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The implicit price of carbon

October 25th, 2010

I was too busy to post when it came out, but the Climate Institute has recently issued an important report on the implicit carbon price associated with such measures as renewable energy quotas. The take home message is that major economies, either directly or indirectly, are putting in place carbon prices. China’s current implicit price, for example (in PPP terms), is roughly either times higher than Australia’s and three to four times higher than the USA and Japan.

You can read more here.

An important implication is that concerns about Australia “acting alone” or “getting out in front” are misplaced. We are, as we have been for most of the past decade, at the back of the international pack. One day, this will come home to hurt us.

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  1. October 25th, 2010 at 18:20 | #1

    from the numbers at the link (China $14.20, Australia $1.70), I think ‘either times higher’ is a typo for eight times higher.

    Fixed thanks – JQ

  2. BilB
    October 26th, 2010 at 00:36 | #2

    Julia Gillard has finally accepted that there is a problem. But to just say that there needs to be action on carbon pricing is not “owning” the problem. It is an “oh well, I guess we are going to have to do something” resignation to the inevitable. Now I know that she is busy with …health..education, employment, economy,..,.,,,,,. Geese it must be annoying, this environment stuff, this climate change stuff, this peak oil inconvenience. It’s like……fixing the roof. Why should you ever have to fix the roof for goodness sake? Some things are meant to just work, forever.

    What are the many faces of government on this. There was the Howard fob off, then the Howard denial, then the Howard blame everyone else (china particularly), then the Howard “how can we put this to good use like mining the difficult stuff…… uranium and,..and..we could use this to get nuclear power in here, we’ll have a study”. Slam. Then there was the Rudd embracement and the Kyoto signing. Hurray!!!! Followed by the study. Ohhh. Then came the long drawn out characteristic Rudd micromanagement, like mud that gets thicker and harder till it dries and sets,..nothing. Slam. Then the Gillard 3 point plan, which quickly became a one point plan, and we will have to defer environment at least two years to give time for …… a study! Where are those Greenies when you need them? Oh look they’re here… they’ve been here all along. Phew, that was close. Now we are able to continue our important work on Health….Education…Employment, Economy,,,,.

    tick, tick, ticK, ticK, tiCK,tiCK, tICK, tICK, TICK, TICK…that is not your biological clock Julia, that is the sound of an environmental time bomb.

  3. Ikonoclast
    October 26th, 2010 at 07:06 | #3

    The reason nothing happens is that the mining corporates (and other corporates) own our two major political parties by means of large donations to both parties. “Do what you are told and the donations keep flowing. Disobey our orders and the donations stop. Now, sack Rudd and put in Gillard. We can work with her.” Subtext, Gillard is more compliant than Rudd and ready to sell anyone down the river as evidenced by her betrayal of Rudd.

    Rudd did have many of the faults Bilb listed above. However, one reason he could do nothing is that nobody else in the Labor supported him when he tried to wrest control of the country from the corporates.

    This site is probably worth a look.

    http://www.democracy4sale.org/

  4. DavidC
    October 26th, 2010 at 07:41 | #4

    The latest piece of research that should make every sane person *very* motivated to see urgent and significant action on carbon reduction:

    Future temperatures could exceed liveable limits. Reasonable worst-case scenarios for global warming could lead to deadly temperatures for humans in coming centuries. http://www.purdue.edu/newsroom/research/2010/story-print-deploy-layout_1_5572_5572.html

  5. Donald Oats
    October 26th, 2010 at 10:05 | #5

    Jim Hansen’s view is that a price needs to be placed at the point of extraction, eg coal mine, rather than calculated in a market. The tax collected is then shared more or less equally across all citizens as a dividend. Citizens who are able to reduce their use of power benefit because they get a full dividend while avoiding some of the price increases of power (as a consequence of annual hikes in the tax applied to GHG sources). Ultimately dirty coal get priced out of existence.

    Jim’s main point is that if we don’t leave most of our coal in the ground then the CO2 that is emitted will push us to the very upper end of the warming predictions – we don’t want that. If carbon capture is attempted it might help a little, but not enough to make up for the GHGs being emitted from the existing power stations. Tar sands and shale oil, and oil from coal, would be about the most foolish things we could do.

    I’m not sure if Jim Hansen’s Tax and Dividend would work as intended or not; assuming it does satisfy the economists as sound then I’m inclined to think this is a far simpler and much more direct attack on the problem of GHG emissions.

  6. BilB
    October 26th, 2010 at 10:33 | #6

    Donald O,

    The point of extraction tax is a good mechanism. But then turning collections into a dividend voids any benefit, as the buying public would then have additional income with which to pay higher prices for the electricity or other carbon content products. This only makes sense if the collections are channeled directly and completely to renewable infrastructure specifically targeted at retiring fossil fuel power stations, and eliminating fossil origin carbon in physical products. Remeber there is an already compromised very tight time frame, inefficient devices such as market incentives have to greater a margin of error to be anything other than casually effective.

  7. Donald Oats
    October 26th, 2010 at 11:50 | #7

    @BilB

    I agree that knocking out dirty coal infrastructure by replacing with renewable infrastructure is essential. Jim Hansen’s view is that by returning the tax directly to the people it avoids both the political temptation to redirect the money on tom-foolery not directly relevant to the task at hand, and it allows people to choose how to spend the money on their choice of power company, type of power source, etc. Some people no doubt will take the first year of dividend and blow it all on a new car or pool table or something, but when that second year of power price hike comes in…and then the third year of price hike…consumers will probably get the drift and investigate how to both reduce power consumption outright and how to reduce cost by switching to better power companies, ie those companies that don’t have such a high reliance on coal-generated power for supply.

