A Study by Energy Strategies for the Clean Energy Future Group

Consisting of:

Authors: Dr Hugh Saddler, Dr Mark Diesendorf, Richard Denniss

A CLEAN ENERGY FUTURE FOR AUSTRALIA

Australasian Energy Performance Contracting Association

Australian Business Council for Sustainable Energy

Australian Gas Association

Australian Wind Energy Association

Bioenergy Australia

Sustainable Energy Development Authority of NSW

Renewable Energy Generators of Australia

WWF Australia

Study Focus

• Reduce stationary energy emissions to 50% of 2001 level by 2040.

• Use existing technologies with marginal improvement

• Continuing economic growth

Fore-casting: Respect and understand economic drivers of energy

demand growth.

Back-casting: Choose workable 2040 energy supply system to match

projected demand, then work out how to get from present (2001 data) to

2040.

Fore-casting and back-casting

This method tells us what the future economy, energy use and

emissions could be like.

• Dr Hugh Saddler, Energy Strategies Pty Ltd,

- on future energy demand with and without efficiency

• Dr Mark Diesendorf, Sustainability Centre Pty Ltd,

- on future energy supply

• Richard Denniss, The Australia Institute,

- on present and future economic structure of Australia

Authors and Roles

2.30All other non-metallic mineral products

2.20Cement, lime, plaster & concrete

1.42Basic chemicals

1.21Sugar industry

2.30Food, beverages, tobacco

1.42Iron & steel

2.20Mining (non-energy)

2.62LNG production for export

1.55Coal mining for export

N/A**Domestic energy supply industries

2.40*GDP

Output ratioCategory

GDP AND SECTORAL VALUE-ADDED GROWTH RATIOS, 2001 TO 2040

*Intergenerational

Report

** Endogenously

determined

Residential: Solar efficient design, solar

hot water, insulation, space heating &

cooling, lighting, taps & showers

Commercial: Design, heating & cooling,

‘sleep’ modes, refrigeration, lighting

Industrial: Cogeneration, electric motors,

boilers, kilns, heat pumps, design of

systems, industrial processes

MEDIUM ENERGY EFFICIENCY

Technological Options

With medium energy efficiency the increase in energy demand was reduced

from 57% (Baseline/low efficiency) to 25% (Medium Efficiency)

0

200

400

600

800

1000

1200

Energy intensive

industry

Non-energy intensive

industry

Mining, Agriculture,

construction

Commercial/Services Residential

Major Sector

)

2001 2040 Baseline 2040 Medium eff iciency

Final energy demand by major sector in 2001, compared with

2040 Baseline and 2040 Medium Efficiency (PJ)

FUEL SUBSTITUTION & EFFICIENT

GENERATION

• Electricity supply shifted from mainly coal to natural

gas plus renewables

• Widespread cogeneration (combined heat & power)

• Solar thermal preheating in industrial & commercial

sectors

• Substitution of natural gas for coal in most non-

metallurgical applications

Emissions from stationary energy in Australia

0

50

100

150

200

250

300

350

1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038

Mt/

a C

O2 e

qu

iv.

Energy Efficiency

Renewable and gas

fired generation

Baseline

(low

efficiency)

Baseline

with

medium

efficiency

Clean

Energy

Future

50% reduction

in CO2 emissions

The time path is a notional one, based on the assumption that policy recommendations are adopted

Electricity demand (TWh) and fuel mix with resulting CO2 emissions

(Mt) in 2001, and in the 2040 Baseline and Clean Energy Future

Scenario

0

50

100

150

200

250

300

350

400

2001 2040 -

Baseline

Scenario 1

2040 - Clean

Energy

Scenario 2

Te

raw

att

-ho

ur

(TW

h)

Reduced demand

due to medium

energy eff iciencyPhotovoltaic

Hydro

Cogeneration

Wind

Biomass

Natural gas

Petroleum

Coal

262 million

tonnes of

CO2

310 million

tonnes of

CO2

131 million

tonnes of

CO2

Coal 9%

Petroleum 1%

Natural gas 17%

Biomass 26%

Wind 20%

Cogeneration 15%

Hydro7%

Photo voltaic 5%

BIOMASS RESIDUES

Biomass supplies 26% (65 TWh) electricity plus

process heat in 2040 Scenario 2

Burning sawmill & sugar cane

residues Rocky Point, Qld

• Residues & wastes cheapest &

fastest, but resource limited.

• Fuels include stubble from grain

crops, bagasse, plantation forest

residues, firewood, black liquor.

• Rural job creation

• Electricity cost 5-6 c/kWh

WHEAT STUBBLE

• Kelleher (1997) estimated harvestable stubble residues from

Australian grain crops 3.4 green t/ha over 20 M ha.

