By David Holland
It is pleasing to see that the Gillard Federal Government supports the sustainable production of energy and is introducing activities to support the development of sustainable renewable energy production within Australia.
This article is based on the latest letter from the Australian government. This letter is from the office of the Minister for Resources and Energy, The Hon. Martin Ferguson AM MP introducing a range of initiative that will flesh out the Gillard Government sustainable/renewable production of energy for Australia’s future.
On the 10th of July 2011 the government announced its Clean Energy Future Package. This package was designed to allow a smooth transition to a market based carbon trading system. This is to be done by establishing a market price on carbon emissions as a starting point before the transition to the market based carbon trading system when both the Australian and the world’s renewable energy industry and carbon abatement industries mature.
This price will initially be in the form of a levy or tax which will provide a range of offsets to individual Australian residents to compensate for the increases in energy costs likely to be passed on by large energy producers though this artificial price correction. This price correction is designed to protect the integrity of the ‘public good’. (ie. The public good in this case is defined as levels of carbon dioxide concentrations in the atmosphere that do not cause global climate change)
This carbon price levied by the government, which has been described as a tax, attempts to introduce a financial signal to industries that contribute to dangerous climate change through the emission of carbon dioxide into the atmosphere. By imposing this price on the emissions, the government attempts to reduce the long term impact carbon polluting industries will have on the existing quality of life of a large part of humanity, although unless global action is taken unilaterally, any effort by Australia will not impact on the global climate change process. However, Australia, among some other countries leading the way to reduce climate change, may embolden yet more countries to take more decisive action to combat climate change.
The government suggests the carbon price will see Australia’s 500 largest emitters of the carbon dioxide gas pay for their carbon emissions. Some of these large emitters will attempt to reduce the cost of paying this emissions price to the government by improving their production of energy methods. This will progressively start industries to produce more of their energy from renewable sources. Others who cannot change there emissions mix, may be able to offset the cost of emitting the carbon dioxide by having a financial interest in the development of renewable energy projects or invest in abatement programs designed to reduce carbon dioxide levels in the atmosphere.
As part of the budgetary package, the Gillard government is committed to record levels of funding to support the development and commercialization of renewable energy technologies.
Up to $3.2 billion in funding will be administered by the federal government’s Australian Renewable Energy Agency (ARENA). This body will take over three existing bodies (currently administering $1.5 billion).
The Australian Solar Institute was a mechanism by which funding applicants can get funding for research on specified criteria. With this Institute, solar was the main focus of any successful research funding. However, under the new ARENA a much wider focus for applying for research funding is expected, covering all renewable energy types.
The Department of Resources, Energy and Tourism had a wide portfolio. By including Tourism in the department, the funding for renewable energy projects were diluted giving a certain amount of funding to tourism development and thereby as a consequence away from developing new renewable energy sources. ARENA will become a more transparent funding pool for projects related to renewable energy development.
In addition, mining was part of the administrative responsibility of the Department of Resources, Energy and Tourism. By considering both resources and energy, this department was able to consider energy security. This link between energy systems development and mineral resources is a particularly important link in any transition from fossil fuel resources and fossil fuel driven energy utilization to renewable resource development and sustainable energy delivery systems.
The Australian Centre for Renewable Energy (ACRE) is a funding source for renewable energy initiatives. Previously with a budget of $690 million dollars, it is now planned to administer a budgeted of $5 billion. However, soon all of the effort focused in this organization will be refocused into ARENA. ARENA will have a much wider scope than ACRE, as it will incorporate the responsibilities of the other two organizations, the Australian Solar Institute and the Department of Resources and Energy.
The new organization of ARENA will also have an additional $1.7 billion of unallocated funds to invest into renewable energy projects.
Potentially, with the introduction of the carbon price, electricity generators in some cases could find it difficult to adapt to clean energy production. This is due to the higher costs of producing non-clean energy in a high carbon dioxide producing asset like a power station. Such owners of these assets may find it difficult to gain finance to invest in clean energy due to the devaluation of their asset and the lower profit levels expected under a carbon price.
Ref: Australian Energy market Commission – Advice on the impact of the introduction of a price on carbon emissions on the energy sector if no financial assistance is provided to highly emissions intensive generators
To help rectify this situation, funding has been set aside for a range of asset owners to help private industry to invest in renewable energy solutions, low emission technologies and energy efficient technologies. The Gillard government has provided the commercially oriented Clean Energy Finance Corporation (CEFC) to be responsible for providing up to $10 billion of revolving funding to support Australian business interests in becoming more efficient and ultimately finding an energy production pathway to renewable energy utilization.
