Home > Economics - General > Buying out brown coal

Buying out brown coal

October 15th, 2009

Today’s Fin (paywalled) leads with a story that the foreign owners of brown coal power plants are demanding that, instead of receiving compensation over time for the effects of the ETS, they should be paid a lump sum, in the billions of dollars, to shut down the plants. Given that compensation is to be paid, it is impossible for me to disagree with this. The whole point of the ETS is to reduce pollution, and that can’t be done effectively if major polluters receive payments that are conditional on continuing polluting activities.

But should they receive compensation. These plants were all in public ownership in 1992, when the Australian government first committed to reducing CO2 emissions (subject to the findings of the then-new IPCC). When Jeff Kennett sold them, the original buyers ought to have known they were taking a commercial risk regarding possible limits on emissions. Most of the current owners bought even later, after Australia had participated in the negotiation of the Kyoto Protocol.

The people who should be getting compensation are not investors who made bad bets, but the workers and communities who pay the price for their bad decisions. More on this in this paper with Flavio Menezes and Liam Wagner.

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  1. Michael of Summer Hill
    October 17th, 2009 at 09:53 | #1

    Hermit, if the nuclear nuclear industry are really fair dinkum they could start by telling Australians which insurance company are willing to grant nuclear power plants operators 100% full protection coverage against any forseeable radio active disaster? Otherwise time to stop the rot.

  2. Stephen Gloor (Ender)
    October 17th, 2009 at 10:05 | #2

    Hermit – “Several analysts conclude it could perhaps be done at 2-3 times the capital cost of nuclear energy. See here. Thus 5 GW of networked renewables could cost $30-40 bn while 5 GW of Gen III nuclear could cost $15 bn. ”

    I wondered when Peter Lang’s flawed analysis would start being used as reference and here it is. This analysis is just plain wrong. It assumes far too much storage and costs for solar and understates nuclear costs by over half.

    “That leaves a combination of wind and solar which could be overbuilt and extensively networked to achieve say 90% reliability. ”

    As solar thermal power stations can use supplemental fuel there is no necessity to overbuild as they can be direct replacements for fossil fuel power plants.

    “Thus 5 GW of networked renewables could cost $30-40 bn while 5 GW of Gen III nuclear could cost $15 bn. ”

    5GW of nuclear at current finished nuclear plant prices of $8000 per kW is going to cost 40 billion and that is without the enrichment plant for nuclear fuel and/or a waste repository.

    The solar plants with 16 hour storage will need 2 times the collector area and will not be cheap however they will not be more than $8000 per kW. Solar plants are far quicker to build so the overnight cost of $4000 per kW will not blow out too far by the time the plant is complete. Perhaps you should read this:

    http://peakenergy.blogspot.com/2009/10/nuclear-nonsense-amory-lovins-on.html

    “But on closer scrutiny, nuclear power’s real potential is disappointing. Despite over half a century of intensive subsidisation and promotion, it produces less than 15 per cent of the world’s electricity. This may seem hard to believe, given the fervour with which its promoters have been singing its praises of late, but the numbers speak for themselves.

    In addition to 430 reactors operating worldwide, 52 reactors are listed by the International Atomic Energy Agency as ”under construction”. Thirteen have been on that list for over 20 years, and 24 still don’t have an official planned start-up date.”

  3. Hermit
    October 17th, 2009 at 10:26 | #3

    I think the battle of the arithmetics is best left to another forum. Is that the same Amory Lovins who said we’d all by driving hydrogen cars by now? On insurance it could be pointed out that both the WA and Federal governments have idemnified the gas plant operator Chevron against leakages of CO2 from under Barrow Island. That is if anybody sues the taxpayers pick up the tab. Unlike the US Price Anderson Act for nuclear indemnity the Chevron indemnity has never been to legislation.

  4. observa
    October 17th, 2009 at 11:06 | #4

    “Don’t you just love the post-modern ALP: talks a good game Left but always tacks Right at the death.” Well I’d argue that’s merely the ‘quants’ (ie the left or those who tilt toward quantitative controls/central planning) being mugged by the reality of superior ‘price’ (ie the right or those who tilt towards markets and concomitant myriad of individual decion-making). Nowhere is this better illustrated than the quant’s rapidly impending dilemma where their carbon cap rubber hits the road with La Trobe (and places like SA with Leigh Creek and Port Augusta) If the Soviet experiment with quantitative measures hasn’t convinced you of that already, then recent quant failure with water in the MDB and impending quant failure in La Trobe should. That’s because quantity control measures often come in difficult, lumpy to swallow bites, whereas price can be carefully managed in an infinite spectrum, or more exactly down to the indivisible cent, which for all intents and purposes is the same thing.