    The government may also invest in renewable energy sources if it wishes, but the money used must not come from the “tax and dividend” money; it must come from general tax, if major distortions for political purposes are to be avoided as much as possible. At least that is Hansen’s view, in my words though.

  8. Chris O’Neill
    October 26th, 2010 at 11:50 | #8

    @BilB

    But then turning collections into a dividend voids any benefit, as the buying public would then have additional income with which to pay higher prices for the electricity or other carbon content products.

    No, if the price of Carbon-based electricity is higher and the price of non-Carbon based electricity remains the same, then at some point the non-Carbon based electricity will be cheaper and people will stop buying the Carbon-based electricity. End of problem.

    Remeber there is an already compromised very tight time frame

    Yes, we’re working really well to a very tight time frame aren’t we :-) . My prediction is that Australia’s emissions in 2020 are going to be WAY more than the 5% reduction of Rudd’s plan.

  9. silkworm
    October 26th, 2010 at 12:03 | #9

    It is only in the last few weeks that I have come to realize that there are two types of carbon price. One is the proposed carbon tax and the other is the already existing feed-in tariff, which only operates, as far as I can tell, in NSW and the ACT. A feed-in tariff operates in a different way from a carbon tax. A carbon tax penalizes electricity producers for the carbon they produce, while a feed-in tariff rewards electricity producers for the carbon they do not produce. The carbon tax produces a revenue stream from polluters to government while a feed-in tariff produces a revenue stream from government to non-polluters. Theoretically and ideally, the revenue raised by the government from a carbon tax should be spent subsidizing the feed-in tariffs. Another major difference between these two modes of carbon pricing is that the governments operating each mode are different. The proposed carbon tax will be collected by the federal government, while the feed-in tariffs are paid out by state governments.

    The NSW government seems to be carrying the can for the whole of Australia at the moment on the feed-in tariffs. If all the states had the same level of feed-in tariff as NSW, then Australia’s contribution to carbon pricing would be maybe three to four times higher than the US$1.70 per ton given in the article.

    I see the role of the federal government as threefold. Firstly, the federal govt has to equalize the feed-in tariff across all the states and territories. Secondly it has to impose a carbon tax at the same rate as the common feed-in tariff or at such a level so as to make carbon pricing revenue-neutral, or even revenue generating, given the third obligation, which is to compensate the poorer households who will be hit hardest by rising electricity prices. The federal government should be raising revenue from a carbon tax now because electricity prices have already risen and poorer households are suffering now.

  10. Fran Barlow
    October 26th, 2010 at 12:37 | #10

    @Chris O’Neill

    Just so Chris. It’s possible to describe this as the reverse of a loyalty or reward scheme. In a loyalty scheme as you buy a commodity or service you might get a discount on subsequent goods or services, making them, at the margin, cheaper than comparably priced goods. Of course, to realise the benefit you are forced to do business with the traders running the loyalty or rewared scheme. You can’t take your business elsewhere, so your money is less liquid.

    If an explicit price is put on CO2 emitting activities and the money collected is returned to those buying the goods and services falling within the purview of the charge, then while they can continue to purchase the goods if they wish, they may choose to keep the cash and not take the services, or spend it on goods and services that are less CO2-intensive. So their CO2 purchasing is made more liquid because the CO2 is unbundled from the product into a cash component. Where there’s no feasible alternative, people will continue to pay (using their cash rebate to meet the extra cost).

    On the other hand, perhaps they will pocket the cash and move into a smaller and more energy efficient house, effectively downsizing the CO2-intensive bits of their lifestyle. Perhaps they will car-pool and use public transport more often, consolidate their shopping trips, move to a place closer to work even though this is slightly more expensive per unit of space but now fundable out of their cash rebate and lower energy bills.

    Of course, if you use some of the funds to provide access to means-tested low carbon or socially equitable public services — public transport, free dental care, a community organic food-co-op for example — you are running a new low carbon/equity loyalty program since to get the benefit you have to use the service. This might be a useful feature at the lower end of the spectrum because in many cases, cash rebates will find their way out of household budgets and into “consumption” that won’t be of use (and perhaps pernicious) to low income families. Making the benefits less liquid makes sense.

  11. BilB
    October 26th, 2010 at 12:39 | #11

    Chris, what is wrong with that train of thought is that it is assumed that someone will start installing renewables as soon as electricity is more expensive. Not necessarily so. This did not happen in the US and that caused the brownouts of the eighties and nineties. There could very well be unforeseen consequences. Another issue never spoken of by any economist here is that infrastructure financed from a prepaid fund has the opprtunity to be mortgage free upon commissioning. Therefore the electricity produced can be significantly cheaper, allowing more scope for the spectrum of alternatives with widely varying delivered power costs to be packaged as an apparent business as usual product. This enhances economic stability during the transition phase from fossil fuel to solar fuel.

    Where an infrastructure fund is competitively tend to for access for renewables projects there is still some scope for “shenanagans”, but I doubt that this could come even vaguely close to the way an industry can creatively manipulate cash flows within markets as we saw with the GFC at all levels. So regardless of how the funds are collected coal face tax or electricity retail levy, or sales of carbon credits, the infrastructure fund administered by an authority is the most efficient method to achieve our environment goals.

    It should be noted that such an infrastructure fund in no way prevents industry in general from performing independently to achieve carbon emission reductions.

