The End of Clean Energy Subsidies?

The federal government has given generously to the clean energy industry over the last few years, funneling billions of dollars in grants, loans and tax breaks to renewable power sources like wind and solar, biofuels and electric vehicles. “Clean tech” has been good in return.

During the recession, it was one of the few sectors to add jobs. Costs of wind turbines and solar cells have fallen over the last five years, electricity from renewables has more than doubled, construction is under way on the country’s first new nuclear power plant in decades. And the United States remains an important player in the global clean energy market. 

 

Yet this productive relationship is in peril, mainly because federal funding is about to drop off a cliff and the Republican wrecking crew in the House remains generally hostile to programs that threaten the hegemony of the oil and gas interests. The clean energy incentives provided by President Obama’s 2009 stimulus bill are coming to an end, while other longer-standing subsidies are expiring.

If nothing changes, clean energy funding will drop from a peak of $44.3 billion in 2009 to $16 billion this year and $11 billion in 2014 — a 75 percent decline. 

This alarming news is contained in a new report from experts at the Brookings Institution, the World Resources Institute and the Breakthrough Institute. It is a timely effort to attach real numbers to an increasingly politicized debate over energy subsidies. While Mr. Obama is busily defending subsidies, the Republicans have used the costly market failure of one solar panel company, Solyndra, to indict the entire federal effort to encourage nascent technologies. 

The Republican assault obscures real successes that simply would not have been possible without government help. Wind power is a case in point. By spurring innovation and growth, a federal production tax credit for wind amounting to 2.2 cents per kilowatt-hour has brought the cost of electricity from wind power to a point where it is broadly competitive with natural gas, sustaining 75,000 jobs in manufacturing, installation and maintenance. 

But the tax credit is scheduled to expire at the end of this year, with potentially disastrous results: a 75 percent reduction in new investment and a significant drop in jobs. That is just about what happened the last time the credit was allowed to lapse, at the end of 2003. 

This is clearly the wrong time to step away from subsidies. But it may be the right time, the report says, to institute reforms, both to make the programs more effective and to make them more salable to budget hawks. One excellent proposal is to make the subsidies long term (ending the present boom or bust cycles) but rejigger them to reward lower costs and better performance. 

The idea is not to prop up clean tech industries forever. It is to get them to a point where they can stand on their own — an old-fashioned notion that, one would hope, might appeal even to House Republicans.

The End of Clean Energy Subsidies?

Huge Solar Project in Limbo as Newman Pulls Funding

The first chance to test whether solar thermal energy can provide large-scale alternative power in Australia may be in doubt under the new LNP state government.

The incoming Queensland government wants to pull out of an agreement formed by its predecessor to provide $75 million towards the $1.2 billion Solar Dawn solar research and power plant at Chinchilla, west of Toowoomba, Premier Campbell Newman said yesterday.

The Solar Dawn project is set to be one of the largest of its kind in the world.

Mr Newman said following the first LNP party room meeting the cost of the federal government's looming carbon tax would affect the state economy and public sector, and said Queensland would be “paying twice” if state-based climate change initiatives were not dumped.

However he said the green programs set to be axed under his government could be revived if the carbon tax was scrapped.

Mr Newman said during the state election campaign he wanted to dismantle Queensland’s carbon reduction schemes to save $270 million for the state budget.

Solar Dawn is a 250 megawatt solar thermal project using sun-heated water in tubes to produce steam-driven energy, and is backed by the federal government and was supported by former Premier Anna Bligh.

It is part of the federal government’s Solar Flagship Program. A similar project at Moree, in New South Wales, has received federal funding under the same program.

The University of Queensland has developed a $60 million research project to link to Solar Dawn.

UQ's Professor Paul Meredith, the head of the university’s renewable energy research, said he was worried the LNP’s decision would damage what he thought was a worthwhile project and one that provided almost 400 jobs.

‘‘Hypothetically if the state contibution of $75 million does not flow that leaves a very big hole in the project’s funding,’’ Professor Meredith said.

‘‘And I think it is anybody’s guess what the Federal Government will do at that point.’’

