The economy is completely underwritten by the energy market in Australia. The challenge remains to provide adequate supply cheaply for today’s consumers while ensuring that the impact of the generation and consumption of that energy is not unfairly borne by future generations.
The energy market in Australia is complex and encompasses all forms from liquid, gas and solid fuel systems to renewables like solar, hydro, wind and geothermal systems. The consumption of energy is also wide ranging in utilisation of electricity for stationary applications to fuels for transport and industry. From a consumptive perspective the major energy products consumed in Australia are approximately coal (37%), oil products (35%), gas (23%) and renewables (5%). Nuclear does not feature currently in the Australian domestic energy landscape due in part to our natural advantages in renewables.
Electricity has been primarily the domain of state governments historically, however increasingly the emergence of the interstate transmission grid has shifted the responsibility. Increasingly there is an emerging conflict between corporatisation and full privatisation of electricity assets. The ownership of generation and transmission assets is of primary concern to the national interests of Australia and a rethink of the role of the federal government in this space is now warranted.
Approximately 85% of Australian electricity is currently generated on simple cycle thermal coal fired power stations. This generation technology is nearly a century old and the full climatic and ecological impacts of this generation system will not be fully realised and borne for generations to come. Notwithstanding the long term impacts of relatively inefficient generation of 33% in energy conversion, the current electricity prices do not include capital or replacement costs for the fleet of generators that are fast approaching their decommissioning as they literally wear out.
Major generators are now coming off line and increasingly running below capacity. It is becoming urgent to make decisions on infrastructure in this sector to ensure the Australian economy is not exposed to increasing volatility in supply and price of electricity.
Newer generation technologies must be incorporated to dramatically reduce the climate impact of our electricity needs. For example, combined cycle gas turbines are much more efficient generators in the energy conversion sense, approaching 60%, effectively halving greenhouse gas emissions per kilowatt hour. However there needs to be a much greater emphasis on incorporating renewables and newer technologies into the generation mix to replace the ageing fleet of generators in an orderly fashion without exposing the economy to price or supply shocks.
In regard to the development of new power generation infrastructure, the cost of wind and solar energy systems will be no greater than fossil fuel generation systems. Bloomberg New Energy Finance notes that wind is already cheaper than new coal or gas fired generation and solar soon will be. These are critical points because renewables are often painted as expensive when compared to fully depreciated forty plus year old fossil fuel plants, but this simplistic cost comparison is not borne out when we fairly compare the cost of renewables against capital cost of new fossil fuel systems required to replace the ageing fleet or meet new demand.
Beyond electricity, Australian energy demands are massive in the form of oil and gas products. Currently Australia consumes approximately 18.5 billion litres of diesel and 2.7 billion litres of petrol annually. Intuitively diesel is more geared to commerce and industry with mining consuming approximately 30%, transport approximately 35% and agriculture about 2% of annual diesel usage. Gas consumption currently stands at approximately 210,000 GJ of which manufacturing consumes approximately 40% and electricity and heating consume approximately 42%.
Clearly Australia is heavily dependent on fossil fuels to meet current demand. It is unlikely that the current energy demands can be met cost effectively in the short to medium term through renewables. However, current assets and infrastructure deployed in the Australian economy are unacceptably exposed to increasing fuel cost and supply volatility.
The “just in time” practice of supply in modern supply chains dramatically increases the social and economic risks associated with disruptions in the energy sector. The Australian government has a responsibility to assure adequate supply at an affordable and stable price to ensure long term economic prosperity and effective public utility. Rural and regional Australia’s exposure to disruptions in fuel supply is amplified significantly simply due to the vast distances over which industry operates and the goods and services are transported.
There is an ongoing demand for fossil fuels and there is a need responsibly manage the current energy market to maximise Australia’s competitive advantage. However, in the face of increasing scientific consensus around carbon emissions it is essential to balance the short term economic concerns with longer term climate and environment outcomes.
CountryMinded is committed to real and meaningful solutions to Australia’s energy needs to underpin a viable economy to secure jobs and prosperity for the entire nation. In this context CountryMinded will pursue policies that will:
- Extend the Mandatory Renewable Energy Target
- Establish a Domestic Resource Reserve policy to guarantee domestic supply
- Enable new technologies to improve efficiency and reduce emissions of fossil fuels for complex transport tasks, eg atomized refined coal or coal water fuel technologies
- Retain the Clean Energy Finance Corporation
- Establish an independent Australian Energy Authority with a clear charter and the requisite authority to map and implement meaningful solutions to Australia’s energy challenge.