  12. BilB
    October 26th, 2010 at 12:49 | #12

    Fran, that is all all entirely assumptive thinking. The sum total of which in no way guarantees that any alternative energy infrastructure is actually ever built. The much maligned RET scheme at least guaranteed that something predeterminable was achieved. The indirect incentive approach does not stand up to scrutiny at all.

  13. Hermit
    October 26th, 2010 at 13:30 | #13

    Here’s a question for the direct subsidy proponents; should the Snowy Mountains hydro-electric scheme get feed-in tariffs? My understanding is that old hydro is excluded from the REC scheme because it was built before 1997. If REC is replaced by FiT as the Greens seem to want this question must come up.

    Note that hydro is quite different to wind and solar in that it can supply both baseload and on-demand peaking power, taking only minutes to ramp up. It doesn’t need any subsidies because it does what we want when we want . Shame that Australia is 70% desert.

    What about wood fired power stations? Instead of those pesky stumps and thinnings lying on the ground they are taken away in big trucks, chipped and burned. It must surely get a feed-in tariff because it’s renewable. My challenge to FiT enthusiasts is to come up with a coherent set of criteria that explains why post-WW2 hydro and new wood fired power stations are in or out.

  14. BilB
    October 26th, 2010 at 14:17 | #14

    You answered your own question, Hermit. The aim of all of this is to retire fossil fuels with new infrastructure Solar origin energy, and very astute of you to point out that Australia is 70% desert and amoungst the most solar energy rich countries in the world.

    Why in or out? One way of justifying this is that the Snowey Mountain Scheme investment has been paid out long ago, and does not need an investment incentive unless they were able to build new capacity and increase the output from the system. In which case the new capacity might be eligible for assistance.

    It is a good point that you raise and clearly under that logic infrastructure funded from a levy or tax accruals account would not be eligible for the feed in tarrif, and rightly so. As for your stumps and thinnings, where the material is fed into a gassification process that produced electricity as well as bio char, the bio char (surface carbon sequestration) would be eligible for a further production ongoing incentive or carbon credit. This process would effectively be taking Carbon from the atmosphere via photosynthesis and binding it in long lived compounds for burial and/or soil improvement.

  15. Fran Barlow
    October 26th, 2010 at 15:48 | #15

    @BilB

    Fran, that is all all entirely assumptive thinking.

    Assumptive thinking? Is that a way of saying I rely on an assumption?

    sum total of which in no way guarantees that any alternative energy infrastructure is actually ever built.

    Or put another way, it guarantees that any that does get built will fit into the budget for it and that if not enough fits into the budget we can conclude that we need a larger price rather than just guessing what will happen. Given that the cheapest measures, the low hanging fruit upon which so many renewabilists depend in their arguments — energy efficiency and usage avoidance — a price on CO2 — even a low but ubiquitous one — is the place to start.

    What you want of course is for no questions asked but supposedly good stuff to be built at any cost, which rather subverts your arguments for energy efficiency and usage avoidance.

    The much maligned RET scheme at least guaranteed that something predeterminable was achieved. The indirect incentive approach does not stand up to scrutiny at all.

    No it didn’t. What was not “predeterminable” was the dollar cost of the stuff per unit either of abatement or served demand. It was essentially a blank cheque for anyone who met the REC standard. It’s the RECs and MRETs and FiTs that don’t stand up to scrutiny.

  16. BilB
    October 26th, 2010 at 17:29 | #16

    Fran,

    Market mechanisms

    “Or put another way, it guarantees that any that does get built will fit into the budget ”

    do not guarantee anything of the sort. Electricity infrastructure is an unattractive risky investment made even more so by climate change and the political uncertainties that will come as peak oil takes hold. Who wants to build multi billion dollar infrastructure that could very well wind up being poorly place, too expensive to operate, or be nationalised due to national crisis.

    “What you want of course is for no questions asked but supposedly good stuff to be built at any cost, which rather subverts your arguments for energy efficiency and usage avoidance”

    Quite the contrary. All drawings from a national infrastructure fund would competitively challenged for cost effectiveness and relevence. Such a system would allow new entrants into the industry. All of the best private industry competition that you have argued for.

    This

    “No it didn’t. What was not “predeterminable” was the dollar cost of the stuff per unit either of abatement or served demand. It was essentially a blank cheque for anyone who met the REC standard. It’s the RECs and MRETs and FiTs that don’t stand up to scrutiny”

    does not address the fact that the function of the initiative was achieved. And the scheme does stand up to scrutiny. It was a stimulant to promote hardware throughput in order to achieve industry experience, promote technological advancement, and thereby reduce future costs. It achieved all of that regardless of whether the naysayers want to see it.

    The renewables industry is in its infancy but is making performance advancements typical of the computer industry. And most important is that the technological advancements of the last 10 years have been in an immensely diverse spectrum of fields, and all very much stimulated by the threat of climate change. It is in this broad technological front that the price on carbon will have its greatest effect for both micro carbon emission solutions for the “other 50%” and for employment driven economic stability. This is the hidden benefit of distributed energy generation that the big industry quick fix proponents fail to appreciate.

  17. Hermit
    October 27th, 2010 at 09:38 | #17

    Funny how electricity prices are going through the roof when it’s all supposed be getting better. And we don’t even have an official carbon price yet. Australia’s coal dominated power industry produces about 200 Mt a year of CO2. Suppose by decree that was cut in half to 100 Mt. That would be an instant bonanza to anyone who could fill the gap. The customers are out there.. aluminium smelters, air conditioned shopping malls, owners of big screen plasma TVs. Surely the banks would lend money to whoever could generate all that electricity minus the CO2. Those alternative suppliers don’t need any additional REC, RET or FIT because they are sitting on a gold mine. Give them nothing.