• Leaving 1.4 t/ha on land and combusting 2 t/ha @ 35% thermal

efficiency generates 39 TWh/year.

BAGASSE & ‘TRASH’ FROM SUGAR CANE

• Dixon & Bullock (2003) find potential from sugar mills of 1.7 GWe and

9.8 TWh

• Allowing for increased conversion efficiency yields 15 TWh/yr in 2040

PLANTATION FORESTRY

• Assumed 10 TWh/yr in Scenario 2 -- needs separate study.

TREE CROPS WITH MULTIPLE

USES: e.g. OIL MALLEE

• Needed if sugar industry disappears, or greater emission reductions sought

• 3 products: electricity + activated charcoal + eucalyptus oil

• Reduces waterlogging, dryland salinity & erosion

• Creates rural jobs

• Improves landscape

• Electricity cost ~9.5 c/kWh (Enecon, 2002) minus value of other products & land improvement

• Land use for 18 TWh/yr electricity, assuming 10 dry t/ha/yr, is 0.81 Mha (half land currently under plantation).

SPECIFIC POLICIES PROPOSED FOR

BIOENERGY

• Change MRET regulation to encourage dedicated tree crops for bioenergy

on land cleared before 1990.

• Pay farmers grants for planting trees to limit dryland salinity, erosion, etc.

• Introduce bioenergy crop establishment grants.

• Fund national bioenergy roadmap.

• Fund bioenergy showcase program to demonstrate full-scale integrated

energy crops/energy conversion process.

• Encourage shift to highly efficient, low emission, biomass-burning stoves &

heaters, especially in urban areas. Start by banning open fires & fireplaces in

metropolitan areas.

CONCLUSION ON BIOENERGY

• Substantial potential contribution to electricity & heat: 65 TWh/yr

from crop residues and organic wastes alone. Much more if short

rotation crops used.

• Small area of land required for stationary energy.

• Detailed studies of bioenergy potential needed for all climatic

regions of Australia, taking into account proximity to population

centres and powerlines.

• Demonstrate factory producing ‘simultaneously’ electricity, useful

heat and liquid fuels.

ECONOMIC MODELS

• There is no accurate model to integrate macro-economy and

energy over a 36 year period.

• Great difficulties in handling technology & policy changes, and

market barriers & failures.

• Large uncertainties, notably in future fossil fuel prices and

international greenhouse gas agreements.

• Difficulties of quantifying economic benefits of various

technologies: hence cost-benefit analysis questionable.

• We offer approx estimates of costs of electricity under various

assumptions re fuel prices, demand and fuel mix.

AVERAGE COSTS OF SCENARIOS 1 & 2 IN 2040,

FOR VARIOUS FOSSIL FUEL PRICES

0

5

10

15

20

25

30

Avera

ge c

ost

in 2

040

($B

)

(10,7) (9.3,7) (5,5) (4,4)

Coal- & gas-fired electricity prices (coal, gas) in c/kWh

Scenario 1

Scenario 2

In Case (5,5) we can implement energy efficiency with average cost =

4.4 c/kWh saved, before cost of Scenario 2 reaches that of Scenario 1.

SOME KEY GENERAL POLICIES & STRATEGIES

1. In short term expand Mandatory Renewable Energy Target substantially to establish industry capacity. In longer term, phase out MRET & replace with carbon tax or levy or environmental / health pricing of fossil fuels or emissions permits with cap and trading.

2. Disallow new base-load or intermediate-load power stations with emission intensities greater than that of the best available combined-cycle natural gas power station.

3. Give economic value to environmental benefits of clean energy, such as salinity control and land restoration

4. Introduce CO2 targets for operation of each sphere of government and large business, with mandatory strategic plan and reporting.

5. Remove market barriers to efficient energy use and renewable energy

6. Introduce mandatory energy & greenhouse labelling, ratings and performance standards for appliances, equipment and buildings.

7. Fund new powerlines for renewables and natural gas on the same basis as historic funding of powerlines for coal. i.e. spread cost over all electricity consumers.

CONCLUSION• 50% emissions reduction target is technically feasible and

compatible with continued economic growth.

• Target cannot be achieved with business-as-usual demand growth and improvements in coal-burning technologies.

• Between now & 2040 we can replace most energy-using equipment with more efficient versions at little or no net cost.

• Natural gas, wind power, bioenergy and solar hot water could each make big contribution to energy supply in 2040.

• Energy efficiency savings can pay for all or part of additional costs of renewable energy, provided they are packaged together.

• Need policies to remove market barriers & build industry.