The Gillard Government has promised $475 million and the Bligh Government agreed in February this year to give $75 million in a ‘‘conditional agreement’’ to help build the huge solar thermal plant, which is scheduled to be operating by December 2015.

The project must reach ‘‘financial close’’ by June 30 this year.

Federal Energy Minister Martin Ferguson, speaking in Queensland yesterday, said he was surprised the new state government was considering backing out of Solar Dawn.

‘‘As the ’Sunshine State’, Queensland is well-suited for a significant solar thermal project able to competitively deliver electricity to the grid,’’ Mr Ferguson said.

‘‘Given the new Premier’s focus on jobs and training, it is worth noting the Solar Dawn project brings with it an average of 300 jobs during the three-year construction phase, with a peak of 450 jobs.’’

Mr Newman has an election promise to reduce Queensland’s unemployment to four per cent in six years.

‘‘If the new Queensland Government chose to breach the existing financial commitment to the Solar Dawn project, the Australian Government would need to consider its own position,’’ Mr Ferguson said.

The other main funding for Solar Dawn is coming from two joint venture partners: AREVA Solar and Wind Prospect CWP.

Solar Dawn project director Anthony Wiseman said his organisation had received no advice from the incoming Newman government that it would not provide the money.

‘‘Solar Dawn has not been notified of any change of intentions of the Queensland Government under the terms of the existing conditional agreement and we continue to work with relevant parties on developing our proposed project,’’ his statement read.

Solar Dawn would not answer what impact the removal of the $75 million in state government funds would have on the project.

Mr Newman said the LNP would examine any contractual commitments entered into by the previous government, but would not “in some silly way” scrap the contract if the cost outweighed the savings.

“If we can exit this project and save $75 million we will,” Mr Newman said yesterday.

Mr Newman has said the Queensland Government was contributing to projects that should federally funded.

BP Plans to Withdraw From Solar-Energy Venture in Australia

BP Plc, Europe’s second-largest oil company, plans to withdraw from a venture seeking Australian government funds to build a solar-power project in the state of New South Wales.

“We’ve indicated that we wish to leave the consortium and that we won’t be part of the new bid process,” Jamie Jardine, a Melbourne-based spokesman for BP, said by mobile phone today.

BP, Fotowatio Renewable Ventures and Pacific Hydro Pty, which won A$306.5 million ($329 million) in Australian funds last year to build the Moree solar farm, missed a December financing deadline. That prompted the government to reopen the competition to other bidders, including AGL Energy Ltd.

The company decided to exit the global solar business after 40 years because it has become unprofitable, Mike Petrucci, the chief executive officer of BP’s solar unit, told staff in an internal letter in December. The industry faces oversupply and price pressures after Chinese competitors increased production.

BP and its partners in the proposed A$923 million solar photovoltaic plant had failed to sign power-supply agreements needed to advance with the project, it said in December. The company said Dec. 23 it was sticking with the Australian project, even after deciding to exit the business globally.

“In the past two weeks, we’ve worked with the consortium to refine and develop the proposal, and we believe the new consortium will be an effective one,” Jardine said today.

The Moree venture will be eligible to bid for the funds and have a chance to show it is “still the most meritorious project,” Australia’s Resources and Energy Minister Martin Ferguson said earlier this month. The government also invited TRUenergy Holdings Pty Ltd. and Suntech Power Holdings Co. to update their applications seeking solar grants.

The government expects to make a decision in the second quarter, according to Ferguson.

Clean-Tech's Surge Masking Troubled Times

SOMETHING very unusual has been happening in the Australia sharemarket. In each of the past three months and for the last quarter as a whole, Australian clean-tech stocks have outperformed the broader index by a ratio of about two to one.

In January, the ACT Australian CleanTech Index, which comprises 77 local stocks with a combined market cap of $8 billion, recorded a 10 per cent gain, double the rise of the Australian sharemarket's benchmark S&P/ASX 200.

Over the last three months, the CleanTech index has enjoyed a gain of 5.5 per cent, compared with a 1.9 per cent loss in the broader index.