    On a side note I see the generators forum has questioned the equity of feed-in tariffs for residential PV. Outer suburb battlers get to pay higher electricity prices so the well-to-do can enjoy solar panels peeking through the greenery. I suggest subsidies for commercial solar are inherently the same; it’s really so urban elites can feel good about themselves while the exorbitant cost is borne by the silent majority.

  18. Ken Fabos
    October 27th, 2010 at 10:34 | #18

    I think BilB has a point; from the point of view of the big energy suppliers the intention to increase supply using coal or – if pressed hard – gas, remains firmly fixed. I think reducing emissions remains low priority and even the gains they might make by upgrading infrastructure are primarily motivated by improved cost efficiency rather than emissions. If an excess of fossil fueled infrastructure can be put in place before regulation catches up the expectation is that – for economic reasons – they won’t be forced to replace or shut down any but the oldest and most polluting plants. And in the process of gaining approvals for more plants they have Carbon Capture and Storage as their get-out-of-jail-free card, with the same thinking – if it fails to be economically viable (which seems most likely) the plants will already be in operation and effectively immune to closure or sanction.

    So, that said, I think a carbon price has to be high enough, existing plant can’t be exempted, shareholder value can’t be an excuse – and it has to be just one tool of many for bringing on the decarbonising of our economy. Yet we have yet to see this industry engage in open battle, just quiet, behind the scenes application of their considerable influence. The day could come when we see rolling blackouts – not for lack of supply capacity, but as part of a determined campaign to fight regulation, as a show of strength to let us all know how dependent we remain.

    The essential problem is lack of political will based on lack of understanding or acceptance of the underlying need to reduce emissions.

  19. Chris O’Neill
    October 27th, 2010 at 12:22 | #19

    @BilB

    Chris, what is wrong with that train of thought is that it is assumed that someone will start installing renewables as soon as electricity is more expensive. Not necessarily so.

    Yes but probably. This is what has happened in Australia with wind power.

    Another issue never spoken of by any economist here is that infrastructure financed from a prepaid fund has the opprtunity to be mortgage free upon commissioning.

    Perhaps because no economist would want to damage their credibility by making such a facile statement.

    Therefore the electricity produced can be significantly cheaper

    A magic pudding argument. That “saving” only comes at the expense of people paying the tax. The total cost of the electricity including taxes is not cheaper.

  20. BilB
    October 27th, 2010 at 13:07 | #20

    Very shallow perception of business at large there, Chris. For starters this principle is used routinely by government, usually in the form of grants to enterprise, special purpose levies are also used. In the broader business world second generation ownership where the first investment fails and is written off, the recapitalised enterprise is usually successful. Same principle except that in the case above the write down is made by the public up front in the form of higher prices for a period. The classic case of the use of a levy to write down debt was te Ansett levy, in that case the general public was put to the task of paying out a failed business debt.

    Magic pudding not at all. This process offers certainty and limited price increases. At that the moment the electricity is gouging the public having been set free from price constraint by pricing signals from the failed CPRS. Next there will be a carbon price which will drive prices higher. Supposedly revenue from this tax flows back to the most affected public. The short fall is made up by business who bear over 50% of the full value of the tax take. This inflates prices which then feed through to the public heavily eroding the effect of their compensation. On top of that prices must rise again as the electricity industry must still find the funds to invest in alternative infrastructure, assuming they choose to take that path.

    Anyone who thinks that this market driven approach will all end well is living in a fools paradise.

  21. October 27th, 2010 at 15:20 | #21

    Ken Fabos: Your scenario probably will not happen in NSW while the generators and major transmission company remains in the hands of the Government. Your point is actually a strong argument against privatisation.

  22. Hermit
    October 27th, 2010 at 15:54 | #22

    I would like to know what happens when there is no money for subsidies and like the UK Australia goes from gas-rich to gas-poor. That means we can’t pay any more directly for wind and solar nor can we balance intermittent output with gas fired generation. I think KF is right that the coal burners have us by the short and curlies and the carbon taxers will soon back off to keep power prices down.

    Same goes for coal exports which help pay for increasing oil imports. We could use natural gas as a vehicle fuel as done in many countries then gas fired electricity would get even more expensive. No doubt BilB has the answer.

  23. silkworm
    October 27th, 2010 at 15:58 | #23

    All the cuts in emissions that Australia has achieved are piecemeal, and are this way because we are only just fulfilling our obligations under the weak Kyoto protocols. Unless Australia takes on a leadership role, we are unlikely to commit to deeper cuts. However, the opportunity is there to make much deeper cuts by adopting a reasonably high tax on carbon.

    The effect of a tax has to be to make renewables, especially solar thermal storage, economically feasible. The technology is already there, as the Spanish have shown at their Andosol 1 plant. Beyond Zero Emissions and the University of Melbourne Energy Institute have shown that zero emissions are possible in Australia with a 40-60 mix of wind and solar thermal.

    The main argument coming from the coal industry is the loss of jobs that the growth of a new industry will cause, but this is not a sufficient reason to stop the implementation of a new growth industry in renewables. Australia, with its new parliament including Greens and independents, is in a unique position to take a leadership role in global climate change mitigation.

