Australia's renewable energy future
The contribution of renewables in Australia’s future energy mix
Tuesday, 4 August 2009
Dr John Wright
Advisor, Sustainable Energy Partnerships
CSIRO Energy Transformed Flagship
Dr John Wright has over 35 years experience in the minerals and energy sectors. Currently, he is an advisor to CSIRO’s Sustainable Energy Partnerships working across CSIRO to develop major partnerships with industry, governments and the community. He was previously the Director of the CSIRO Energy Transformed Flagship, a position he held from 2002 to end 2008. Before that he was the Chief of CSIRO Energy Technology. His major interests are in the development of low emissions technologies involving energy futures modelling, electricity from fossil fuels and renewables, alternate transport fuels and distributed energy. Current Board memberships include the Centre for Low Emissions Technology, and the Priority Research Centre for Energy. He is a Member of the Implementation and Liaison Committee of the International Partnership for the Hydrogen Economy, the Executive Committee of the International Energy Agency’s Hydrogen Implementation Agreement and the IEA Experts Group for Energy Science. He is a Conjoint Professor at the University of Newcastle and a member of the Facility of Engineering Advisory Committee. He is a Fellow of the Australian Academy of Technological Sciences and Engineering, the Australasian Institute of Mining and Metallurgy, the Australian Institute of Energy and the Australian Institute of Company Directors.
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The contribution of renewables in Australia's future energy mix
Chair (Mike Dopita): Good evening, ladies and gentlemen, and welcome once again to a completely full house. This series has demonstrated the enthusiasm with which people want to embrace change, and change is what we are looking for in our energy future.
Tonight we are going to have a summing‑up talk, which will be much broader than some of the talks that we have had up to now, describing how we might produce an energy mix which is appropriate to Australia's conditions. I am very pleased to welcome Dr John Wright, who is the adviser of the Sustainable Energy Partnerships of the CSIRO Energy Transformed Flagship. He has enormous experience in the mineral and energies sector, adviser to sustainable energy partnerships, and working in major partnerships with industry, governments and the community.
His major interests involve not only low emissions technologies but modelling electricity from fossil fuels and renewables and looking at alternative transport fuels and distributed energy. He will be giving evidence to a senate committee tomorrow.
I think you will agree he is enormously experienced, and an expert in the field. I am very pleased to welcome Dr John Wright to give the final talk in this series.
John Wright: Thank you, Mike, for that introduction. It is great to see so many people interested in the energy scene in Australia. It really is an extremely complex area, and there are so many issues that Professor Garnaut in his report said, it is a ‘diabolical problem’, but there are also fantastic opportunities associated with the problem that we face.
I am very happy to be here to present this last lecture in the series in one way, somewhat daunted in another, that you have been confronted with a range of experts, I suspect, and, looking at the list, extremely passionate about their particular area of endeavour in renewable energy. For somebody to come along and try to pull it all together is not the easiest task in the world, particularly when there is probably something in my presentation tonight which everybody, perhaps, has got something to disagree with. That's the way it goes when you really, really try and polish the crystal ball and try to see into the future as to where this country might go.
Now, the title of the presentation is The contribution of renewables in Australia's future energy mix.
As such, it won't be simply on renewable energy or even any one technology, but it is going to look at the much wider picture and attempt to place the contribution of renewable energy in the context of Australia's potential energy mix out to 2050. Why 2050? Well, it is far enough off to be different, 40 years, but still close enough so that the things we say might happen in 2050 are not totally unreasonable. Although, I must say, it is great fun to speculate in the very longer term future.
Now, my belief is that one of the keys to achieving a more rapid take‑up of renewable technologies is going to have to be, simply have to be, the smooth transition of these technologies into the overall energy mix. This is largely going to be the theme of the presentation tonight.
I am going to try to pull it all together in a way that works and achieves an optimum outcome. However, that might need to be defined. That is one of the problems: one person's optimal outcome might be different to somebody else's.
An example of the integration of energy systems is shown on my opening slide. This is an aerial view of the CSIRO Energy Centre in Newcastle. It was built to be one of the most energy efficient buildings of its type in the world. It has an array of passive and active energy elements to achieve that objective – the integration of all these things together.
It is a great place, I must say. If you are ever in Newcastle, we can arrange for people to see the energy centre. It has got four different types of photovoltaics adding up to about 90 kilowatts. It has three small wind turbines of about 60 kilowatts each. We have a couple of gas micro-turbines: two 80 kilowatt systems. We have large scale battery storage, our own new ultra battery, plus a commercial flow battery for storing all this energy. We have special heat reflecting glass. We have cross‑flow ventilation. We have under-floor, low velocity air‑conditioning. And a huge leap forward in technology, that we said would have to happen right from the beginning, you can open the windows. You can open and shut the windows when you like.
Ideally, we'd like people to be energy educated and not have them open on a freezing day where the heating has to come on. Nevertheless, for several months of the year in Newcastle the outside temperature and humidity are just fine. We don't need air‑conditioning, and it is turned off. We have a flow of air across the building. It is long and skinny to get maximum light bouncing off light shelves in the building. It really is a delightful place to work, and that is all connected to our local mini‑grid. That runs the system.
