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Global Risk Insights

Global Risk Insights

GlobalRiskInsights.com provides the web’s best political risk analysis for businesses and investors. Our contributors are some of the brightest minds in economics, politics, finance, and…

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Blackouts May Cause Australia To Shy Away From Renewables

Coal shipping

In 2015, Canberra signed the Paris COP21 Agreement pledging to reduce its carbon emissions. The government concurrently set its own voluntary target aiming to secure 23 percent of its energy from renewable sources. But a string of recent blackouts might have prompted Canberra to change tack.

Following a massive storm last autumn, South Australia was plunged into darkness after high voltage power lines were severed by a series of tornadoes. A subsequent December blackout wreaked havoc on a major industrial plant, which suffered damages that required a multi-million dollar government bailout. Investigating the catastrophic failure of backup systems to kick in, the Australian Energy Market Operator (AEMO) concluded that South Australia’s reliance on renewables played a significant part in producing the outage, as wind farms shut down for security reasons.

(Click to enlarge)

As a result, Australia’s Deputy Prime Minister has claimed that the country’s renewables target could be reduced as coal plants with high efficiency, low emissions (HELE) technology could provide a solution to Australia’s energy security. His comments faced significant backlash from opposition MPs and from an independent government-commissioned study stating that Australia would be unable to meet its emission targets if the current policy remains unchanged.

Australia, therefore, faces a conundrum: while heavily investing in renewable energy could eventually lead it to meet its emission targets, the blackouts in South Australia are emblematic of the debate over the state government’s over-reliance on renewable energy grids. In Australia where targets for renewable energy technology are set at the state level, this has led to political bickering where parties have attempted to “show off” that their targets work better than the opposition’s policies. Essentially, it’s not so much about protecting the environment as it is about beating your opponent with a windmill-shaped stick.

In South Australia, the target for renewable energy is set at 50 percent by 2025 – double the federal target. Following the blackouts, Frydenburg, Australia’s Minister for Environment and Energy, criticised South Australia’s state policies for creating “the highest electricity prices in the National Electricity Market, while at the same time being the only jurisdiction that has had a state-wide blackout”. Essentially, South Australia’s unrealistic renewable energy goals were responsible for driving up consumer prices while failing to maintain energy security. Related: Are Oil Markets Ignoring Demand?

Although renewable energies have made giant strides over the past two decades, they have been unable to meet the world’s growing energy needs. However, the current debate between renewable technology and energy security in Australia misses the point. The availability and affordability of coal mean that the fossil fuel will remain integral to the global energy mix for some time to come – up to at least 2040 according to experts. Therefore, the question is more about how to reconcile coal with COP21 commitments while keeping energy affordable for the consumer. By many accounts, clean coal and carbon capture and sequestration (CCS) technology could help close the gap between maintaining energy security and reducing carbon emissions.

Traditionally, CCS has been an inherently technical process that has proved too expensive to deploy. Its main idea revolves around capturing carbon emissions from burning coal and storing them under the earth. The technology has existed for decades, but it is only recently that it has become commercially affordable and has garnered increased interest around the world.

According to the International Energy Agency, following the Paris Agreement, the ability of CCS to reduce emissions from fossil fuel use in power generation and industrial processes – including from existing facilities – will be crucial to limiting future temperature increases to “well below 2°C”. Related: Electric Car Sales Undaunted By Low Gasoline Prices

Countries around the world are again closely examining the question of clean coal. India is spearheading the push, with a new plant in Chennai that captures more than 90 percent of its CO2 without needing government subsidies to stay competitive. The technology converts emissions to soda ash, which is then used in a variety of industries ranging from glass manufacture, sweeteners, detergents and paper products. China, one of the largest producers of carbon emissions from coal plants, has increasingly implemented both clean coal, CCS and CCU (Carbon Capture Utilisation – where captured carbon is used to produce a variety of materials) as a viable balance between energy and environmental security.

However, the greatest concern with respect to clean coal and CCS is the creation of an appropriate policy and regulatory framework that recognises the technology’s utility in helping curb carbon emissions. As stated by an expert of Australia’s Global Carbon Capture and Storage Institute, “the biggest technical issue is reducing cost, and that’s being actively pursued through global R&D. The policy side is what really needs attention.” Part of this includes tax incentives and other legislation limiting carbon emissions. However, a large part will come down to creating a stringent approach to issues of governance and enforcement.

For clean coal and CCS to become recognised as a middle way between energy and environmental security in Australia will require political leadership. HELE technologies should form the backbone of the country’s future coal plants – not only would they reduce CO2 emissions but also nitrogen oxide, sulphur dioxide and particulate matter emissions. This explains why the Turnbull government is even contemplating offering HELE clean-energy subsidies.

Bipartisan support for these efforts can be gathered by looking at facts and the growing evidence of work supporting CCS and HELE technology, as coal remains a vital resource in the country’s energy mix. The cost of ignoring technology could be even greater for the climate in the long run.

By Nicolas Jenny via Globalriskinsights.com

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  • EdBCN on February 18 2017 said:
    It would be lunacy to invest in a new coal-fired thermal plant now. It's too expensive if you use any kind of 'clean' technology, which aren't very clean in any case. It's getting beat by solar PV on cost now, and PV keeps falling. It would take at least 5 years to get a coal plant built, assuming all went very well. In five years solar will be cheaper than just the fuel cost of a coal plant. Batteries will be $80/kWh.
  • David Hrivnak on February 19 2017 said:
    Crazy the author is attributing a major storm and an industrial outage as a failure of renewables? Renewables are cheaper and faster to deploy than any coal plant. India just brought on a large 670 MW solar plant in 8 months for about $650m. Try that with any fossil fuel plant. And by the way future fuel costs are free.
  • Edward Best Christian on February 19 2017 said:
    Wind and solar are not such a good investment when people start dying as a result of repeated grid blackouts. Modern societies need good, affordable, predictable power, not shady political insider dangerous intermittents. Time to stop the bandwagon before it runs over the goose.
  • Cantina green on February 20 2017 said:
    I live in Adelaide SA. Power outages happen too frequently compared to the rest of the states of Australia. The December outage was one of the worst I had friends who were without power for 3 to 4 days others even longef. We have the. Most expensive electricity prices in Australia. As mentioned in the article it is obvious this is caused by the cost of our unreliabe renewable energy sources. The cost of our electricity in Adelaide means many can longer afford it and higher numbers are having their power cut off then govt tell us to look after the elderly in the hot weather which in summer is often above 40s. Pensioners cannot afford their airconditioning. Every year it increases this year is an approximate 200$ per annum increase. This state govt needs to be answerable to the public but they dont care for us.

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