  24. silkworm
    October 27th, 2010 at 16:32 | #24

    I would like to know what happens when there is no money for subsidies…

    As I was trying to argue above, subsidies for renewables can be funded by the revenue coming in from a carbon tax. If I were to have my way, I would have just a carbon tax, with the revenue going to compensate the poorer households paying for the higher electricity prices, but at the moment we are stuck with the feed-in tariffs. While feed-in tariffs do help to reduce carbon emissions, we are better served by a carbon tax on polluters. With a combined carbon tax acting from above and feed-in tariffs acting from below, the polluters are hit with a double whammy that will help drive down the use of coal and drive up the use of renewables. Whichever way we do it, our aim is always to shift power generation from coal to renewables.

  25. BilB
    October 27th, 2010 at 16:41 | #25

    You’re making a lot of solid sense, Silkworm.

  26. Ken Fabos
    October 27th, 2010 at 16:49 | #26

    @JohnL
    JohnL – that scenario is exactly what is happening in NSW – big new coal plants to be built in the Hunter Valley and near Lithgow that will ensure that low emissions alternatives are feel-good but not necessary exercises at the fringes whilst they get on with supplying ‘real’ energy. Their priority remains increasing supply using coal to keep up with projected growth in demand – emissions reductions and serious regulatory or pricing measures are something this sector continues to treat as something that, when push comes to shove, they believe won’t apply to them.

  27. Chris O’Neill
    October 27th, 2010 at 20:14 | #27

    @BilB

    This inflates prices which then feed through to the public heavily eroding the effect of their compensation.

    Your scheme produces the same price rises, only difference being the public get zero compensation. How do you think they’ll feel about that?

    On top of that prices must rise again as the electricity industry must still find the funds to invest in alternative infrastructure,

    The funds are financed by the higher prices for non-carbon-emitting electricity. That’s why the prices are higher.

    Anyone who thinks that the massive slush fund approach will all end well is living in a fools paradise.

  28. BilB
    October 27th, 2010 at 20:52 | #28

    That is exactly my point, Chris, in the CPRS model the public only gain apparent compensation is like scratching your left ear with your right hand over the top of your head. There is no benefit, only obfuscation, confusion and losses through transactional inefficiencies. In the levy model prices are only marginally higher and by a known amount. True this feeds through to prices, but in no way by as much because business also only sees a small marginal increase. It is far easier to contain a small cost in a business, but if a cost increase is large it forces repricing and by significant amounts.

    One fundamental difference, Chris, is that with the fund approach the infrastructure in principle belongs to the public. Operated for profit by private interests, but in the same manner as tollways revert to public ownership so too can the energy infrastructure. Or be sold to reimburse the public at some future time.

    A fools paradise is where one thinks that they are gaining a benefit when they are actually not.

  29. Chris O’Neill
    October 27th, 2010 at 20:58 | #29

    @JohnL

    Ken Fabos: Your scenario probably will not happen in NSW while the generators and major transmission company remains in the hands of the Government. Your point is actually a strong argument against privatisation.

    Indeed. In Victoria where the electricity industry is privatised, most of the noises about free permits and compensation under emissions trading came from the privatised electricity generators, in particular from the US-owned TRU. It’s funny when people say that the buyers of coal-burning generators should have expected a Carbon price because what they might actually have expected was for things to turn out the way they actually have, i.e. attempts to impose a Carbon price have failed and this is what they expected.

  30. BilB
    October 27th, 2010 at 21:39 | #30

    By the way for those who have not heard, the NSW govt has cut the feed in tarif from 60 cents to 20 as of midnight tonight.

  31. October 27th, 2010 at 22:31 | #31

    @BilB

    Good thing too …

  32. Ken Fabos
    October 28th, 2010 at 06:31 | #32

    BilB – for my family – having paid a deposit for, but not yet had solar installed – this is a concern as payback times on the basis of 60 cents FiT did play a part in the decision. I’ll be checking to see if we still qualify. At 20 cents the prices are at parity. I still think it’s a worthwhile investment but it’s not the one we signed up for.

  33. Hermit
    October 28th, 2010 at 07:03 | #33

    The proposal to subsidise renewables while taxing carbon (and other dependable power sources) is in essence the German model. Do we really want to follow their lead? The cost of their feed-in tariffs has been horrendous, many billions of euros to residential PV for little more than 1% of electricity supply. The Germans seem quite unable to shake of coal (and another dependable power source) and they rely on imported Russian gas. They want to build more coal fired power stations. Whether they can ever achieve their aspired 50% renewables target remains to be seen but indications aren’t good. Therefore I find it disturbing that anyone in Australia would even want to copy that model, that is a huge cost that doesn’t achieve the objectives of self sufficiency and low emissions.

  34. BilB
    October 28th, 2010 at 07:05 | #34

    Yes you do, Ken, having paid a non refundable deposit. This is based on comments I heard from installers signing up new customers until midnight last night.

  35. BilB
    October 28th, 2010 at 07:32 | #35

    You must really have trouble getting out of bed in the morning, Hermit. There is so much to worry about out there. Will it be too cold, or will it be too hot? Is the sun going to come up? Will the LandRover start, do I still have a job (your retired I know but the worry must still be there)?

    C’mon,its a brand new day. Show that you have the strength of your new convictions. Drag those old ugly solar panels off their frame on your roof, plug yourself back into the grid , get the scrap guy to pick up your biodiesel tanks, and scatter dandelion seeds around the vege patch. You will feel so much better. Then you can head down to the servo to fill up on real diesel, zap off to the super market to charge your pantry with fun food, and later head off to the pub and disco till dawn.