Now, this is way over the top, and you can see a 500 kilowatt solar field with a solar tower. We have solar troughs. There are PVs all around the building, and so forth. But it is built to demonstrate and experiment with all these technologies. We are learning how to integrate them with each other in the building and, importantly, with its occupants. You need to have an energy-educated staff to get the maximum out of this building. At times we act as a small power house and return energy to the grid, even with our laboratories and everything else going full bore. On days that are very clear, and the photovoltaics are working at their maximum, with a little bit of wind we become a powerhouse, particularly with the lower energy draw of the building in the way that we have designed it.
We are trying to answer the question: How can we slot all these things together to maximise utility of our energy services in terms of safety, reliability, cost effectiveness, environmental responsibility and, importantly, public acceptability? That comes with a number of guises from a desire to be part of sustainability actions to perhaps more prosaic requirements of being able to afford the power that we are producing.
Now that's quite a list. Nothing can be taken in isolation. They are all interrelated and require a systems approach to make it all hang together.
There is no one solution – you have probably heard that many times – that is going to cover all these requirements. Each technology will need to be the appropriate jigsaw piece that builds the future energy picture.
Just to make things a little bit more complex, the individual pieces will have to be modified, they will grow, they will change, they will disappear when appropriate, just as perhaps I am sure a lot of people in the audience will like to see the coal jigsaw piece replaced by something else. Well, we will see. It is a complex picture.
It is a complex, complex picture. And it is one, over the next few decades, that will become even more complex.
In the very long term, and let's talk 100 years out, I believe things will be simpler. But that is a different story. You might like me to say something about that in question time.
So, looking into the future requires a crystal ball. So what sort of crystal ball do we use to see into the future energy mix?
Well, we have a range of, perhaps not crystal balls, let's call them directives and tools, that help us divine possible futures. Let's start with the directives first. Claude Mandel, when he was head of the International Energy Agency a couple of years ago, said about Australia that: 'Environmental sustainability represents Australia's greatest energy challenge, with high and growing carbon dioxide emissions.' It was also a not-so-guarded message that Australia, as a developed country, is expected to play a leading role in reducing greenhouse gas emissions.
Now, I actually don't think that message has been lost on the current government. And we now have in place an interesting range of potential greenhouse gas targets and means of achieving those targets.
Here are some examples of this. You will recall that for the Garnaut review, conducted probably about a year or so ago now, his team looked at a number of potential greenhouse gas reduction scenarios, including a couple that were designed to contribute to stabilisation of carbon dioxide in the atmosphere at 550 parts per million and 450 parts per million.
The government took this information and also proposed another couple of paths just to fill in the gaps, and they were consistent with the 510 to 550 parts per million concentration just to cover that range.
And in a fairly bold move, I must say, for an Australian Government, they also introduced a mandatory renewable energy target: 20 per cent of our electricity generation in 2020 is to be produced from renewable sources. That has had a tremendously strong effect on where renewables research and development are going in this country.
And there is a range of low emission funding schemes available in both fossil and renewable energy domains. For example, there has recently been announced a $1.6 billion solar flagships initiative to put in 1,000 megawatts of renewable energy over the next few years.
But I suppose the linchpin of the government's greenhouse gas reduction policy involves the introduction of an emissions trading scheme.
This is designed to set a carbon price to make carbon emitting activities more expensive and narrow the basic cost difference between fossil energy and renewable energy.
Now, obviously it is a bit of a political football at the moment and we are waiting to see what happens in parliament next week. The emissions trading scheme is basically a cap and trade scheme that sets targets between 5 and 15 per cent reduction of greenhouse gases below year 2000 emission levels in 2020. And will lead to a 60 per cent reduction by 2050, the so-called CPRS‑5 and CPRS‑15 scenarios.
The final reduction target depends on what the rest of the world is going to do. That is really part of the bone of contention over the emissions trading scheme at the moment.
In another bold move the government has announced that a 25 per cent reduction target is back on the agenda if – and it is a big if – the other developed countries agree to similar cuts. So we will have to wait for the outcome of the end of the year Copenhagen conference to see if this target will survive. It will be interesting to see exactly what this looks like for Australia.
Now this is a plot of Australia's whole-of-economy greenhouse gas emissions from 1990 to 2005. That is the black line you see on the plot. The blue line is the projected emissions in the absence of any targets or carbon price. If you like, this is a bit of an open slather scenario.
It is probably not particularly realistic now. But it does give you an anchor point for this growing country of ours. Let's say at the end of the year at the Copenhagen Climate Conference [COP15] the world agrees to cut its greenhouse gas emissions with a target of stabilising carbon dioxide concentrations in the atmosphere of 450 parts per million. It is about 380 now. Why 450? Well, there seems to be a consensus appearing in climate change circles that this would limit global damage rising to around about 2 degrees. Not good, but perhaps something to which we can adapt. It is interesting to look at what Australia's role would be in this scenario.
It looks something like this, the orange line. We would have to come down that orange line to get to something like 90 per cent cut of our overall whole-of-economy greenhouse gas emissions by 2050.
Now when it is thrown up in that form the task is really stark. If you look at the gap between the blue and the orange lines, it really does show you the magnitude of this change. You really do have to ask the question: is it achievable? Well, you can certainly say it is not trivial. It really does represent a fundamental change in the way in which not just Australia, but indeed the rest of the world, is going to have to operate to achieve the overall global target. This really does push the boundaries of how we do things. It is moving away from evolutionary change to something else all together.
If an agreement is not reached in Copenhagen this won't happen. But the government has also given what they call a non‑conditional pledge to cut our greenhouse gas emissions by 5 per cent over 2000 levels no matter what happens at Copenhagen. And this is what this looks like.