Gillard Government Launches $340 Million Energy Programme

The federal government of Australia launched on Thursday a $340-million energy programme designed to provide energy efficiency to businesses, local government and communities.

The bulk of the funds will be for efficiency upgrades to infrastructure, including council buildings, stadia, education facilities, town halls and nursing homes. It will be made up of three programmes, with the funds broken down into $200 million for councils and not-for-profit and community groups, $100 million for low-income households and $40 million for small- and medium-sized enterprises and community groups.

Climate Change and Energy Efficiency Minister Greg Combet, Regional Minister Simon Crean and Parliamentary Secretary for Climate Change Mark Dreyfus jointly in Canberra the new initiative.

"The community accepts the need for action on climate change and the programmes announced today are a step in the transition to a cleaner economy," the ministers said in a joint statement.

It will reach the different groups through grants to interested parties. The government will issue calls for expression of interests next week. The ministers assured there would be proper safeguards to ensure the money would be spent well.

Mr Dreyfus said the energy efficient programs are designed differently from the failed home insulation scheme which caused the death of four Australians and hundreds of razed homes.

Under the community energy efficiency programme, funding for wind and solar power systems are not eligible, but solar hot water systems are included since the latter is not considered a renewable energy generation scheme.

For the low-income energy efficiency programme, the purchase and installation of renewable energy generation systems such as solar photovoltaic, micro-hydro, wind turbine and biomass generation systems are excluded.

The launch came ahead of the July 1 implementation date of the carbon tax, which some sectors blame for the expected rise in prices, including air fare.

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Australia: Wind Energy and Solar Power Needs Support

The Grattan Institute has studied the potential of wind power, solar energy (photovoltaic and concentrating solar thermal power), geothermal energy, bioenergy, nuclear and CCS to generate near-zero emissions power.

No easy choices: which way to Australia’s energy future? explores the acute intellectual and policy challenge Australia faces in energy policy.

Markets must be the primary mechanism by which Australia transforms its electricity supply. Yet it will not be able to meet its emission targets and at the same time produce future electricity at a price acceptable to the public unless governments act to reduce the costs of low-emission technologies.

It is increasingly clear that the carbon pricing scheme alone is not enough to make low-emission technologies competitive and effect the change that Australia needs.

The report analyses the potential of seven clean-energy technologies: wind farm, solar photovoltaic panels, large-scale concentrated solar power, geothermal energy, carbon capture and storage, nuclear and bioenergy.

The report argues that wind turbines and solar photovoltaic may be commercially viable if carbon pollution prices rise to foreseeable levels over the next 20 years. But it states that those technologies can never provide more than 50 per cent of Australia's electricity needs without massive advances in storage technologies.

Geothermal energy, which has huge potential in Australia, is highly uncertain when it comes to reliability and costs because it's still in the exploration stage. The report acknowledges that nuclear and CCS are unlikely to be demonstrated in Australia anytime soon "unless government takes on most of the material risk of the project".

Mr Wood says the carbon tax and subsequent emission trading scheme (ETS) must be the primary mechanism by which Australia reduces its emissions but he argues the market on its own won't make low-emissions technologies competitive.

The Gillard government, at the behest of the Greens, is establishing a $10 billion Clean Energy Finance Corporation which will leverage private sector financing for renewable energy and clean technology projects. But the Grattan Institute report says more needs to be done aside from support for research and development.

Labor's carbon price scheme begins on July 1, at a price of $23 per tonne of carbon dioxide emitted. The government has also promised a $10 billion clean energy finance corporation, due to start in 2013-14, and Australia has a target of 20 per cent of energy coming from renewable sources by 2020.

But the Grattan Institute found government was responsible for several barriers preventing the development of clean-energy technology. They could be removed by changing the rules governing the electricity network, improving mapping of solar and geological resources and giving potential investors greater certainty by releasing annual emissions limits for well into the future.

Further, it calls on governments to expand exploration and mapping of solar energy and geographical resources to aid in the development of concentrated solar thermal power and geothermal energy and the location of suitable sites for carbon storage.