    I know that will blow a whole in your carefully scrutinized budget, but there is a quick fix. First thing tomorrow dash off an email to Prez Sarkozy and tell him that you would be only too pleased to look after an acre of those spent nuclear fuel rods that he is so desperate to foist onto our integrity free government (you know that nuclear waste that is absolutely no problem at all) because they are so safe and the neighbours will have no problems at all cozying up to their warmth. Then you can sleep in the comfortable knowledge that you will have no cash flow problems for the next 10,000 years…without ever having to flex a muscle ever again.

    Ahh…Bliss.

  36. Fran Barlow
    October 28th, 2010 at 09:01 | #36

    I’m just wondering how much abatement you could get if you had a budget of $600mWh. How much could you afford to buy. Plainly, not very much, if you also have to pay for frivolous things like public transport, health, education, child services, water and so forth.

  37. BilB
    October 28th, 2010 at 10:54 | #37

    KenF,

    In order to get the best performance from your new solar panel system what you might consider is with your next vehicle purchase buying an all electric car. This would ideally fit the VW Milano performance formula of top speed 120 kph /range 300 klms/ battery charge 45 kwh. Now if the system that you are putting up is a 6Kw system this will deliver you about 7000 Kwh per year. So if you charge you car 1 and a half time a week (450 klm range) from your internal system this will consume about half of your output and save you $1800 per year in offset petrol costs and the balance will save your $600 in offset electricity charges. So under those circustances a 6Kw system would earn around $2400 per year with the fuel replacement cost being valued at around 60 cents per kilowatt hour. That is at todays electricity and petrol prices.

    So for the time being you are covered by the FiT as you have secured your 60 cents per kilowatt hour, but that earning power is still available to anyone who upgrades to electric vehicles. I just had a look at the cost of a 6Kw system, this would be around $20,000 installed or $3.30 per watt, a 12% return on the investment. The other factors are the increase in property value and the future proofing effect.

  38. Hermit
    October 28th, 2010 at 13:04 | #38

    @BilB
    Remarkable insights there. I’ve been wondering what to when it all gets too hard ie chopping wood, boiling up large pots of oil, dusting off panels on ricketty ladders. Mind you my feed-in PV tariff is a measly 18.5c per kwh not a sumptuous 60c. Since I have a few hectares I will indeed make them available for fuel rod storage should anybody ask.

    My beef with the subsidisers is that they kid themselves it makes a difference. In Australia the heavy lifting in electricity, transport and food production is all done by fossil fuels. Therefore you can subsidise renewables all you want it only raises the cost of living for the majority. We’re still waiting for that large coal fired power station to be retired early because it has been replaced by wind and solar.

  39. Chris O’Neill
    October 28th, 2010 at 17:27 | #39

    @BilB

    So if you charge you car 1 and a half time a week (450 klm range) from your internal system this will consume about half of your output

    Sounds great. I am so looking forward to my electric car spending half of daylight hours sitting with the solar charger.

  40. October 28th, 2010 at 17:40 | #40

    @Chris O’Neill

    I suppose if you invested in an alternative (redundant) battery bank … Hmmm

  41. Chris O’Neill
    October 28th, 2010 at 19:04 | #41

    @BilB

    in the CPRS model the public only gain apparent compensation

    So they are only paid apparent dollars or apparent tax reductions and the real money is hived off to someone else. Riiiiiight.

    There is no benefit, only obfuscation, confusion

    Obviously, obfuscation and confusion is your objective.

    In the levy model prices are only marginally higher and by a known amount. True this feeds through to prices, but in no way by as much because business also only sees a small marginal increase.

    I can see two arguments here. One is that a small wrong makes a right. The other is that a known wrong makes a right.

    A fools paradise is where one thinks that they are gaining a benefit when they are actually not.

    An example of which is a giant slush fund.

  42. Chris O’Neill
    October 28th, 2010 at 19:40 | #42

    @Fran Barlow

    I suppose if you invested in an alternative (redundant) battery bank … Hmmm

    Let me add a few $ signs. Alternative battery bank. H$m$m$m$m.

  43. BilB
    October 28th, 2010 at 21:16 | #43

    Chris @ 39,

    You can be forgiven for having so little appreciation of how this all works, as you are clearly not interested in the future. The Milano charges to 80% of its capacity in 1 hour. But charging remotely is no problem. You gotta learn to have faith in technology, Chris.

    @39 Yes aparent dollars. Compensation that becomes eroded by higher costs is no compensation at all.

  44. Ken Fabos
    October 29th, 2010 at 09:47 | #44

    The Feed in Tariff isn’t the most effective way to deal with the fundamental problem of decarbonising our energy supply – I agree, even as I intend to take advantage of it – but so far we have no real policies, from any levels of government, that look much better than watered down greenwash. A carbon price might help but it won’t do it on it’s own, especially if the big existing generators manage to successfully negotiate exemptions – the need for certainty of supply trumping the need to cut emissions. That said, I think that even very expensive renewable energy is preferable to global failure to reduce emissions. Or very expensive nuclear for that matter.

    The strong economic inertia that climate science denial and opposition to action exploits relies very much on presumptions of little economic cost of failure to rein in emissions – those costs being hard to quantify, hard to convincingly communicate and easily overshadowed by short term worries and the up front costs of action. Will it take a mega heatwave that kills whole regions? If that happens will the urge to build more coal plants to run more powerful air-conditioning overshadow efforts to reduce emissions? Especially if the rest of the world is failing to act? Going on results to date I am not optimistic.