The green line takes us to a 60 per cent cut in overall greenhouse gas emissions by 2050, and to a 20 per cent cut by 2020. The gap is still pretty wide, I've got to say, and it is still not going to be trivial. Again, this is really a major change as to how we do things. Do we really know what these cuts mean in terms of what we have to do to get there, and what the consequences are? Well, this is when the dismal science of economics rears its ugly head and we can have a shot at it.
Besides what I call 'directives', driven by both climate change and policy results, we also have modelling tools to help us try and understand what these trajectories mean. That's again the introduction of economics into the system.
We combine economic modelling of the sorts of things that we have to do to get to those targets with scenario building. We can't predict the future, but what we can do is design the future. In this case our principal anchor is greenhouse gas emissions at various points in our future. With what we know now and how we predict the technology might change, together with cost curves, all those sorts of things, calculate the most effective mix of technologies that will deliver the result we are seeking.
There are a huge number of assumptions associated with this process to get to these possible futures. It is very reasonable for people to ask: well, what makes your assumption better than anybody else's? The government might think one thing. The industry might think another. An environmental group might have some other opinions. How the heck do you get some sort of consensus so that people are comfortable with what you are proposing?
In CSIRO we try to overcome any potential bias or lack of information or judgment by employing what we call a forum approach to these developing scenarios. This is how it works.
We invite a range of interested groups from industry, state and federal governments, environmental groups, public interest groups – you can see all the logos of the various groups listed there – to come together with us in a formal process to develop a range of future energy scenarios. These have to be plausible. Then we have some very interesting times when we bring together people from the World Wildlife Fund for Nature and the aluminum industry, for example, and get them together and ask them to develop an appropriate scenario that they can both be, if not necessarily totally comfortable with, but things that they can live with.
We do a range of these so that we accommodate most people's requirements. In the end we get them to come to accommodation so that we can go forward. We take those scenarios and go away and model them to produce a series of results. We then go back to the group to discuss what they look like, modify some of the assumptions if people aren't comfortable, and we finally get down to a series of between six and 10 scenarios that every group that has helped us will agree to, and to put their logos on the final report. So we come out with a series of scenarios that we can use to look into the future.
At the end of this process, which takes some months to go through, we come out with a comprehensive report that is approved by all of the groups participating. We have to twist arms at times to get them to approve. We are getting very good at being the diplomat here. They don't necessarily agree 100 per cent with all the scenarios and the outputs, but we look for enough agreement for all the parties to attach their logos to the final reports. And a couple are illustrated on the slide.
The first one we did on general energy futures was called The Heat is On. One that was done just recently, Fuels for Thought, looked at Australia's alternative fuel situation and what we might do if, for example, we ran into a situation of peak oil and didn't move fast enough to get us over the worst of those effects.
So, in this way we have developed an inclusive process that we hope takes into account a range of views from groups that will have to play a major role in developing our energy future. It is not perfect, but I don't think it is bad either. It seems to work well.
What I am going to do now is to show you a range of our latest outputs from this modelling process. These change all the time because with the state of the world's economy we are on a bit of a rollercoaster at the moment and we have to keep updating our economic forecast. You would say well, doesn't that cause a whole lot of changes all of a sudden out of the blue? Well, yes, it does. But we have to keep up with what is happening at the moment because we have to make some decisions now, and we have to make some very big decisions.
Now, just to simplify what will still be a pretty complex mix, I am only going to look at two trajectories that I have shown you on the previous slide called the CPRS‑5, that is a 5 per cent reduction in greenhouse gas emissions over year 2000. I alternate here between CPRS‑5 and 550 parts per million and the Gaunaut 25, which is a 25 per cent cut over the same time period, which is the 450 scenario.
Eventually I will get to the role of renewables and what role they will play in these future mixes. I just needed to set the context.
To understand these plots I want to introduce you to the concept of wedges. I think a lot of people will probably be aware of what greenhouse gas wedges are, because they have been used quite a few times to explain how we shave off greenhouse gas emissions compared with business-as-usual by setting up appropriate technologies that take out an amount of greenhouse gas from the economy.
This is best illustrated with this fairly simple slide, which has some quite interesting ramifications.
This is a plot of Australia's greenhouse gas emissions, whole-of-economy versus years out to 2050. The blue line is the business-as-usual greenhouse gas emissions with no constraints at all. There are two wedges here. The blue one is the amount of greenhouse gas reduction that we need to take out from the other part of the economy. I will talk about what that is in a second. The yellow part is the amount that needs to be taken out by the energy sector. You can see it is not just energy that we are going to have to reduce greenhouse gas emissions from. It is from all parts of the economy. Most of the focus is on energy, but there is a lot more that we have to consider.
Things such as the forestry, land use changes, fugitive emissions, agriculture, non‑electricity steel, cement, chemicals, for example, and even the purchase of overseas emission offsets to get us to our targets, which is an interesting process that we may have to go through.
So again you can see it is not just energy that will have to play its role, it is the whole of the economy. And this more often than not gets lost when the energy sector gets the blame.
Here is the same plot for the more stringent target. You can see it is a pretty similar shape but the wedges are just increased in magnitude. You can see the tremendous tasks that we have to go through. So that is really just a helicopter view of the whole of the economy with the part that the energy sector will have to play to achieve the greenhouse gas targets that are being set.
I am going to forget about the other, because I don't know very much about that, and dig out the role that renewable energy might play in the orange wedge. I will take that yellow wedge and break it up into its own series of wedges.
