Consultant Dan
17 March 2011
The next step in Australia's renewable energy and carbon price politics
The Japanese nuclear disaster has brought an added urgency to the conversation today at the second Greens carbon consultation, in Parliament House, Canberra. The world needs to make the transition to safe, renewable energy and Australia is already way behind.
The invited participants have been asked by Senator Christine Milne, the Greens energy and climate spokesperson, to bring concrete policy proposals to the meeting today. The Greens party will then pass proposals through its own policy process, before putting a position to the Multi-Party Climate Change Committee.
There are grounds for hoping that this will be more productive than the last round of climate policy negotiations, the CPRS process run by Climate Minister Penny Wong.
Firstly, Labor is in minority Government, sharing power with the Greens, rural independents and Andrew Wilkie MP. This means that it has to deliver or it will lose the next election. It also means that the Greens will keep the deal from being as generous to the big polluters as the CPRS was.
Secondly, the solar sector has grown significantly in the last 2 years and the technology has improved.
Today’s consultation in Parliament House will bring big companies and unions alongside climate activists and social justice groups. The corporates present will include finance, solar PV, wind turbines, gas, transport, construction, rail, community wind and consulting firms.
An infinite universe of policy options will be on the table this year, but they all boil down to one foundational decision; do we want a carbon price in isolation or a combination of carbon pricing policy and industry policy?
Option 1 – a carbon price only – assumes that we can design the perfect price for the initial fixed price phase, the right date for the scheme to switch into a flexible price phase and design the best trading parameters to get us to a low carbon economy. It is the sort of idea that some US Republicans favour. It has support from a few naive economic rationalists but nobody who understands the global warming problem or the renewable energy solutions.
Option 2 is to use the fixed/flexible system to generate revenue for funding the renewable energy industry. This is crucial because no amount of carbon farming, energy saving or dodgy international carbon trading will protect the climate if our energy still comes from coal, oil and gas.
It is widely accepted that option 2 will result in lower initial emission reductions, but that it is the necessary prerequisite for building a resilient, efficient, low-carbon economy and creating genuinely green jobs.
I also believe that option 2 is the only scenario in which the alliance of Labor, Greens and independents has any chance of winning the next election. The public will be inspired by big solar plants and might vote for them at the next election. Whereas the voters are not going to vote back in a Government that merely delivers an abstract price and market to deal with concrete problems (floods, bush-fires, food insecurity, climate refugees etc).
The good news that makes this all more likely to succeed this time around is that solar and other renewable energy technologies are smarter than coal and getting rapidly cheaper. It will be years not decades before coal is nobbled by market forces, because solar and wind will be at “grid parity”, the point of consumer price equivalence with fossil fuel electricity.
Germany, USA and China are racing to grid parity and according to new modelling, Australia is not that far behind, thanks to our great sunshine (not our energy policies!).
A new model developed by the Australian PV Association for the Australian Solar Institute calculates that grid parity will be reached in Brisbane by 2016 and Sydney by 2018-19. This is a stunning prediction. The limitation is that this does not include the cost for night-time storage and load-balancing across the grid. Download here .
Earlier this year the US Energy Secretary Steven Chu announced the SunShot initiative, a play on President Kennedy’s successful vision to send astronauts to the moon (a “moon shot”). Nobel laureate Dr Chu plans to bring solar to grid parity in the USA by 2020.
Crucially, Secretary Chu has designed the subprogram for solar thermal generation and storage to also get to grid parity by 2020. Unlike solar PV, these solar thermal systems will have the ability to dispatch 12 to 17 hours of “baseload” power, when the sun don’t shine. (On that day our superannuation funds, banks and the stock markets will have to write down trillions of dollars worth of stranded assets in coal generation and mining.)
To get an idea of how to get from where we are to solar PV grid parity, read this excellent presentation by Dr Lothar Wissing, which was given to a conference organised by Turkey’s PV industry organising body (Turkish PV Technology Platform) and the International Energy Agency (IEA-PVPS), in February.
Dr Wissing’s presentation shows that solar PV costs in Germany have been cut by 45% between 2006-2010 (based on roof-top installations up to 100kWp – Wissing, p. 17).
The Wissing paper shows that about 230,000 PV systems were installed in Germany in 2010, for a total output of 7-8GWp. Global figures collated by the IEA for 2010 will be out soon but event just taking the 2009 figures, we can see the scale of Germany’s achievement (Wissing, p.10 graph).
Germany spent EUR12billion in 2009 building PV systems. PV and solar thermal energy had a combined turnover of EUR13.9bill that year. Employment in PV rose from 25,000 in 2004 to over 80,000 in 2009.
The primary driver for these PV sector outcomes in Germany is the Federal Feed in Tariff, which pays a generation tariff for PV electricity.
If the renewable energy industry does it advocacy and lobbying right over the next weeks and months, a FiT mechanism like Germany’s will become part of the Labor-Green carbon policy. The FiT would be the primary beneficiary of revenue generated by the carbon tax/trading system. The revenue transfer can be designed to be progressive, compensating poor households while providing the tariff incentive for PV.
The genius of the FiT is that it would drive innovation in solar technology, by carefully reducing the subsidy over time, through a carefully managed process. Predictions are that Germany’s FiT will drop 50% between 2009 and 2012 (Wissing, p.15 graph).
Japan’s nuclear disaster is still unfolding but I predict that the long-term impact it will have on energy technology will be positive for solar and other renewables. If Japan sets its extraordinary industrial and R&D talents to the task of hastening solar grid parity, I’d recommend dumping your coal shares immediately!
A good package that combines carbon price and industry policy such as a FiT will set Australia on the path to deep emissions cuts. It will also increase energy security and benefit the economy. New jobs will be generated and regional economies will gain.
The stakes are higher that when Penny Wong was in charge and the technologies are more mature. The German experience shows how to drive cost reductions and technical innovation. President Obama’s genius Energy Secretary has set the target of 2020 for solar baseload grid parity. These and other reasons give us cause to be optimistic.
RSS
I agree, but everyone needs to understand that adding Solar to their home is an asset that could boost the future value of their home if / when they make a choice to sell. With the environment the way it is going we are unable to dismiss any item that provides free power at no cost to both the client and more notably the world!