  45. Chris O’Neill
    October 29th, 2010 at 11:44 | #45

    @BilB

    You can be forgiven for having so little appreciation of how this all works,

    What’s your excuse?

    as you are clearly not interested in the future.

    I don’t think an ad hom argument proves anything.

    The Milano charges to 80% of its capacity in 1 hour.

    So where does this charging power come from? Certainly not your solar cells.

    You gotta learn to have faith in technology, Chris.

    Just like you learning to have faith in nuclear technology.

    @39 Yes aparent dollars. Compensation that becomes eroded by higher costs is no compensation at all.

    Assuming those costs (non-existent in the case of tax reductions) are greater than the costs associated with a giant slush fund.

  46. BilB
    October 29th, 2010 at 13:19 | #46

    Clearly Chris, you’re only, interested in a tit for tat slanging match (no brain power required) so I think that we should compare notes in ten years from now to see how the technology streams are performing and what influence the then price on carbon is having.

  47. Chris O’Neill
    October 29th, 2010 at 17:13 | #47

    @BilB

    you’re only, interested in a tit for tat slanging match

    Just be careful with your hypocrisy. It’s not my fault if you put up silly notions. By the way, there’s no need to use solar electricity costing 60c/kWh to charge an electric car when you can get it for 20c/kWh. The savings on operating costs (which are wiped out if you use solar cells to supply the charge) are needed to cover the higher capital cost and battery depreciation of electric cars.

  48. BilB
    October 30th, 2010 at 07:57 | #48

    Not really worth commenting on, Chris, however. The 60 cents example is a very real cost comparison against fossil fuels. It is totally valid as this is the advantage gained by the users during their system amortisation period, beyond which their electricty is free, meaning that the net gain through the life of their transition to a totally self sufficient carbon emission free future is very large. And on your

    “higher capital cost and battery depreciation of electric cars”

    clearly you are not converscent with the many advantages of electric vehicles. Yes indeed, LiFePO4 batteries have a replacement requirement within the life of a vehicle. This is more than offset by the servicing requirements of petrol engines vehicles, and will in time become a reconstruction cost rather than a replacement cost. Apart from that there are very solid indications that these batteries will increase in energy density 3 fold in the not too distant future. Of course there are endless other tit-tatty irrelevencies that can be waffled on about, but they are effectively arguments based on ignorance which presuppose that there is no improvement beyond the present, a demonstrably false assumption.

    And here is one for the energy storage disputers out there. I read that there is now a determined effort under way to develop low cost derivatives of fulvaline diruthenium now that the energy holding mechanism is fully understood. This promises indefinite storage of heat energy from the sun completely closing any remaining gaps in the energy delivery cycle for both concentrating solar thermal systems and concentrating solar photovoltaic.

  49. Chris O’Neill
    October 30th, 2010 at 17:12 | #49

    @BilB

    Not really worth commenting on, Chris,

    Promises, promises.

    however. The 60 cents example is a very real cost comparison against fossil fuels. It is totally valid as this is the advantage gained by the users during their system amortisation period,

    This doesn’t make sense. 60 cents is not an “advantage”. It’s a cost.

    And on your

    “higher capital cost and battery depreciation of electric cars”

    clearly you are not converscent with the many advantages of electric vehicles.

    Clearly you are not conversant with the costs.

    Yes indeed, LiFePO4 batteries have a replacement requirement within the life of a vehicle. This is more than offset by the servicing requirements of petrol engines vehicles,

    Otherwise known as proof by vigorous assertion.

    and will in time become a reconstruction cost rather than a replacement cost.

    Changing the name of a cost doesn’t change it from being a cost.

    Apart from that there are very solid indications that these batteries will increase in energy density 3 fold in the not too distant future.

    So you agree it’s not worth using yet.

    Of course there are endless other tit-tatty irrelevencies that can be waffled on about, but they are effectively arguments based on ignorance which presuppose that there is no improvement beyond the present, a demonstrably false assumption.

    You’re one to talk about waffling on and ignorance. What a lot of waffle you put up. You’re still completely ignoring the fact that solar cells are very poorly suited to charging electric cars.

    And here is one for the energy storage disputers out there. I read that there is now a determined effort under way to develop low cost derivatives of fulvaline diruthenium now that the energy holding mechanism is fully understood. This promises indefinite storage of heat energy from the sun completely closing any remaining gaps in the energy delivery cycle for both concentrating solar thermal systems and concentrating solar photovoltaic.

    It has nothing to do with photovoltaic. So you agree that the storage problem is not yet solved and thus the present technologies are useless for dealing with the issue. Even if the storage was cheap, solar thermal is still expensive. You haven’t solved the issues at all.

  50. BilB
    October 30th, 2010 at 19:00 | #50

    Wow, after that, Chris, I’m left wondering what you did before you retirement? taxi driver? news anchor? wedding planner? I really can’t tell from your logic. I’d like to know.

  51. BilB
    October 31st, 2010 at 06:44 | #51

    Democracy is only a delaying influence for bribery and corruption.

    http://www.nytimes.com/2010/10/30/us/politics/30coal.html?_r=1

  52. BilB
  53. Chris O’Neill
    October 31st, 2010 at 16:32 | #53

    @BilB

    I’m left wondering what you did before you retirement? taxi driver? news anchor? wedding planner? I really can’t tell from your logic. I’d like to know.

    I go through your arguments in detail while your main arguments have been ad hom. Nothing new here.