This is for the electricity sector. The amount of greenhouse gas emission projected out to 2050. You will see on the left‑hand side the numbers are about half of what they were before, because the energy economy is responsible for half to 40 per cent of our emissions. Again, we have the reference case, the open slather case for the energy industry. The electricity industry puts out about 200 mega tons of CO2 per year at the moment. That is predicted to go up, as shown.
How can we take that out? Well, there are a number of ways we can do it.
First of all, we can really push hard on energy efficiency. In all the projections all over the world, the International Energy Agency, any country, you will find that there is going to be a huge push to increase the efficiency with which we use energy.
In other words, we have to stop using as much energy as we do now. There is a heap of different ways of doing that. It just has not been high on anybody's agenda, particularly in this country, because our energy costs have been relatively cheap.
In your and my houses doing a lot of energy efficiency modifications has not really been worth it: but it will be, believe me, as the price of electricity must inexorably go up.
We believe from the modelling we have done that energy efficiency – demand side management, smart grids, smart meters – are going to have to play a role of that magnitude. It is probably one of the most cost effective ways of reducing greenhouse gas emissions.
Here is a renewable wedge. I finally got there. It is a big one. You can see that it is pretty skinny around about now 2010. In 2015, 2020 it starts to get a bit bigger and beyond that it really starts to open up. It has to open up to achieve our targets. It simply has to. We believe that there are a number of energy technologies that are really going to contribute to widening out that wedge.
There's a green line here, it is coal and gas carbon capture and sequestration or storage. It is relatively small compared to renewables, which is rather surprising. If I had presented this information a couple of years ago that would have been a much larger wedge. But it is smaller now. Why is that? Well, it is because the real cost of carbon capture and storage is now starting to be understood, and it is expensive. It is particularly expensive at this point in our economic history.
Prices for new plants, piping, all that sort of stuff have gone through the roof. It may reverse it and come down again, but certainly at the moment our understanding is that we just cannot produce our targets without a very large amount of renewable energy.
The 450 scenario looks like this. Pretty much the same sort of shape, other than the wedges, obviously, have to get quite bigger. And again it shows that the renewable energy contribution to reducing greenhouse gas emissions cuts in at around about 2020. So we have to wait a little bit longer before we see the huge increases of renewable energy. That is just part and parcel of the energy business, in that it is a big game. We produce energy from large plants. They are big. They are expensive. They are capital intensive and they take time to put together. That's the sort of projections that we are looking at up to 2050.
Now, recall that there are two main drivers to make this happen. One revolves around the mandatory targets, the 20 per cent renewables target. That is a pretty good mandatory target. And the other is an all pervasive carbon price we don't have at the moment set by an emissions trading scheme or other carbon mechanisms. I am not discounting them. There might be some other mechanism by which we might set the price of carbon.
If we put a price of carbon, what is the carbon price on these things to make this happen? You know, when you put a carbon price on the energy industry it is more expensive to generate power through fossil fuels. Renewable energy becomes more cost effective, and so the two come together and you can put more on renewable energy technology than you otherwise might. That is the way it works.
Have a look at your carbon prices. The CPRS‑5 carbon prices are in green and the Garnaut in orange. The start for the ETS will be 2011, if it gets through parliament next week. There was a $10 a ton cost set by the government to start it, and that then has to rise quite steeply.
With our modelling, to make our targets we are looking at the carbon price rising up to between $116 and $200 per ton of carbon dioxide by 2050. It is a huge change for Australia. It is something that we are going to have to get used to.
You can see from these figures why the industry and the government is approaching it with some degree of caution. Let's assume that we are going to go on this nice smooth rise in carbon price, pushing more renewables into the sector. Let's zoom in and see what's in the renewables band.
I have broken this up into a number of bands. You can see the various energy technologies, the renewable energy technologies and the sort of wedges they occupy to remove greenhouse gas emissions from the energy slice.
The wedges consist of geothermal, called 'hot fractured rock' in this slide. That is the dirty green one. Ocean power: that can be tidal or wave. That is in black. We are not predicting very much at the moment. Biomass is in the brown/red colour there. Solar thermal is pink, solar photovoltaics orange and wind is yellow. You can see the relative contributions of these renewable energy technologies. Modelling is basically telling us that the major technologies are going to be wind, and solar in all its forms. A big role for geothermal. That's a bit of a risky prediction because we still don't know how well geothermal is going to perform.
I am very much a geothermal optimist, I have to say. I think the technology has got a lot going for it. It still has its problems, of course, and has to be proven. Nonetheless, it is an amazing and almost uniquely Australian resource.
Smaller roles for biomass, because we are not really sure how much biomass we have to use to generate power. There will be niche ocean power applications. Overall, increasing renewable energy technology will take out in the order of 200 million tons of CO2 by 2050 under this scenario. That is equal to about all of our major stationary energy CO2 emissions now. This is a major, major change.
This is what the numbers look like. You can see how we are predicting the growth in renewables will take place. This is for CPRS‑5 and Garnaut‑25 scenarios. The Garnaut numbers are shown in the brackets. The CPRS‑5 are shown without the brackets. You can see wind is starting to pick up, getting up to about 10.8 per cent share of total electricity generation by 2020, 19 per cent in 2050. And geothermal, is not predicted to be huge in 2020, but certainly picking up beyond that. Solar PV and solar thermal also start to rise quite dramatically.