    That’s the fundamental lesson quants should take from Jack’s astute observation about where their typical quant policy rubber hits the road. They need to accept that price is an infinitely superior managment spectrum, just as ‘free market’ fans need to accept there is no such animal, but really a set of prices that can/will emerge freely after some initial marketplace constitution. That initial constitution is the result of a democratic ‘social contract’ and is largely set by the plethora of taxation (albeit things like private property, intellectual rights, rule of law, etc are long ago givens in that contract). That’s the lesson of the third way for us all. The quants need to understand the superior mechanism of price, whist those that already do, need to understand that the current prices they observe are really the free market outcome of an inherited constitutional marketplace. It is that constitution or set of observed prices we should be analysing for their current shortcomings, in order to reach agreement on how to sensibly reconstitute them to emergent realities. Agreement on the fundamental constitution of the marketplace should be sought, before we go about adjusting prices gradually or quickly to get there. The true path always lay with privately faced price, but we all need to understand it must be carefully socially constituted.

    That’s the third way path and my challenge to you all. Devise that overarching constitutional marketplace devoid of quantitative whims that offers the best social set of prices for us all as individuals.

  5. Michael of Summer Hill
    October 17th, 2009 at 11:11 | #5

    Hermit, as a taxpayer I currently object to giving out free permits to the big polluters under the CPRS and I strongly object against footing the bill of any nuclear power plant catastrophy.

  6. Michael of Summer Hill
    October 17th, 2009 at 11:40 | #6

    Observa, I’m going to have a kitkat and observe how Master O’Reilly goes in the Caulfield Cup.

  7. Stephen Gloor
    October 17th, 2009 at 17:57 | #7

    Hermit – “I think the battle of the arithmetics is best left to another forum. Is that the same Amory Lovins who said we’d all by driving hydrogen cars by now?”

    Sure however it still will be the same no matter what the forum and some people are driving hydrogen cars. What I am saying is the nuclear is expensive and slow and is the last choice a country like Australia should make. In the last discussion I had with Barry about this he was quite happy to be completely dependant on the Chinese to fuel and build our reactors. Being tied in this way to a military dictatorship for the energy for our entire economy does not seem to be sensible in any strategic sense. Especially when we have the best renewable resources of any OECD country. Perth has the most sun hours of any OECD city – why would be waste this resource

    http://www.world-nuclear.org/info/inf02.html

    In May 2008 South Carolina Electric and Gas Co. and Santee Cooper locked in the price and schedule of new reactors for their Summer plant in South Carolina at $9.8 billion. The EPC contract for completing two 1,117-MW AP1000s is with Westinghouse and the Shaw Group. Beyond the cost of the actual plants, the figure includes forecast inflation and owners’ costs for site preparation, contingencies and project financing. The units are expected to be in commercial operation in 2016 and 2019.

    In November 2008 Duke Energy Carolinas raised the cost estimate for its Lee plant (2 x 1117 MWe AP1000) to $11 billion, excluding finance and inflation, but apparently including other owners costs.

    In November 2008 TVA updated its estimates for Bellefonte units 3 & 4 for which it had submitted a COL application for twin AP1000 reactors, total 2234 MWe. It said that overnight capital cost estimates ranged from $2516 to $4649/kW for a combined construction cost of $5.6 to 10.4 billion. Total cost to the owners would be $9.9 to $17.5 billion.

  8. Stephen Gloor
    October 17th, 2009 at 17:58 | #8

    Sorry the last section should be in quotes to read like this as it is from the link I posted:

    “In May 2008 South Carolina Electric and Gas Co. and Santee Cooper locked in the price and schedule of new reactors for their Summer plant in South Carolina at $9.8 billion. The EPC contract for completing two 1,117-MW AP1000s is with Westinghouse and the Shaw Group. Beyond the cost of the actual plants, the figure includes forecast inflation and owners’ costs for site preparation, contingencies and project financing. The units are expected to be in commercial operation in 2016 and 2019.

    In November 2008 Duke Energy Carolinas raised the cost estimate for its Lee plant (2 x 1117 MWe AP1000) to $11 billion, excluding finance and inflation, but apparently including other owners costs.

    In November 2008 TVA updated its estimates for Bellefonte units 3 & 4 for which it had submitted a COL application for twin AP1000 reactors, total 2234 MWe. It said that overnight capital cost estimates ranged from $2516 to $4649/kW for a combined construction cost of $5.6 to 10.4 billion. Total cost to the owners would be $9.9 to $17.5 billion.”

  9. pablo
    October 17th, 2009 at 19:29 | #9

    Perhaps it is off subject but the absurdity of Vic brown coal export potential should be seen alongside the probable environmental catastrophe of the blowout in that oil/gas platform off the NW Shelf. A third attempt is about to be made to plug this monster some two kilometres down. The public is constantly lulled by big oil/gas/coal that all’s well, that they have the technology to expand our fossil fuel reserves into this frontier. Well here’s the quid-pro-quo, hopefully third time lucky but we’re seeing the limits to this exploitation and it is costing us big time.