  54. BilB
    October 31st, 2010 at 17:15 | #54

    There was no detail in your “critique”, Chris. Apart from that, the whole thing was no longer relevent to this thread. So what is your background?

  55. Alice
    October 31st, 2010 at 17:45 | #55

    The major economies are putting in place carbon prices. Others like China are doing a bit (lot) of nation building and putting in fast trains…while QLD dithers with a luxury carriage upgrade to the Cairns tourism centre up north (toys) and the last thing done to rail in NSW was a quick monorail loop (another toy) that mostly runs pretty empty around darling harbour for the tourists -

    We are at the back of the pack as usual – when other countries are now advancing Australia has taken neopoliticism to the xtreme.

    I just wish we could have the words “nation building” front and forward and the words “rational” and “efficient” chucked in the passe saying bin along with “hit the ground running”.

    The right or ultra right influence in Australia is so souless crass and greedy. It also makes both parties redundant.

  56. Chris O’Neill
    October 31st, 2010 at 19:42 | #56

    @BilB

    There was no detail in your “critique”,

    Just one small example:

    I read that there is now a determined effort under way to develop low cost derivatives of fulvaline diruthenium now that the energy holding mechanism is fully understood. This promises indefinite storage of heat energy from the sun completely closing any remaining gaps in the energy delivery cycle for both concentrating solar thermal systems and concentrating solar photovoltaic.

    It has nothing to do with photovoltaic.

    You can’t even admit that you were wrong to imply that heat storage has anything to do with photovoltaics. “No detail”? Tell us another one.

    Apart from that, the whole thing was no longer relevent to this thread.

    You started it. Obviously you think you’re entitled to talk off-thread garbage.

    So what is your background?

    You just don’t get it do you? I have no interest in paticipating in ad homs.

  57. BilB
    October 31st, 2010 at 20:14 | #57

    Solar photovoltaic and heat absorbing/storing technologies are entirely compatible partners potentially more than doubling the overall efficiencies and suitable for a huge number of total energy solutions. You will learn this in time. I’m going to assume union representative, based on the predominately aggressive posture.

  58. BilB
    November 1st, 2010 at 03:35 | #58

    Talk about pace of technological development. Here is a German article that was reported by a blogger in Seoul. The linked article is in German but the substance is in the text. The essential point is that this a conversion of a standard sedan car with all regular features. Wowow!

    “The yellow and purple Audi A2 car took around seven hours to complete the 600-kilometre (372-mile) stretch, even had the heating on.

    Driver Mirko Hannemann, the chief of DBM Energy, drove the distance at 90 km/h (55 miles per hour) on average, had the heat on and was able to whisk around a few more miles in the city. When the A2 electric finished, it still had 18% of the initial electric charge in the battery.
    ?

    The battery weighs about 100 kilograms in total. (http://www.zeit.de/auto/2010-10/elektroauto-langstrecke?page=1).

    It has a lithium-metal-polymer battery. DBM Energy, the company that built the battery and electric motors into the Audi A2, said the battery would function for 500,000 kilometres.
    ?
    A representative of the car said the Audi still featured all the usual creature comforts such as power steering, air-conditioning and even heated seats as well, so it was not like the car was especially made for long distance record attempts
    ?
    The German engineers said their car was special because the battery was not installed inside the luggage area, but under the luggage area, meaning the full interior space of the car was still available
    ?
    The battery, based on what DBM Energy calls the KOLIBRI AlphaPolymer Technology, comes with 97 percent efficiency and can be charged at virtually every socket. Plugged into a high-voltage direct-current source, the battery can be fully loaded within 6 minutes

    The young inventor couldn’t give an exact price for his battery — he said that was dependent on scaling effects — but vowed it wouldn’t just be more powerful, but in the end also cheaper than conventional lithium ion batteries.

    What’s more important, the technology which made the trip possible is available today.
    ?
    German Economics Minister Rainer Bruederle, who subsidized the drive, said it showed electric cars are not utopian but really work.”

    This doesn’t leave much doubt as to the direction that our future is headed, and why the Australian government no matter which side or which colour had better pull its head out of its arse and get on with the job.

  59. Chris O’Neill
    November 1st, 2010 at 12:01 | #59

    @BilB

    Solar photovoltaic and heat absorbing/storing technologies are entirely compatible partners

    Heat storage cannot store or be used for the energy produced by photovoltaics in any economic way. “Compatible” is economically meaningless. You also ignored the fact that even if heat storage was cheap, solar thermal is still expensive.

    potentially more than doubling the overall efficiencies

    What, pray tell, do you mean here by “efficiency”?

  60. BilB
    November 1st, 2010 at 13:55 | #60

    Chris, if you cannot fathom what this is about then you are out of your depth. Go argue something that you can understand.

    So what did your think of the Lithium-metal-polymer battery test? 600klm range with reserve, 100Kg weight (far less lithium), 97 percent efficient, 8 minutes to charge, service life 500,000 klm. It may require some creative solutions to enable charging at that rate in the service station type scenario, perhaps very large flywheel motor generators. Assuming that all of that stacks up in production then I would say that the petrol engine is ready to fade slowly into history.

    Well I’m impressed.

  61. Chris O’Neill
    November 1st, 2010 at 19:44 | #61

    @BilB

    Chris, if you cannot fathom what this is about then you are out of your depth.

    There you go again, just another ad hom after I respond in detail.

    Go argue something that you can understand.

    Take you own advice.

    By the way, it’s all very well to talk about electric car technology but, contradicting your own complaint, the thread was more to do about where the electricity is supposed to come from.

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