As far as the total is concerned, we are at about 6.6 per cent renewable energy right now. In 2020 under the CPRS‑5 we are looking at something like 18.4 per cent. That is not the 20 per cent target, but the rest of it is made up by our hydro generation, which is not in these figures. We don't see a major role for hydro in the future other than what it is at the moment, because we are flat and dry. And we are probably not going to be building too many more major dams for hydro‑power. There is potential for getting up to around 70 per cent renewables for our electricity generation by 2050.
We say that on the basis that once you have achieved your 2020 targets, you have curled over your greenhouse gas emissions, it is starting on the downhill slope and it should get a lot easier once we start on the downhill slope.
So, the chart emphasises the growth in renewables that will have to take place over the next four decades to reach our target.
Each of these has its attributes and problems. Wind, for example, is a very mature technology now and most of the technological innovation there is just making turbines much bigger than they are. The biggest turbine at the moment is about a 7 megawatt turbine. Huge device. One of the limitations is the length of the blades on the turbines, that they are very difficult to transport because they can't fit around corners on the road. So they might have to reach an innovation in manufacturing there. Overseas, big turbines are going offshore. It puts the price up but gets them out of sight, and out into areas where people are happy for them to be.
Bioenergy, as I said, is a bit of a fraught problem for Australia because we don't really know how much useable resource we have. Geothermal is still in the demonstration stage. I think it has a bright future. Solar PV; we know how that technology works, it is just a matter of bringing down the cost. Solar thermal is relatively new on the block. It has a big advantage over PVs in that it is relatively easy – I use that term advisedly – to store energy in the form of heat, molten salts and other forms so that we could have a solar thermal generator that could operate seven days a week, 24 hours a day. So it is looking very prospective.
Let's bring this back into context again. I am afraid it is another one of these slides. Now I've plotted the terawatt hours energy units versus year with all the technologies shown. So this is a full energy mix for CPRS‑5. Note that on this plot you can see how energy consumption continues to increase; it still goes up. But, at the same time, our greenhouse gas emissions are going down. That is a pretty good trick. Our power generation simply has to be less carbon intensive, so our overall greenhouse gas emissions go down.
The top five wedges here are the renewables. You can see the difference they are making from the orange right through to the blue.
You can see the huge increase in renewables that are coming in and the decrease in coal, as we use it now. We are bringing in carbon capture and storage; carbon capture storage also on the brown coal. So all these things are integrated together to produce those targets.
And for the Garnaut‑25 targets, a similar story, except our coal goes down sooner. Most of the renewable energy technologies come in sooner. They have to, to reach the target.
You can see we have a little bit of wave [energy] coming in under this scenario, which is what it takes. It is not to say we won't have wave and tidal. But it will be so small that they are very difficult it see on a plot of this size because a terawatt hour is quite a big unit of energy.
So what about nuclear, I hear you say? I couldn't avoid it. We also include scenarios containing the nuclear option. I will just show you one.
This is if we don't have any CCS [carbon capture and storage], for whatever reason. The nuclear wedge appears right up in the corner. We are looking at it coming in at 2030, 2034 and supplying a reasonable amount of energy. Now, you can play all sorts of modelling games with nuclear. I chose not to for this talk because it just gets confusing. Nonetheless, it could be a significant contributor to Australia's future power.
These are purely economic plots. We pick a scenario. We know what greenhouse gas target we want; what is the mix that is going to get us there in the least costly way? That is how the results come out. Nuclear has other issues, like where you put the waste? Where you set up your first, second and third plants? What technology do you use? So it is there, and we could predict quite a strong role for renewables for nuclear if we wished. But nuclear, while it is a very low CO2 technology, is still relatively expensive.
Now, I can't stop without talking about costs. Low emissions technology is always going to be more expensive than the way we do things now. We do things now because it's the way the economics has panned out. We have been richly endowed with good quality coal. We seem to be finding more gas all the time. There doesn't appear to be a problem. And we have used it in the most cost‑effective way. But times have changed, and if we are going to clean up our act with both gas and coal it is going to cost us more money. And, of course, one way of cleaning up our act is to put in more low greenhouse gas emission technologies. That is also going to cost us some money.
This is a slide of wholesale, if you like; what it costs to produce power at the plant gate into the future. The black line there is the no carbon scenario. It is really quite different, obviously, to the CPRS and Gaunaut scenarios, which show steep initial cost rises. There are some steady rises after that.
Now these costs in wholesale prices are dollars per megawatt hour. They look a bit savage. But Australia's real income is also expected to increase over that time from around 50k per person to about 80k – $80,000 in real terms by 2050 – an increase of 60 per cent. So a lot of these power price increases we expect by the growth of the economy to make it not more affordable, but certainly the affordability aspect makes it less of a cost impost.
If we move fast there will be some price shocks in the beginning. I'm not quite sure how the government is going to handle that. It's another one of these diabolical problems that they have to face. Inevitably the price of power is going to go up as we move to a lower emission economy. That is just the way it is.
If you are going to have a price on carbon, you are trying to make power where you release CO2 into the atmosphere more expensive so there is less of it. That is a matter of fact.
Based on these wholesale costs we are looking at retail prices – to you and I – which could double the power prices over this period. So with the general growth of the economy we probably won't feel it as a doubling of prices because our incomes will also go up at the same time.
Can we afford the changes? Well, I think we can. But we certainly need to be realistic in our expectations. I think will be rather bumpy along the way.
