on land cleared before 1990.

• Pay farmers grants for planting trees to limit dryland salinity, erosion, etc.

• Introduce bioenergy crop establishment grants.

• Fund national bioenergy roadmap.

• Fund bioenergy showcase program to demonstrate full-scale integrated energy crops/energy conversion process.

• Encourage shift to highly efficient, low emission, biomass-burning stoves & heaters, especially in urban areas. Start by banning open fires & fireplaces in metropolitan areas.

CONCLUSION ON BIOENERGY

• Substantial potential contribution to electricity & heat: 65 TWh/yr from crop residues and organic wastes alone. Much more if short rotation crops used.

• Small area of land required for stationary energy.

• Detailed studies of bioenergy potential needed for all climatic regions of Australia, taking into account proximity to population centres and powerlines.

• Demonstrate factory producing ‘simultaneously’ electricity, useful heat and liquid fuels.

ECONOMIC MODELS

• There is no accurate model to integrate macro-economy and energy over a 36 year period.

• Great difficulties in handling technology & policy changes, and market barriers & failures.

• Large uncertainties, notably in future fossil fuel prices and international greenhouse gas agreements.

• Difficulties of quantifying economic benefits of various technologies: hence cost-benefit analysis questionable.

• We offer approx estimates of costs of electricity under various assumptions re fuel prices, demand and fuel mix.

AVERAGE COSTS OF SCENARIOS 1 & 2 IN 2040, FOR VARIOUS FOSSIL FUEL PRICES

0

5

10

15

20

25

30

Ave

rag

e co

st in

204

0 ($

B)

(10,7) (9.3,7) (5,5) (4,4)

Coal- & gas-fired electricity prices (coal, gas) in c/kWh

Scenario 1Scenario 2

In Case (5,5) we can implement energy efficiency with average cost = In Case (5,5) we can implement energy efficiency with average cost = 4.4 c/kWh saved, before cost of Scenario 2 reaches that of Scenario 1.4.4 c/kWh saved, before cost of Scenario 2 reaches that of Scenario 1.

SOME KEY GENERAL POLICIES & STRATEGIES

1.1. In short term expand Mandatory Renewable Energy Target substantially to In short term expand Mandatory Renewable Energy Target substantially to establish industry capacity. In longer term, phase out MRET & replace with establish industry capacity. In longer term, phase out MRET & replace with carbon tax or levy or environmental / health pricing of fossil fuels or carbon tax or levy or environmental / health pricing of fossil fuels or emissions permits with cap and trading.emissions permits with cap and trading.

2.2. Disallow new base-load or intermediate-load power stations with emission Disallow new base-load or intermediate-load power stations with emission intensities greater than that of the best available combined-cycle natural gas intensities greater than that of the best available combined-cycle natural gas power station. power station.

3.3. Give economic value to environmental benefits of clean energy, such as Give economic value to environmental benefits of clean energy, such as salinity control and land restorationsalinity control and land restoration

4.4. Introduce COIntroduce CO22 targets for operation of each sphere of government and large targets for operation of each sphere of government and large business, with mandatory strategic plan and reporting.business, with mandatory strategic plan and reporting.

5.5. Remove market barriers to efficient energy use and renewable energy Remove market barriers to efficient energy use and renewable energy

6.6. Introduce mandatory energy & greenhouse labelling, ratings and Introduce mandatory energy & greenhouse labelling, ratings and performance standards for appliances, equipment and buildings.performance standards for appliances, equipment and buildings.

7.7. Fund new powerlines for renewables and natural gas on the same basis as Fund new powerlines for renewables and natural gas on the same basis as historic funding of powerlines for coal. i.e. spread cost over all electricity historic funding of powerlines for coal. i.e. spread cost over all electricity consumers.consumers.

CONCLUSION• 50% emissions reduction target is technically feasible and

compatible with continued economic growth.

• Target cannot be achieved with business-as-usual demand growth and improvements in coal-burning technologies.

• Between now & 2040 we can replace most energy-using equipment with more efficient versions at little or no net cost.

• Natural gas, wind power, bioenergy and solar hot water could each make big contribution to energy supply in 2040.

• Energy efficiency savings can pay for all or part of additional costs of renewable energy, provided they are packaged together.

• Need policies to remove market barriers & build industry.