  10. observa
    October 18th, 2009 at 10:10 | #10

    It just struck me that the founding fathers missed a fundamental human right. Namely, all men are created equal and as such should all face a level playing field on price (and by deduction subsidy) with a sensible caveat or two. No doubt some of you quants are justifiably getting nervous now about that right being trampled on with the impending Carbon Profits Rorts Scheme and those enterprising folk at Goldman Sachs and the like. I share your concerns, particularly as I’ve been distracted from the usual productive pursuits, availing me and mine with some well intentioned quant largesse of late. (Whilst some like punting the Caulfield, the Observa prefers one way bets) Basically, don’t you ever let such a chance go by old son, or it’s every citizens fundamental right to stick his hand up for whatever’s going, even as he shakes his head at its design.

    Here’s a level playing field price devotee shadowing typical quant policy rubber hitting the road. Over a year ago I grabbed their $8k solar to grid subsidy and $1.5k in RECs and shelled out for the remainder of the $21.5k for a 2.1kw system at the time. Coupled with their mandated 44c/kwhr excess buyback (and a further Truenergy 20c for some greening reason), when I’m paying around 9c-24c off peak hot water to max summer peak tarriff in my all electric household now, that would give a 9-10% after tax return on investment, with no prizes for guessing who is forcibly subsidising it. Well perhaps the quants got an attack of the guilts and subsequently restricted their largesse to households with incomes under $100k pa. It was largely DINK baby boomer households like mine that were power bill proofing their homes for retirement. Struggletown or their kids faced the natural savings barrier until time and events took their course to remove it. Firstly the GFC cooled overheated demand for the panels at the same time as supply was ramping up to meet demand and suddenly new cadmium telluride panels lowered costs significantly as well. That meant enterprising alliances like Diamond Energy and Lend Lease could offer a free 1.15kw system if the customer assigned the subsidy and RECs to them. The new price was now some form filling and photocopying before worried Treasury officials managed to convince Minister Garrett not everyone should be greened as much as the O household had been. Well not before my 89yr old father and 90 yr old mother-in-law had been greened naturally enough. How did your rels and acquaintances go or were you a bit slow off the mark, or busy at the races?

    Now you quants might say this Greatest Generation was well deserving and alls well that ends well but it doesn’t necessarily stop there. With my father going into extra service aged care, the need to sell his freshly greened unit for bond purposes arose and Master O stuck his hand up for the opportunity to help out. Naturally the contract to sell was signed before the end of Sept while that maxm $18k in quant FHOG and SD concession was up for grabs. On Mrs Os side that decision has not arisen yet, but for her 90yr old mum it draws nearer. Hers is a stand alone austerity era house in a middle distance suburb of Adelaide, rapidly being engulfed by higher density housing as her generation sell up and move on. She’s astute enough to know the house her deceased husband built will go the same way and is more than happy for RE son to organise that in due course for the family benefit. When the time comes the small matter of that valuable $8-$9k worth of solar system on the roof can be taken care of by young sparky Master O of course. Installed appropriately on another roof to avail themselves of the current $4.5k worth of RECs up for grabs to all at present. Notice the possibility of double counting here folks? Still, what’s a bit of fuzzy carbon credit creation between friends and Goldman Sachs eh quants? Like those RECs they run off with after changing your light bulbs and shower heads for ‘free’.

    Me? I’m a committed level playing field price man, any time you concerned quants want to come and chat about our shared concerns.

  11. Chris O’Neill
    October 18th, 2009 at 12:28 | #11

    The other side of the issue of buying out brown coal is that it would mean the end of Aluminium smelting in Victoria. As Royce Millar in The Age points out:

    A LIBERAL Party elder and senior member of the state cabinet that decided to build a huge aluminium smelter in south-western Victoria has declared the decision ”absolute madness”, saying it had been a costly ”disaster” for the state.

    Also, Testing our Mettle:

    It gobbles up ONE-FIFTH* of Victoria’s electricity and has cost taxpayers billions of dollars in subsidies. Now its producer is pressing for more public dollars to shield it from the Rudd Government’s emissions trading scheme and the global financial crisis. It may be a lightweight metal, but aluminium exacts a heavy toll.

    Aluminium smelting in Victoria has been an economic disaster for Victoria and environmental disaster for the world. As a Victorian taxpayer, I resent being forced against my will to subsidize the burning of brown coal and emission of carbon dioxide into the atmosphere. Any message from the Victorian government to reduce greenhouse gas emissions will be treated with more than a little cynicism.

    *This means Victoria’s greenhouse gas emissions could be reduced by 10% overnight by turning off the Aluminium smelters.

  12. carbonsink
    October 18th, 2009 at 13:30 | #12

    @Ikonoclast

    Carbonsink, if politics was the only variable I would agree with you. However, matters will have changed so radically by 2020 that current politics will obsolete

    I doubt it. Human-caused climate change can be plausibly denied forever. Even Katrina-sized events are quickly forgotten, and explained away as natural variation.