So there you have it. This is our best estimate of what the energy future may look like, with what we know now and our present constraints to meet our targets, with particularly the 450 parts per million target, the Garnaut‑25 case, being a massive challenge. It's bordering on the revolutionary rather than evolutionary. And we will need to be ready to step up to take on this challenge.
Now, I never discount the possibility of a disruptive technology – I often dream about being a developer of a disruptive technology, but I haven't managed to do it yet, even though I spent a number of years in my shed trying to come up with something – something that will change the picture completely. Just look at what has happened over the past couple of decades. You just couldn't imagine some of the changes that have occurred.
I must say that in the energy field they haven't been all that quick and stunning, but perhaps its time is yet to come. There is something like a fourth generation nuclear technology that doesn't produce any dangerous materials and is cheap – a variation of cold fusion, maybe. A method that turns water into its components, hydrogen and oxygen, cheaply using sunlight. There is a lot of work going on around the world on that at the moment. We have proponents of things like zero point energy, exploiting the weirdness of the quantum dimension.
Who knows what is going to come along. And perhaps we are going to need something like that to really get us to where we want to be. So pick your own energy breakthrough that will change the world. But I'm afraid in the meantime we'll plod along with what we know now to push the edges of existing technology.
There is one other thing I wanted to say about the introduction of much greater amounts of renewable energy into the grid. It is variable – geothermal isn't, we certainly hope, biomass isn't, but all the others have a certain degree of variability – and it is going to produce its own set of challenges in terms of integration into a stable, cost‑effective supply. We think it is going to require a much greater degree of smart grid thinking through demand side management – smart meters, load shedding, automatic control, smart appliances and the like – all to make it work together. And we are only just embarking on what I think is a pretty exciting journey when we start to pull all this stuff together.
As I said in my opening remarks, I think integration of all of this is the key. Of course, each and every one of us are going to have to play a role in the mix and be conscious of our own energy demands and how they can be fulfilled with the least impact on the environment.
This is my last but one slide. To achieve our targets, we need a whole of economy transition. Not just energy, but energy is obviously going to play a vital role. There is a pivotal role for renewable energy in our future, but it cannot be considered in isolation. We have most of the parts of the jigsaw puzzle, we just need to put it together appropriately. And my personal belief is that we have to bypass what I call the 'energy class wars' – renewables versus coal versus gas versus nuclear. I think we need to put it all behind us because we are going to need every kilowatt that we can lay our hands on. We are still a young country. We are still growing quite strongly. Our population is going up. We are going to need just about everything we can lay our hands on.
I think that we are really in a critical time in our energy planning and the decisions we make in the next few years, perhaps over the next decade, will set us on a particular path. We'd better get it right, or as right as we can, or energy sustainability will be an unreachable goal.
Then finally, I just wanted to acknowledge our Energy Futures Modelling Team, led by a gentleman called Paul Graham, who developed most of this information used in this presentation. I hope you found it interesting, and I thank you for your attention.
Chair (Mike Dopita): Thank you for an inspirational talk. It demonstrates the enormous complexity of this issue. I think that we have collectively achieved an understanding of why this field is so complex. I think we all hope that when the final decisions are made we do get it right, because it is going to make not only a difference for our own nation but also for the world. It is something that is too important to come at lightly.
Are we ready to take questions?
Question: Can you just give a bit of background on why you thought biomass, or bioenergy as you described it, would make a fairly minor contribution to stationary energy generation? I ask that particularly since the Clean Energy Council last year released a report called the Bioenergy Road Map, which predicted quite a big future for biomass generation in Australia, particularly sourcing it from stubble in the future. But you are obviously of a different school of thought, I am just wondering why?
John Wright: I have to say that the jury is still out, as far as we are concerned, on what level of contribution biomass will make to our future energy mix. We are in the process now of doing some very detailed studies on exactly where the biomass is, what type of biomass it is, where it comes from, how it can be collected, how it can be converted into energy. We are particularly interested in biofuels, second generation biofuels, which we think have a fairly optimistic future, if we can get the technology right.
But just looking at what we know now, the problem with biomass is that if you have to transport it any great distance, it's not a very energy dense material, and you tend to not get the full benefit of it. I really feel at a bit of a disadvantage here because I am not really sure what the true potential is. But we are working on it.
Question: The question I would like to ask is about the grid. You were proposing to take energy currency from multiple sites, and in your beautiful photographs at the start in Newcastle, it was all together. How are you going to capture this energy on a grid? Can we adapt the existing electricity grid to this or do we need to make a new one? And, if so, how much would that cost, roughly, in terms of GDP?
John Wright: You hear all sorts of cost figures bandied about. The lowest I've heard is $30 million, and I think that is probably out by a figure of at least two, perhaps even more.
We have a relatively old grid in Australia. It has been around for an awful long time. The interconnector between Victoria and South Australia is in dire need of upgrading. It is actually stopping greater uptake of wind in South Australia because we can't transfer the energy we need between those two states. That needs basic upgrading.
We also have a different situation to most of the rest of the world. Our grid on the east coast is long and skinny. That has its own problems. If you were in Europe you would just be surrounded with dense energy generation all over the place. So it is much easier to off‑load or reduce energy in one part and increase it in another. We don't really have that luxury. So there is going to have to be some quite major changes.
Now, once we start moving into an increased amount of solar energy, for example, initially those plants will not operate 24/7. They will operate a lesser time. With the introduction of storage over a period of time it will become easier to integrate those with the grid.
