Adapting our energy policy to climate change

Australia needs an insurance policy against being caught out by the massive changes to energy systems heading our way. That policy is acquiring adaptive resilience. But, while government action has recently improved, it is not yet thinking in these terms, and likely doesn’t have adequate coverage.

Adaptive resilience is the capacity to sustain core functioning while coping with change, through making adaptable adjustments. It is the primary form of insurance against being surprised and damaged by change.

In the energy context, resilience means sustaining the provision of energy services through the coming massive changes, changes induced principally by global constraints on oil supply and on carbon dioxide emissions (plus declining fresh water) yet with rapidly rising energy demands.

The principal government approach before 2006 was inaction and denial that we needed to face change, while the world signed the Kyoto Agreement and introduced carbon emissions trading.

Some caution was justified: the nature of climate change and our role in it was unclear; Kyoto was flawed; development of clean coal technology (aka carbon sequestration) was in its infancy; early European experience with emissions trading did not sufficiently benefit needed innovation; and Australia’s extreme coal intensiveness and smaller economy made it more vulnerable than most to prematurely committing to impractical technologies.

But the immediate risks of this policy were also clear: we denied ourselves the opportunity to both innovate and export in the emerging raft of clean energy technologies and to join global emissions offset trading. Both of these are huge potential costs: global trading doubled to $22 billion last year, and overseas competitors developed commercialisable technologies while Australia lost many of its own innovations to them.

Sectors of the business community, including some in the energy sector, increasingly chafed that they did not have a clear policy and incentives framework within which to pursue innovation and trading. The less immediate, but larger, risk was that Australia would be unprepared to adapt, technically and institutionally, when the time of local climate change and global shove arrived.

2006 saw a policy shift driven by increasing world conviction about energy imperatives, the upshot being some modest research and development funding initiatives in the context of a bias toward first, coal and second, nuclear energy, with solar relegated to a minor role.

Again, some coal bias is understandable: Australia has large coal reserves and a developed industrial coal infrastructure; if carbon sequestration can be made to work at a reasonable cost, it offers obvious advantages, plus the option to provide hydrogen to replace oil for transport energy. There is a similar uranium resource advantage for nuclear power. However, while coal supports a wide range of skills and mid-sized technical businesses that suit our mid-sized economy - generating employment, innovation and exports - it is likely that specialist nuclear technology would not perform so well (though we don’t have the research to know for sure).

But again the risks are clear: we forego the opportunity to innovate and export in the suite of new clean radiant solar technologies, where the energy resource is far larger than either coal or uranium (notwithstanding the PM’s conflation of it with limited wind); we may find that the present process of choosing technologies to support leaves gaps that turn out to be important (for instance, energy storage, concentrating solar thermal?); we may be caught out if carbon sequestration proves to be too limited or too expensive, and similarly for the promised new nuclear technologies; we may be caught out on the wider issue of supporting skills and businesses (on which renewable technologies also likely perform well). Again, these are all potentially large costs. For instance, if some of the many radiant solar technologies become commercially competitive, as they currently promise to do, then at shove time Australia would suffer a costly and disruptive energy transition.

As noted earlier, the proper way to protect against these risks, even while pursuing coal prospects, is to acquire suitable adaptive resilience. In the energy case this is achieved by systematically acquiring a level of technological capacity in each of a full suite of the relevant technologies, according to their promise, so that we are ready to utilise them. Plus we should introduce a clear supporting framework concerned with transport, energy conservation, and so on, including helping to introduce an improved emissions trading scheme, in Australia and globally.

I suggest that to ensure resilience is achieved and remove the danger of gaps and undue biases risked by the present approach, it may be necessary to create a public national capacity to systematically evaluate potential technologies, including their wider societal impacts, together with the level of Australia’s technological capacity appropriate to each, and propose share-able national projects.