    @Chris O’Neill

    This means Victoria’s greenhouse gas emissions could be reduced by 10% overnight by turning off the Aluminium smelters.

    …And households are only responsible for about 20% of total emissions. If I were a politician and I had a choice between jacking up electricity prices for everyone or closing a couple of smelters, I know which I’d choose. Lose a few thousand votes in smelter towns or p*ss off the entire state. Hmmmm.

    Of course, they’re not going to do either. Roll on BAU.

  13. Michael of Summer Hill
    October 18th, 2009 at 14:48 | #13

    Update Update Update, Lord Christopher Monckton former science advisor to Margaret Thatcher reckons Copenhagen is a done deal arguing ‘Virtually nobody won’t sign it’.

  14. Ken
    October 18th, 2009 at 22:54 | #14

    I’m waiting on a bipartisan consensus on this, so pre 2020 would be optimistic! Yet I think that it will come.
    Seriously I wonder if we aren’t beginning to see the first cracks that sees the old party alignments beginning to break down; the various stream of concern for the environment – small g green wanting the coal fires to start going out, food and economic security increasingly recognised as paramount amongst the hard and practical, the self interested who don’t want to face the end of our extravagantly wasteful way of life, merging into a middle ground that demands a steep carbon tax without fear or favour, and demand that our options include nuclear. The Greens are going to lose their middle Australia support if they can’t bend on nuclear. The part of the Coalition that grasps the sustainable future nettle firmly will need to ditch or gag the denialists or get dragged into irrelevance by and with their climate recalcitrants. Labor’s victory by default status can be lost if they don’t deliver – and it really looks like they won’t. Ultimately they need as deep a shift in attitudes and policy as the Coalition on this; some CCS R&D and some gas-fired power plants just won’t cut it as credible.
    I think when people truly get that failure to deal with emissions isn’t an option the political landscape will look very different.

  15. Chris Warren
    October 19th, 2009 at 06:07 | #15

    Gawd, who let the nutters in?

    …to be completely dependant on the Chinese to fuel and build our reactors. Being tied in this way to a military dictatorship for the energy for our entire economy does not seem to be sensible in any strategic sense.

  16. Salient Green
    October 19th, 2009 at 07:53 | #16

    “The Greens are going to lose their middle Australia support if they can’t bend on nuclear”

    Ken, you could well be correct in the longer term. At this moment, the Greens would cut emissions by 40% by 2020 without the need for either nuclear power or even a CPRS. This makes the major parties look foolish. I can’t see how the Greens could lose credibility on nuclear power while they are taking such a credible lead on GHG mitigation.

    In any case, if Australia was to go down the nuclear power track, it makes much more sense for countries with nuclear expertise to ‘develop’ the Gen 4 and for us to buy it in when proven. This is realisitically at least 15yrs away. 15 yrs is a long, long time in the development of renewable technology.

    I think the Greens are safe in their non-nuclear policy for a good while.

  17. Hermit
    October 19th, 2009 at 10:10 | #17

    SG how are Spain, Germany and Denmark getting along with their efforts to cut either coal or nuclear?

  18. Salient Green
    October 19th, 2009 at 11:52 | #18

    Hermit, the object is to reduce emissions and deep cuts can be made quickly with the low hanging fruit as outlined by the Greens.

    “There are 4 things we could begin today that would cut
    our greenhouse gas pollution by over 40%, ten times the minimum measly
    targets envisaged by Labor. First, stop logging native forests. Second,
    introduce feed-in tariff legislation modelled on Germany’s as well as
    decent renewable energy targets and watch a solar and renewable energy
    industry take off and create new jobs. Third, redirect the billions of
    dollars from the recent stimulus packages away from roads and coal
    mine-supporting infrastructure, and into sustainable public transport.
    Fourthly, a job-creating package of nationwide home and office energy
    efficiency and retrofitting would itself cut our greenhouse gas emissions
    by 10%.”

    We will require fossil fuels for some time yet but we need to extract much more energy from them and use that energy much more efficiently.

    From The Oil Drum, “The Speech Obama Needs To Give”
    http://campfire.theoildrum.com/node/5874

  19. Ken
    October 19th, 2009 at 17:01 | #19

    Salient, there are people here who’ve shifted on nuclear. With some reluctance I’m beginning to move that way too. Sure, we won’t be leading the way on nuclear but real spending on renewables, given the scale of the problem, is miniscule and Australia’s energy sector has embraced denialism rather than seriously working on solutions; their renewables efforts are half-hearted and almost entirely at taxpayer expense. They do get the scale of the problem but entirely fail to see the necessity.
    I’d like to see serious renewables under construction and am probably more willing than most to accept higher energy costs in the process but I suppose my point is that there is room for the Coalition to come up with real policy alternatives that could have mainstream appeal and one of the main appeals of nuclear looks to be cost.
    Sustainability is absolutely essential and it crosses political boundaries. I think more of Australia’s mainstream get this than Labor or Coalition appreciate; a Coalition that truly gets this could undermine the default winner status of Labor and get Green preferences. But they need a bit of credibility on this issue and they just don’t have it. On the contrary they are acting on the old basis that AGW, if real at all, is something for the far future. And meantime are too busy fighting to prevent effective action to come up with even a credible pro-nuclear response to climate change.