Finally, the think tank's report stresses the need for a complete overhaul of Australia's distribution network. "Existing transmission networks and network regulation are designed around the assumption that almost all electricity generators will be large plants close to existing centres of generation," it states.

Current cost structures mean wind farm, solar energy and geothermal energy plants in remote locations are unviable simply because they can't connect to the grid. Mr Wood suggests existing generators and retailers should foot the bill for new hubs to be built with low-emissions suppliers only paying a share of the cost once they're up and running. New regulatory frameworks are required that ensure long-run cost-efficient trade-offs, the report concludes.

www.grattan.edu.au/publications/124_energy_no_easy_choices.pdf

Realities of Scale Cast Doubts on Gillard’s Carbon Tax and Clean, Green Future

Viewed from a practical background as an electronics trouble-shooter, it seems to me that the Gillard Government’s “clean energy future” is just a document of hope and uncertainty with a glossy cover.
Overblown expectations of wind and solar power sit at the heart of its plans, and it doesn’t take an Einstein to spot the exaggerated claims and glaring errors of scale.

The Gillard Government would have you believe that it is very simple. “Big Polluters”—500 of them—are to be “supertaxed” creating a simple cost incentive to reduce CO2 emissions.

In Victoria, the Latrobe Valley‘s coal-fired electricity generators can do little to change their ways. Paying the tax is their only real option, and consumer tariffs will rise accordingly. Low income households are to be compensated, emissions will stay the same, and nothing will be gained, except some tax revenue for government coffers.

Many people seem to be under the delusion that this carbon tax will fund the replacement of dirty coal with clean, green power. They assume that the much hyped “clean energy future” sold by Gillard and Brown has it all worked out and under control: the “big polluters” are to pay, and any additional costs to consumers will be minimal. A little research into the detail and the realities of scale uncovers the hidden jumbo amongst the glib tossings of our wry-smiling government.

Consider the situation in Victoria.

Any attempt to supply the state’s peak electricity demand of about 10,000 MW from wind and solar will cost tens of billions of dollars, a cost that will inevitably be passed on to consumers. A current submission to the Victorian Government with cost estimate for our wind-powered future offers a clue to the direction some would have us take, the scale of expenditure involved and what it will do to the industries on its hit list. It is available here.

Cost is only part of the problem. The other, bigger issues are those of scale and nature itself, which, in my opinion, also fail to add up.

Averaged over a month or so, a typical 90-metre diameter wind turbine in Victoria, rated at 2MW, generates only about 30 per cent of its 2MW rating, about 0.6MW, due to wind variability. This is known as capacity factor. Capacity factors of some Australian turbines are listed here.

Ten thousand such turbines would be needed to supplant the 6000MW output of the Latrobe Valley’s coal fired plant on a day of average wind speed. Latest figures from the US Department of Energy list the average “overnight” construction cost of wind generators in the US at US$2438 per kW. (See Table 2, line 26 wind, available here.)

On these figures 2MW turbines would cost US$4.87 million each. Ten thousand of same, for Victoria alone, would cost the Australian taxpayer $US 48.7 billion, though economies of scale would no doubt reduce that figure somewhat.

Ignoring secondary technicalities, such as environmental impact, the enormous costs and electrical losses incurred in lengthy transmission lines, made necessary by wind power’s need for “geographical dispersion” a hypothetical string of ten thousand 90-metre diameter turbines, spaced 100 metres apart in the prime location, along the Victorian coast, would stretch all the way from South Australia to the NSW border.

Even then there is no guarantee that large, slow-moving weather systems would not sometimes create circumstances where supply couldn’t meet demand for periods of hours, perhaps days. Nature will always have the final say in matching supply to demand, and we will be the ones who must make the alternate arrangements.

Full baseload back up from other sources will always be required if outages are to be avoided. Who wants to get stuck in a lift, or walk home, when public transport grinds to an untimely halt due to catastrophic load-shedding?

There are also lessons available from the experience of others, which should serve as a warning to our decision makers. (See ‘A problem with wind’ and ‘Wind power failing to deliver the energy Scotland needs’.)
Wind turbines provide a clean, but costly and intermittent adjunct to baseload power, they are not the answer for cities full of industry, mass transport, factories, with shopping centres, street lighting, and millions of power-dependant consumers. Many, it seems, are pinning their hopes on wind power, but promoting it beyond its capabilities can only lead to very expensive failure.

