Fundamental to Australia achieving significant reduction of CO2 emissions is our ability and willingness to replace electricity generated from fossil fuels with competitively priced, clean, base load electricity produced from renewables. At present, few generators do this, or can, and the political will to replace fossil fuels or even countenance a sharp reduction in their use is lacking, by both sides of politics.
Wind power (priced at about $56/MWh) is competitive with coal generated electricity ($55/MWh) but can not be relied on to produce continuous uninterrupted power 24 hours a day, every day - in other words, base load power. Hydro power ($60/MWh) does produce base load power but is limited in its availability and opportunities for expansion. Given the present state of technology solar-thermal electricity is almost base-load quality but is twice as expensive as coal power.
However, we can not ignore the elephants in the room: nuclear and geothermal.
Nuclear power stations can produce electricity at a similar price to geothermal, but to this has to be added the cost of storing waste. The current inability to treat nuclear waste or guarantee its safe storage are the reasons used by the ALP to justify its ideological position of refusing to countenance the use of nuclear power in Australia. A further problem with this source of energy is that a lead-time of 12-15 years is required for the building and commissioning of a nuclear power station.
Interestingly, the ALP is not critical of countries which use nuclear power stations to meet their energy needs, provided they are signatories to the Non Proliferation Treaty. France produces more than 80 per cent of its electricity in this way and is fast approaching the point where it will use no fossil fuels for this purpose.
At present, the only alternative to nuclear energy is electricity generated from geothermal steam at costs variously estimated to be $65-$70/MWh. “No!”, say industrial consumers, not if geothermal costs $10-$20/MWh more than coal. That rejection is understandable but is based on present day cost estimates, rather than those which should and are likely to apply after introduction of a carbon emissions licensing scheme.
Australia has the highest per-capita CO2 emissions in the world. The major source of those emissions is the burning of coal to generate electricity or provide heat for smelting and other tasks. There is a penalty to be paid by coal users. It is the cost of using technology to prevent or limit emissions of CO2 into the atmosphere or the cost of permits allowing coal users to make such emissions.
Clean coal technology is in the early stages of development and is unlikely to be tried, tested and commercially available for 10 years or more. Briefly, it involves retrofitting power stations with a system to capture CO2 at the point of emission, removal from the agent used to capture it, applying pressure to liquefy it, then transporting it to an often distant secure underground depository.
The energy required for these processes has been estimated to be 20-30 per cent of power station output plus other operating costs, adding an estimated $20-$25/MWh to the cost of electricity generated from coal. If this technology were not applied, power stations burning fossil fuels would have to pay for their emissions, increasing generating costs by a similar or higher amount or, if they had their way, continue polluting at no cost to them.
Either way, generating costs would increase to the point where electricity produced from burning coal becomes more expensive than electricity generated from geothermal steam. The only way of protecting coal and preventing geothermal electricity from being competitive is to issue coal producers and users with free permits, allowing them to continue their emissions free of any penalty. The Rudd Government proposes doing so.
But that defeats the central purpose of having an ETS which is to bring about a reduction not only in global CO2 emissions but those for which Australia is responsible. It is doubtful that governments of any political persuasion could persist with such a permit system for very long without attracting international and domestic condemnation and, ultimately, sanctions.
The cost of base load electricity generated from fossil fuels will become more expensive than that produced from geothermal steam because the latter is emission-free and subsidy-free. Removal of the subsidies currently paid by the Australian and state governments to coal producers and users would further increase the cost of electricity generated by burning coal.
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