  20. Salient Green
    October 19th, 2009 at 17:40 | #20

    Ken said “Sustainability is absolutely essential and it crosses political boundaries. I think more of Australia’s mainstream get this than Labor or Coalition appreciate”

    I think so too. The alternative is that there are still enough of ‘Australia’s mainstream’ to punish a government for higher energy costs and the cowards are waiting for the electorate to really demand change before they ‘courageously’ make the ‘hard’ decisions.

    FWIW Ken I have ‘shifted’ on nuclear also and can say I am reservedly in favour of Gen 4. When I say reservedly, I mean as long as it is used to assist humanity to achieve a truly sustainable future along with the preservation and restoration of the natural world, rather than any sort of BAU.

  21. Fran Barlow
    October 19th, 2009 at 17:55 | #21

    For me, nuclear comes down to the question of feasibility. If we regard the services provided by the biosphere to humans as important and the activities of humans that depend on those services as important, then reason suggests we should choose those measures that best reconcile these competing claims.

    Unless someone can show that renewables, in the sense that we normally understand the term, can do this about as well without nuclear as with it, then nuclear must be in the mix. GenIV is arguably renewable anyway, since it actually doesn’t depend on new mining of ores. It’s just as renewable as harvesting landfill or sewage. But even Gen111 technologies are ahead of all coal and all gas in terms of footprint and arguably ahead of renewables in many settings since these latter demand extra redundancy and copious backend transmission support.

  22. jquiggin
    October 19th, 2009 at 17:55 | #22

    I haven’t shifted on nuclear, at least not for some decades, but maybe I didn’t have far to shift. If nuclear plants built to modern safety standards can be made cost-competitive, after taking account of carbon prices, with other energy sources, they should come out ahead in open competition. So far, that hasn’t happened, despite some pretty big subsidies and govt encouragement.

    At this stage, my reading of the evidence is that nuclear is well behind wind (which is however, limited by the finite supply of good sites) and that solar PV is closing the gap quite fast.

    But, the more options we have the better the chance that we can reach a zero-emissions future, as we clearly must.

  23. Donald Oats
    October 19th, 2009 at 18:00 | #23

    I echo Salient Green on the nuclear option, in which the key word is “reservedly”. Unfortunately somewhere down the track we need to not only find ways of improving the efficiency of what we’ve got, but in making actual substitution of supply away from GHG high emission energy generation to GHG-low/no emission energy generation. As hard as that would be in a static human environment, to do it while addressing both the demands of developing countries and of population growth, well it is a much bigger dimension of problem.

    If it cannot be improved, replace it. If it cannot be replaced, reduce the need for it. If the need itself cannot be reduced per capita, then at least arrest the growth in population – or ideally have natural decline for a bit (of course the odds of that happening are remote).

  24. Fran Barlow
    October 19th, 2009 at 18:17 | #24

    @jquiggin

    Really John, they only have to come out cost-competitive with other energy sources at comparable scale and CF. Even if one accepts your claim that one could run an industrial economy on 25% on-demand supply, then that 25% ought to go to the sources that have the least cost, after the cost to the commons has been factored in. By all the reasonable standards, nuclear is ahead of coal and gas and diesel.

    If traditional renewables can’t do that 25%, it doesn’t matter how cheap they are. They aren’t fit for purpose.

  25. Alice
    October 19th, 2009 at 19:37 | #25

    I rather light candles in the dark than fire up nuclear and create a bigger pollution problem than many in here cant even dream might occur. They cant see the future, they dont want to see the future, and they can neither prevent or fully cost the risks. Its like the financial markets.

    I dont get the enthusiasm of Fran. Nuclear screams warning warning at me. Its not the material. Its clumsy people and its the passage of time. Bechtel are still attempting to ship nuclear waste around the world now through port after port who rejects it, and trying to dump the toxic stuff in poor countries. Ive put all this in before. The list of environmental disasters caused by the ugly stuff is as long as your arm plus every evil criminal and money launderer will want a piece of weapons action profiteering.

    We are not thinking straight if nuclear is even on the cost table.

  26. Fran Barlow
    October 19th, 2009 at 20:40 | #26

    @Alice

    You know, Alice, if we had IFR we could get Bechtel to pay us to take their hazmat and use it for fuel, in the process reducing its volume and halflife …

    What’s not to like about that?