So where will our 24-7 baseload power come from?

Solar-thermal with storage is the other green answer we hear a lot about in latte-land.

In the sunny desert climes of Spain and the US, solar/storage plants certainly can produce power from stored heat even after sunset, but output fizzles after 12-16 hours. We could no doubt draw intermittent power from a source such as this, but not without full baseload back-up for all those days/weeks of cloudy weather we live with in southern Australia.

Once again realities and matters of scale spoil the fairytale. The total construction cost of a solar/storage plant such as the 110MW Crescent Dunes project in Nevada, is estimated at US$1billion, or about US$9.1 million per MW.

To replace the Latrobe Valley’s 6000MW coal-fired installation with this technology would call for 54 such plants at US$1 billion each, a total of US $54 billion. Scaled up from Crescent Dunes, a 6000MW complex would cover 392 sq kilometers and need unfailing sunshine, often a rare commodity in southern Australia.
Maintenance, including maintaining peak reflectivity of some 900,000 computer controlled heliotats (mirrors) permanently exposed to the elements, would very likely present formidable practical problems.

Back in the real world, southern Victoria’s July sunshine averages 3 hours per day and is sometimes zero for days. Our remote desert areas fare better, but not well enough for the standard of reliability required. Long distance transmission once again becomes a limiting factor.

Put kindly, our green energy future is positive thinking on steroids. The technological miracles upon which it is predicated, are not on the cusp of discovery as many believe. They are already here, and they are inherently problematical. No amount of taxpayer-funded research into wind and sunshine will tame the natural perversity of nature, which condemns the exploitation of its elements to accessory status, regardless of well intentioned hopes and dreams

A baseload capability virtually equal to peak demand is still necessary if power outages and chaos are to be avoided at all hours, and in all weathers. Having ruled out the nuclear option, burning gas instead of coal remains the only 24-7 generating option for Victoria’s largely urbanized population. If we really do have more gas than common sense, we just need a large pipe, a generating site or two, and a willingness to pay at least double for a ‘bandaid’ solution.

Compared to “renewables” construction of gas-fired power stations is relatively inexpensive, typically about $1.2million per MW, though “carbon capture” now on the horizon, may eventually add significantly to that cost. The cost of a typical plant can be seen on fact sheet A.

Even the Greens don’t dispute Victoria’s peak power need of 10,000MW. While the Latrobe Valley can supply 6000MW, Snowy Mountains hydro. and other sources can be imported into the mix to meet the occasional 10,000 MW demand.

A 10,000 MW gas-fired plant would be required to cover Victoria’s needs, at a bare bones cost of around $12 billion. Added to this is a long list of ancillaries, which are difficult to quantify, these include pipelines, distribution terminals, transmission towers, access roads, switching yards, land acquisitions, environmental management, legal costs maintenance, price blow-outs, and of course some “showcase renewables” The final outcome would most likely include all three, wind solar and gas, and the price – enormous.

There will be a scramble for dwindling funds from Canberra’s carbon tax fund, extracted from the 500 big polluters, but this revenue stream has been predicted by many to last about as long as their taxi ride to the airport.

One thing seems certain. If big green power gets its way, the taxpayer/consumer will end up with the bill, regardless of whether he/she voted to receive it. It is hard to see how multi-billion dollar projects such as these can be funded without huge increases in energy tariffs, which are likely to soar by two or three hundred percent to service the vast capital costs.

Measured out by ‘smart’ meters, the future price of electricity may depend literally on the price of gas, the time of day, and the weather forecast .

If anyone believes that Victoria’s share of the carbon tax extracted from a mere 500 targeted businesses will deliver us all nice green power at “little extra cost” they’d believe that little green pigs can fly. To believe it, you’d need to disregard the realities of scale, the limits of technology, the huge capital costs, and switch off any remnants of human intelligence.

But lots of people just swallow it whole … just ask around, it’s a worry!

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