But we are going to have all sorts of interesting experiences as our variable renewable energy starts to ramp up. Under those circumstances we have quite a large program, particularly in CSIRO, looking at how we can put some machine intelligence into the current grid and, more importantly, intelligence into our future grid that is going to cope with these variations.
It goes all the way through from smart appliances in houses, so that energy use can be regulated to a degree when a grid or part of the grid is under stress.
So we have some marvelous information technology and energy technology that is starting to come together. It is extraordinarily complicated but absolutely fascinating. And I think this will happen and start to roll out as we go along.
Question: I think it is just following on from your answer there. One of the major criticisms of renewables is that it can't provide baseload power. Yesterday we heard Mitch Hooke from the Minerals Council. He is pretty derisory of renewables, but he says he is open to new ideas. He accepts climate change science, but he is waiting for ideas to come along to replace coal and gas. I was just wondering if you could comment further on any technologies that you think could start to replace them, or maybe produce baseload power.
John Wright: Yes, Mitch has some interesting opinions about renewables versus coal, et cetera. A lot of the time he is dead right. There are technologies, renewable technologies, which are always going to be variable. But there are certainly ways around that. You have got to say that it costs more money. It all comes down to money in the end.
Geothermal we hope will be virtually baseload. It won't quite be, but it will certainly get very close to it. I can expand that, but I won't. Let's just say, geothermal will be a baseload technology. Bioenergy will be baseload, provided you have the appropriate supplies. Solar PVs, a bit of a problem there, producing electricity directly. Now, you could go over-the-top and use the electricity to electrolyse water to produce hydrogen, store it, and then it would become a baseload power generator. But of course hydrogen production, compression, storage and piping is not with us yet. It probably will be in the long‑term future. But it is a way out. It costs more money.
Solar thermal, we are working at the moment on storage of the energy in molten salt. There are a number of proposals on the drawing board around Australia to look at energy storage. Not just in molten salt but also in high pressure steam, hot water, super-heated water and also graphite blocks, for example, storing the heat.
So all the ingenuity and innovation that can be applied to these things is starting to be applied. It is going to take time. That's where people get very impatient and say, why can't we have it tomorrow? We can't have it tomorrow because we haven't developed the technology to the point where it is reliable, safe and cost effective compared to what we have now. But that will change over time. The carbon price is going to help. Mandatory targets are also going to help. They just need a bit of a shove, which is what is happening. There are some fantastic ideas out there and there are a whole host of different ways to make renewables more baseload.
Question: I would like to ask a question about the assumptions in your modelling as compared to the ones used in the Treasury modelling conducted earlier this year. In what ways does your modelling differ in terms of those assumptions, and do they have significant consequences in terms of the projected uptake of different renewables technologies?
John Wright: Our modelling assumptions are really quite similar to the Treasury's, particularly in the transport modelling. Treasury used our results in a way that was full‑on, much more so than we thought. In fact, they went a little bit further than us. They were even more gung-ho in projecting out into the future, which I think we were pleased about. In the general energy area the results are are showing very similar outputs.
The results I have just shown you here are hot off the press. And I showed them with some degree of wariness, because they are so new with the latest cost predictions, particularly for carbon capture and storage. The Treasury modelling is now probably 12 months out‑of‑date. With the global financial crisis things have changed since they were done. So there is a constant process of updating these things to make sure we know where we are at any point in history. But the outputs will be very similar.
Question: Huge amounts of masses of water pour through the Torres Strait and the Bass Strait every minute of every day. It is driven by gravitational energy. I was, therefore, stunned to see that only 0.7 per cent of our renewable energy is going to be derived from this sort of ocean current. Perhaps you can explain why?
John Wright: I think it is early days for ocean technology at the moment. There is quite a bit of activity going on overseas. But even that is fairly small. The International Energy Agency is not predicting any major input from tidal or wave until about 2045, which is the sort of thing that we are also seeing. It is just a matter of getting these things up at scale and getting the power to shore.
I must say, in the wave and tidal area the ingenuity is absolutely amazing, particularly in the tidal area. We have all sorts of propeller devices under the sea. We have things like big tuna fins that oscillate backwards and forwards under the ocean. But it is still a relatively expensive technology because you have all these moving systems either in or on the sea. You have all this cabling to run back to shore. Then you have all the power conditioning and all that sort of stuff. So we have a series of predictions on how costs are going to fall with tidal, but they are still relatively high. They don't catch up to the increase in carbon price until you get out to around about 2030, 2040.
Question: Your graph showed the contribution of geothermal or hot fractured rock energy being quite small and coming in at a fairly late stage. It's my understanding that the technology of geothermal energy is fairly mature and that the resource is enormous. So would you care to comment on that, please?
John Wright: Sure. The last one first. The inferred resource is huge. No doubt about that. Perth, for example, sits on hot water at around about 130 degrees when you get down a couple of kilometres into the Earth. In fact, we are doing a lot of work developing systems that Perth could use for air‑conditioning, for example, from geothermal. The centre of Australia, where Geodynamics is probably the leading company, has hot rocks at temperatures they claim are up to about 270 degrees. The trouble is that it is five kilometres underneath the Earth's surface, and it is hellish drilling down at that depth, let alone into the granites at that temperature. Then you have to fracture it. Then they find they are actually under quite a bit of pressure. Geodynamics had a blow‑out just recently which stopped their one megawatt demonstration plant going forward.
We've got other geothermal processes where people are not drilling down into the granites but they are stopping in the sediments. So three, four kilometres down perhaps. There is enough heat transfer from the hot granite in the sedimentary areas where they don't have over‑pressure problems. The temperature is a little bit lower. They weigh off the temperature differential and efficiencies.