    You speak of “a bigger pollution problem” with nuclear but nothing is remotely as close as the pollution problem from coal in terms of volume and with coal, it is everywhere and it includes actinides you wouldn’t like in a nuclear plant. You talk of “clumsy” people but every year clumsy people cause deaths in coal mines while non-clumsy people get black lung disease.

    You know full well that the world is not going to abandon coal plants in favour of wind or solar or wave and won’t go close to the timeline needed to the coming demand from 9 billion people and that the gas won’t cover all this and that the gas too, is limited and a fossil fuel, but still you say that nuclear is inconceivable. You must know that the demand for new energy in the dfeveloping world will continue. You must know that the bulk of the world does not share Aussie prejudices about nuclear andf thta the waste will accumulate, and yet, IFR is out.

    It’s this paradox that I find insoluble.

  27. Ken
    October 19th, 2009 at 21:32 | #27

    From comments above any assumption that proposing nuclear is electoral suicide looks increasingly shaky. Can The Greens shift on nuclear? It looks extremely unlikely but their membership probably includes people who are rethinking blanket opposition to nuclear for the same reasons as commenters here. It’s probably not as much of a shift in position as the Coalition is facing. I suppose the question is whether Labor can make that change and bypass the Greens and Coalition completely. Unfortunately, with CCS some day and keep the coal fires burning till then policies their credibility isn’t that much better than the Coalition’s. So far the Greens look to have more than either but as these issues become increasingly mainstream ones the Greens will lose influence over the agenda.
    This issue can’t be fixed from the fringes; it will need the middle to take this up and to act.
    Oh, and I had wondered at where private owners of power stations stand – the subject of the post. I don’t expect power companies to bear all the burden of the transition to low emissions but I think any compensation has to bear in mind that they knew then and now know even more clearly that their industry entails an enormous burden of future costs. They can’t claim ignorance. Nor can the governments that sold them those plants.

  28. Alice
    October 19th, 2009 at 21:44 | #28

    @Fran Barlow
    The paradox is there Fran because you are replacing one environmental disaster with another. Im not convinced there isnt a better way and our thinking hasnt done enough running through the options or possible new ones. To hell with costing nuclear. Its back to the drawing board we need.

  29. Alice
    October 19th, 2009 at 21:50 | #29

    In 1888 Tamworth, New South Wales, Australia became the first location in the Southern Hemisphere to have electric street lighting, giving the city the title of “First City of Light”.
    So in merely 120 years we have connected so much electricity to power so many things and destroyed so much of the environment its a wonder we are still here…now, imagine what we could do with nuclear if we really tried.

    Make it better?? I dont think so. The mind boggles.

  30. SeanG
    October 20th, 2009 at 01:03 | #30

    Does that mean that you would prefer living in complete darkness and not having things such as computers, tvs or a fridge?

  31. Hermit
    October 20th, 2009 at 06:24 | #31

    Some realism is needed on the daunting scale of the problem. Currently renewables are about 3% of the energy mix. We want 20% by 2020, just a short decade away. Most of the current renewable contribution is from hydro which has little growth potential. That still leaves 80% non-renewable. Thus we are not even close to being on track to achieve even an inadequate target.

    This magical thinking really amounts to a vote for unabated coal burning. The coal replacement problem has to generate some very big numbers. Current spending on wind and solar seems to be of the order of tens of millions per year, perhaps slowing due to threats of rebate cuts. If we were on track to achieve even modest targets spending would be of the order of billions per year. Therefore we have effectively locked ourselves into coal.

  32. Salient Green
    October 20th, 2009 at 07:45 | #32

    Coal does not need to be replaced yet. It can be burnt in a much more efficient process and the energy used for the electrification of transport which will result in big cuts to emissions.

    The problem is that it appears that we have locked ourselves onto coal because we have a government fixated on the CPRS. If it has a plan to replace coal, it certainly has not been communicated to the elecorate beyond the fact that a CPRS will somehow encourage renewables and reduce emissions.

    As both Ken and Hermit have alluded to, there are no really big renewable energy projects even planned let alone being built and I don’t class any of the wind farms as really big projects. How is this situation to change with such a pissweak CPRS?

    NB SA has 20% energy from wind or 810MW which I suppose collectively amounts to a big project.

  33. Salient Green
    October 20th, 2009 at 08:23 | #33

    Whoops, wrong to say no really big renewable energy projects planned. Vic has 3000MW wind planned and around Australia there is $31 billion worth of projects planned.
    http://www.theaustralian.news.com.au/story/0,25197,25532515-11949,00.html
    http://www.theage.com.au/opinion/politics/a-race-to-the-bottom-20091019-h4wn.html

    In view of our high population growth even these projects probably don’t get us significantly ahead of the game.