The CEFC is commissioned to play a role of unlocking private investment for both the implementation of efficient energy technologies and the production of energy from renewable energy systems by private industry.
To get a better insight into the importance and strategic value of the CEFC the following article explains its value.
Use the hyperlink below to access this article.
Is the Clean Energy Finance Corporation the best way to get clean energy?
Published: 24 October 2011, 6.37am AEST
The above article rightly suggests that just a carbon price alone will not generate enough ability for the Australian energy economy to transform from a carbon-based economy to a sustainably renewable one.
The CEFC will become a way for presently uneconomic aspects of the energy industry to enter the existing market mechanism of the Renewable Energy Target (RET). This market mechanism, recently redirected by the Gillard Government in February 2011, will be the main investment incentive for new renewable energy development using the renewable energy credit (REC) initiative. The RET helps bring on line a security of the renewable asset by putting a value on the energy to be generated by the new renewable asset over and above the sale price of the energy.
Another way to gain renewable energy income for asset owners would be to design a state or federal grid feeding system similar to the one in place in New South Wales. This Feed in Tariff (FiT) system, as suggested in the above article, could be used more widely throughout Australia. However the generosity of returns currently available in the NSW scheme, now heavily underpinned by a NSW State government subsidy, may need to be re-evaluated.
The RET will be the underpinning Federal Government scheme to achieve the renewable energy target of 20% renewable energy production by 2020 throughout Australia. This program is planned to continue until the year 2030 when it is expected that the carbon price will be robust enough to allow Australia to finally enter the world market for carbon abatement.
However, it is encouraging to see some smaller states in Australia already approaching and overtaking this 20% benchmark for the RET. (ref. Australia’s Renewable Energy Report Card 2010)
Until ARENA is established with up to $5 billion of funding available to it, ACRE will continue to be the central point of contact for assistance for companies looking to invest in renewable energy applications within Australia.
ACRE is continuing to operate powerfully, producing a Strategic Development Guide on 5th April 2011. In keeping with its vision of:
National energy markets delivering competitively priced renewable energy sourced from a diverse range of technologies.
And its mission:
To deliver programs and provide relevant policy advice to move promising renewable energy technologies, products and services through their innovation cycles to commercial competitiveness nationally and internationally for the benefit of Australia.
ACRE is involved in development, demonstration and the initial stages of deployment of renewable energy applications within Australia.
Announcement of a 2011 Energy White Paper
The Government is expected to produce an updated Energy White Paper for 2011. It is expected to be available in 2011 or 2012 to be finalized in 2012. This White Paper will set out a policy framework to maintain energy security and prosperity during a transition to a more sustainable fuel mix and a renewable energy future. The paper’s target is to ensure that Australia has a competitive, secure, efficient and sustainable energy sector in place. It is expected that the white paper will announce this transition to renewable fuels, giving a time frame for the transition up to the year 2030.
An overview of the policy priorities and the process needed to accomplish the above target was outlined during the year by Martin Hoffman, the Deputy Secretary Department of Resources, Energy and Tourism.
Ref.: Energy White Paper Presentation by Martin Hoffman
Supporting this presentation is a document that outlines some of the processes the government intends to initiate through the white paper.
Ref.: Enhancing Australia’s Economic Prosperity
The letter from the Minister’s office states that the Energy White Paper will be based on a full strategic review of the energy sector, identifying emerging trends and needs.
A submission on the previous Energy White Paper in 2004 outlines the deficiencies of this paper, highlighting the need to move more progressively into the future by identifying Australia’s great opportunities in moving towards a renewable energy mix for the future.
Ref.: Renewable Fuels Australia (RFA) submission to the Energy White Paper (2004)
The 2011 white paper is expected to identify the growing renewable energy sector as a major trend towards future energy development. As a result of this trend towards renewable energy utilization both within Australia and in the world, the paper is expected to lay a policy framework to plan more effectively for a sustainable and renewable energy future within Australia.
Energy in Australia, Department of Resources, Energy and Tourism
Securing a clean energy future
Energy Security Fund, AEMC 7th July 2011
Energy Security Fund, AEMO 5th July 2011
Australian solar institute, A Strategic research initiative, call for comment final
Reply from Minister for Resources, Energy and Tourism Office