I don't agree that it is proven. I think the technology has some way to go, as evidenced by the problems that Geodynamics are having at the moment. But I do believe they will overcome them, because most of the techniques that are being used are basically those from the oil and gas industry, and there is a huge reservoir of information that is going to help get these projects online.
For a lot of these deposits, the resources are a long way from where it is going to be used. Geodynamics is a case in point. They are talking about moving industry to where they are, rather than putting the electricity back. And talk about DC high voltage lines which have a lower loss than other forms of transmission.
But all of these things, again, take time. And that's why our bringing in geothermal at a decent size on these pilots is out a little bit further than a lot of people would like.
Question: Thank you for a very nice presentation. On that excellent diagram you showed where the cost per megawatt hour was demonstrated for the different targets, can you give us some idea where the cost to society would be on that plot of business-as-usual? And you showed that very sharp rise in cost in the initial stages of switching to sustainable energy resources. But of course the business-as-usual energy source, as traditional ones, hide the true cost. Where would you put the true cost to society? For example, shifting Brisbane inland, if necessary, on that.
John Wright: Oh, good heavens.
Question: Because, you know, the graph looks pretty scary. You have this enormous rising cost, but perhaps that's masking something which is much more serious.
John Wright: Well, now you are getting into the sort of thing that Stern said when he did his modelling: what is the cost of unmitigated climate change? He did some calculations. The net result of that was that he said it was going to be much more cost effective to mitigate greenhouse gas emissions than to adapt. There is a lot of information that came out of that report.
In our own report that we designed we said exactly the same thing. There are some cost error bars – which, quite frankly, I can't remember. But we came to the same conclusion; that looking at the cost of moving Brisbane inland, as an example, is just so overwhelmingly huge that we should be pouring more and more resources into trying to stop the problem in the first place, rather than having to take action that is going to mitigate against climate change.
Question: Going from here to there, would you talk about the earlier adopters who are really into renewables now, and who will be the laggards, the last bastions holding out, and about the scaling issues of going from small scale to national?
John Wright: I think one of the – first the adaptors, is the geothermal industry. I think a lot of the early geothermal consortiums have taken huge risks, spent a lot of money. Admittedly they had gone out and raised public money. I suppose it is the investor that takes that risk. Nonetheless, they believe in a mission for geothermal, and really pushed it forward.
I will just tell you a quick story. The chair of the board of Geodynamics is a guy called Gerry Grove-White. Lovely gentleman. He used to run a big coal-fired power station in the Hunter Valley. He said he just got sick of standing up in front of audiences at conferences and saying, 'Hi, I'm Gerry Grove-White and we put out 20 million tons of CO2 a year.' He was talking to us about distributed energy because they wanted a side benefit.
He has moved now and become the head honcho of Geodynamics. So he has walked the talk, if you like, and is putting his heart and soul into developing geothermal.
And there are people in the tidal industry and wave industry who are all pushing very hard to get their technology up. They are all on a mission to find enough financing and people willing to back them. It is a hard game. It is a very hard game. But as long as we have got people like that then I think the future is looking pretty bright.
Question: Thanks for your talk. In both energy scenarios I am pretty sure renewables were forecast to replace all current stationary energy. And I'm just wondering if we are going to reduce emissions by 90 per cent, isn't the task for renewables greater than that? Because renewables will have to replace current liquid fuel use somehow in order to reduce emissions by 90 per cent.
John Wright: Even at 90 per cent reduction we are still going to have some fossil fuel working. But it is going to be low emission fossil fuel, and probably carbon capture and storage. It is just fossil fuel without the CO2 emission. You are quite right about the fuels. The plots that I showed were just electricity generation. They weren't motor transport, for example. But while all this is going on there are going to be some huge changes in vehicle technology, much more efficient cars, electrification of cars. It is another lecture in itself.
If we are going to go to electric cars where are we going to get the electricity from? But if we are decarbonising the electricity energy then we can do both at once. That is another role for renewable electricity generation to supply our transport fleet.
You have all sorts of things. You have biofuels first and second generation. You have hydrogen looming in the future. It seems to be pushed out every so often a little bit more. Nonetheless, in the end it is one of the few fuels that we can be certain that we have. We just have to get the technology to make it in a cost effective way.
Question: Thank you very much. I would like to just ask one question. It is about nuclear fusion. I note that there is a big international effort going on at present trying to develop fusion power. Do you see any prospects of that in terms of 2050 as a disruptive technology, and should Australia be contributing?
John Wright: I don't know, quite frankly. Fusion research has been going on for zonks. Billions of dollars have been poured into it and billions of dollars still are. It is really big science. Big science. Big money. Australia is involved in fusion. We have a small fusion reactor at the ANU – I am not sure that's what they call it. But they are involved in international consortia working on the basic physics of fusion.
It would certainly be nice to see a breakthrough in that area. Whether it is going to happen or not, I'm probably the wrong person to ask because I just don't know about that technology.
Mike Dopita: I would like to say thank you once again to John for a very stimulating talk and one which clearly, from the breadth of the questions, as usual, the audience has teased out aspects for which there wouldn't normally be time in the lecture. So thank you to John. Thanks to you, the audience. And thank you, above all, to the organisers of this lecture series, which I think has demonstrated how the Academy can stimulate debate, enrich our minds and provide us with a vision for the future.