  34. Hermit
    October 20th, 2009 at 09:13 | #34

    The problem with SA’s .8 GW of nameplate wind power is that it hardly stirs during heatwaves when the State’s electricity demand approaches 3GW. As for solar a typical suburban roof would need to be more than 50% covered in expensive PV to run the air conditioner or heat pump inside the house. Both SA and Vic have gas for now but long run they will have to get new sources of supply. That could be long pipelines to coal seam gas in Qld or conceivably even natural gas from WA. Both Melbourne and Adelaide are likely to hit summer temps of 50C in coming years according to BoM. Apart from the usual fire infernos there will be heat related deaths among the frail. It’s not convenient to cut back on that coal though.

  35. jquiggin
    October 20th, 2009 at 10:13 | #35

    @Fran Barlow
    As I’ve pointed out several times, nuclear and coal aren’t “on-demand supply”, they are fixed supply regardless of demand. In both cases, a large proportion of the power they generate is of low value and has to be priced accordingly to encourage people to consume it.

    For on-demand supply, the leading candidates are gas and hydro, which can be turned on and off at low cost. Looking ahead, there is some progress being made in low-cost storage, which gets around the supply-demand mismatch of coal, nuclear and renewables.

    But the real solution, in my view, lies in smart grids and smart pricing, not in attempts to replicate the characteristics of a coal+gas system.

  36. Salient Green
    October 20th, 2009 at 12:18 | #36

    According to Simon Hackett, Australia’s first Tesla owner, if America’s entire fleet of cars were electrified they could be charged overnight without any extra generating capacity installed. That’s a damning indication of how inefficiently coal is currently used.

    Hermit, there are air conditioners available right now which use one tenth the energy and are run by two solar panels in one case and by solar hot water in several others.
    http://www.coolerado.com/tech-info/

  37. Fran Barlow
    October 20th, 2009 at 12:51 | #37

    @jquiggin

    As I’ve pointed out several times, nuclear and coal aren’t “on-demand supply”, they are fixed supply regardless of demand.

    That’s true but of course the marginal cost (including to the commons) of supplying energy via nuclear is so low that the difference is moot. One would simply run the system at maximum efficiency and sell what was demanded. Ideally, we’d do some sensible demand management around it — encouraging people to recharge their cars when other demand was well short, running high energy deamnd industry and pumping water more at night, perhaps building up pumped storage with the surplus …

    For on-demand supply, the leading candidates are gas and hydro, which can be turned on and off at low cost.

    The problem here is that the hydro is nearly tapped out and certainly the scope for expanding it is quite limited and as to gas, apart from landfill gas this is a fossil fuel.

    Don’t get me wrong. I’m a pragmatist. If nuclear is out (and in Australia that is clearly the case for the foreseeable future) then gas is the next least damaging thing. Here in Australia I’d also be in favour of solar thermal for desal (and maybe wave machines) after the fashion of North Africa and maybe to do F-T from waste biomass for syngas for liquid fuels, a massive expansion of urban pumped storage and wind … That gets us into the game for the next ten years, after which time perhaps we will bite the bullet and include nuclear power.

    The problem is how to rapidly lose coal from the power supply system, and aside from gas, which is only a 30% better solution in terms of GHGs (it’s better in a number of other ways and if we ramped up biogas and maybe got CSB methane involved a little better than that) there isn’t much else we can do.

    PV is too expensive per unit of power installed and recurrent costs are likely to be very high. And nobody talks about decomm for them either …

    I’m not sure how you believe that smart grids and smart pricing can achieve more than peripheral savings. Sure we will probably waste less and avoid consuming recklessly — good things if the consumption has a footprint, but in the end no amount of demand management can abate the really big usages — industry, refrigeration, heating, water management …

  38. Hermit
    October 20th, 2009 at 15:40 | #38

    Aluminium producers insist they can only work on baseload power at low cost but perhaps they haven’t tried very hard eg large battery banks. How much the baseload fraction can be reduced (from say 40% of peak) is debatable. Smart meters that can be programmed to respond to ad hoc electricity pricing need to be online and therefore can be hacked. Could be why in Adelaide they want to ration air conditioning by use of radio signals not the internet. I fear that if smart meters were in every home instead of the expected 20-30% electricity cuts it would be more like 5%. That would be due to rebound (eg bigger TV now we shower less) and drawing the line beyond a token sacrifice.

    What could work is soft rationing such as an appliance-specific base electricity rate that quickly steps up to a penalty rate. That could force everybody on to four or five star fridges for example. Battlers would get help from ETS revenues to buy these appliances. That’s if there’s any money at all after the Turnbull amendments.

  39. carbonsink
    October 20th, 2009 at 17:01 | #39

    But the real solution, in my view, lies in smart grids and smart pricing, not in attempts to replicate the characteristics of a coal+gas system.

    My meter looks like it was built in 1965. I speculate my house will have the same meter in 2020, and the grid will be every bit as dumb then as it is now.

  40. Donald Oats
    October 20th, 2009 at 17:32 | #40

    The entire aluminium smelting process can be reworked. It won’t be unless the business is subject to a much more credible economic signal – gee, removing subsidies would do it. If they chose to invest in renewable energy for their requirements, even in part, they could make further reductions in overall cost of supply. Perhaps a scheme where the government(s) wean them off coal by shifting subsidisation towards any renewable plant capacity installed or invested in by the aluminium industry. Surely a workable scheme can be figured out.

    As for (short-run?) marginal cost calculations for nuclear power generated electricity, in which the nuclear station is already there and under-utilised, compare directly the cost of project funding for nuclear power plant installation against the cost of project funding of an equivalent wind farm installation. Once nuclear station capacity is reached and exceeded, what are the options then? Add another nuclear plant, or chuck in a few extra wind turbines? If anyone can show some reasonable models of how these sorts of scenarios compare I’d be curious. Part of the imperative is to actually directly substitute for coal as fast as possible, and that means that as a wind farm is incrementally installed and made operational, it is able to counter some of its GHG emissions due to construction against the reduction in coal GHG emissions. Without at least taking this into account, it is difficult to do an apples against apples comparison of nuclear projects and wind energy projects. Barry Brooks has made a good start on assessing resource implications; the overall effect for lifetime of an installation is much harder to foresee and I accept that.

  41. Chris O’Neill
    October 20th, 2009 at 21:01 | #41

    Aluminium producers insist they can only work on baseload power at low cost but perhaps they haven’t tried very hard eg large battery banks.

    I don’t think making already expensive wind energy even more expensive by using batteries has a snow-flake’s chance in hell of economically supplying Aluminium smelters. Aluminium can be shipped anywhere in the world cheaply, so the the rational place to produce it is where the electricity is cheapest. The most economical way of smelting Aluminium is to set up big hydro or geo-thermal schemes at wherever in the world these are the most economical. Wind energy cannot compete with this and neither can coal if its emission cost is included. In a carbon rational world, Coal-based Aluminium smelting would be switched to hydro or some other non-emitting source as soon as possible. If this means moving Aluminium smelting from Australia to somewhere else in the world then so be it.

    Could be why in Adelaide they want to ration air conditioning by use of radio signals not the internet.

    Regarding air-conditioning, we should ask ourselves when is the most economical time to pump heat out of our houses:

    1. When it is the hottest temperature outside or

    2. When it is the coolest temperature outside.

    You don’t need to know much thermodynamics to know that the answer is 2. But in spite of that, 1 happens a lot more than 2. The rational way to operate air-conditioning is to run it when the air is coolest outside which is usually before sunrise and then rely on thermal inertia inside buildings with a reasonable amount of insulation to prevent it from becoming too hot inside until late the following night. Smart metering would make this strategy even more economical.

  42. Kevin Cox
    October 21st, 2009 at 02:38 | #42

    There is an “imperfect way” of getting value from paying compensation as that appears to be the way things are heading. We pay compensation but require ALL the money to be invested in Australia in renewables (say geothermal or solar thermal).

    As over 90% of the cost of renewable energy are the finance costs (repayments and interest) the compensation money will be spent profitably. Giving coal burners money that they will then use to build another coal fired plant somewhere else on the planet is not a very sensible strategy.

  43. Ken
    October 21st, 2009 at 07:27 | #43

    I think financial and other assistance to energy companies for conversion to low emissions energy production is reasonable but what they are being given is assistance to keep burning coal without penalty. This will encourage conversion to low emissions technology how?
    Smart grids? They are building more transmission lines near me in order for low cost Hunter Valley coal to be positioned to undercut proposed gas and sugar cane waste cogeneration on NSW North Coast. Underlying assumptions seem to be little or no impact on consumption from efficiency improvements, no carbon price to make that coal power uncompetitive and no requirements to reduce emissions at the coal power stations. If I thought the energy sector would seriously take up nuclear I’d probably support it just because we need a response that the energy sector is actually in favour of but they currently have no more intention of that than phasing out coal in favour of renewables. What big renewables there are in the pipeline are not their idea, they’d rather not have them and don’t want to have to re-engineer the grid to accommodate them. That’s not a recipe for real change.

  44. Fran Barlow
    October 21st, 2009 at 09:06 | #44

    @Ken

    Personally, I’d not be all that keen on across the board assistance. In principle, I’d be happy enough with a well designed program to ensure that those who would suffer significant sunk cost losses and wanted to retool were able to do so with minimal loss. For those coal plants in excess of 30 years of age though I’d be inclined to simply regulate them into accelerated retirement as they ought to have known, from 1997 or so onwards, that this was a serious possibility. Where this would cause significant losses to for example, a compliant super fund in Australia, I’d be inclined to give a one-time payment for the value of any asset loss to the funds affected so that members would not lose. Anyone purachasing after this time could take their chances.

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