Wednesday, November 30, 2011

NZ Election 2011 - Praying to the Growth Fairy

reposted from oilshockhorrorprobe

I had thought that my next post would be on the surreal lack of policy from any of the political parties in the Election addressing resource depletion and their collective failure to face the reality that "economic growth" is not returning. Before I could get around to it I read this excellent post from James Henderson at "The Standard", and so I am re-posting it here. 

Monday, November 21, 2011

Why solar parity scares big utilities

The Climate Spectator has another article on how renewable energy can bring power prices down - Why solar parity scares big utilities.
Thursday January 29, 2009, was a big money day for Victoria’s brown coal generators.

After a night of uncomfortably warm temperatures, and a dawn reading of 32°C, Victoria’s residents turned to their air-con and pedestal fans in near record numbers. By 9am, demand had spiked so high that electricity prices had soared to $10,000 a megawatt hour as utilities switched on every last generator they could find to meet demand. These wholesale prices are normally between $35-$50/MWh.

During that day, which reached a peak of 44.3°C in Melbourne in mid afternoon, the wholesale electricity price never fell below $1,000/MWh. For nearly four hours, it hovered around the $10,000/MWh price. The way the National Electricity Market works means that every generator switched on at that time receives that price, even though it still only cost the brown coal generators around $4/MWh to shovel the coal into their power plants. Over an eight-hour period, the state’s generators would have pocketed an estimated $550 million in revenue, near one fifth of their total revenue for the year.

It was, needless to say, an absolute jackpot for the generators. But while this was an extreme case, it was not an atypical event in the NEM. It is estimated that, on average, around one quarter of the revenue from electricity sales each year is generated from the prices gleaned from around 24-36 hours of peak production. The business models of the energy utilities depend on it. But now those models are under threat.

What, for instance, would have happened that day to electricity prices had there been large amounts of solar deployed along the eastern seaboard available to meet demand? According to modeling conducted by the Melbourne Energy Institute at the University of Melbourne, 5 gigawatts of solar PV would have been very effective in curbing peak demand. Prices would still have spiked, but not over $300/MWh, and for shorter periods. The total revenue for the day would have been just over $340 million – half of what it would otherwise have been.

This is what is known as the merit order effect: the effect technologies with a short-run marginal cost – i.e. with fuel that costs next to nothing, such as solar, wind – have on the market when they deliver electrons en masse to the grid. The overwhelming evidence from Australia and overseas is that they bring the wholesale cost of energy down, sometimes so much that the reduction in prices is greater than the cost of the subsidies that got them built in the first place. And established utilities with higher-cost fuel, such as coal and gas, don’t like it one bit, and are suddenly realising the extent of the threat to their business.

Normally, the overnight load in Victoria stands at around 5.5GW, not enough to even meet the output of all of the state’s coal-fired generators. Wholesale prices barely meet the cost of production. At 8.5GW of demand, an average high-load weekday, peaking gas generators are required and the wholesale price jumps to around $70/MWh. The coal-fired generators make money. But would this still be the case if 1.5GW of solar was available? The Melbourne Energy Institute says not; it would mean that gas-fired utilities normally brought into the grid would not be required and the wholesale price would remain at modest levels.

This might explain why state governments, in Victoria and NSW in particular, are happy to delay the rollout of renewable energy at a large scale. As noted here before, Victoria’s decision to defer an increase in its state-based renewable energy target was motivated by the potential impact of the merit order effect on the state’s coal-fired generators. Right now, the deployment in both wind and rooftop solar is at a virtual standstill because of policy uncertainty. That suits the established generators just fine.

Mike Sandiford, the director of the Energy Research Institute at the University of Melbourne, says that in the case of solar, this is simply delaying the inevitable. Grid parity – and the deployment of solar at a scale that the modeling contemplates – is coming whether the governments and the utilities like it or not, and it’s time policy makers faced up to the issues that it presents.

“We can either hide from grid parity or we can embrace the challenges,” Professor Sandiford said. “All we ever hear is that it is expensive, can’t deliver, or is not worth investing. We rarely hear of the opportunities.” The modeling of the 5GW solar scenario was extended to cover the entire 2009 and 2010 years. It found merit order savings of $1 billion in the first year and $600 million in the second, and avoided transmission and distributed investment.

As those figures show, it’s not just the generators that are impacted by this, it is the network operators as well. NEM data shows that while peak demand is growing, mean demand has plateaued and is now falling, possibly as a result of rising electricity prices, more solar PV, the merit order effect, or even the benefit of the pink batt program.

This divergence has meant that more infrastructure is being built to meet peak demand and is being used less during the day. And despite spending billions on network upgrades, and contributing well over half of the increased retail prices, the industry is losing productivity at a rate of 1 per cent a year. In most industries, this would be untenable. A dramatic increase in distributed energy such as solar would force the network operators to revisit the means to make money.

Professor Sandiford says most of the pubic discussion around feed-in tariffs and other green incentives is to pitch them as a form of regressive tax. That, he says, is way too simplistic. “There are other values here. It can shave peak demand, and it mitigates against extreme prices,” he says. “We are using less electricity at medium prices and more at the peak. It is important to know the answers to these problems before we go off spending. Whether we like it or not, it is going to hit us. We should try and understand what these issues are.”

Thursday, November 17, 2011

Climate change in the NZ election - Elephants swallowed by a snake and flogging a dead horse

A snake swallows the elephant in the room and then flogs a dead horse - The politics of climate change in the 2011 New Zealand Election campaign

Robin Johnson's Economics Web Page posts some thoughts on the politics of climate change in the campaign for the New Zealand general election.Apologies to the Little Prince
So whats happening with climate change in the campaign for the New Zealand general election on 26 November 2011?

I was originally thinking about writing a wonkish post comparing climate change policies between NZ's political parties. e.g. see You know the sort of thing

Which parties have policies that reflect the seriousness of the impacts the science predicts? Who has got the science wrong? Which politicians are all talk and no action? What are the minute details of the each party's NZ ETS policies. Such as delays to sector entry dates, partial price obligations and varying free unit allocation regimes... MEGO, anyone? (My Eyes Glaze Over....)

Then I thought, No! I am looking through the wrong end of the telescope.

You know what really strikes me about climate change in the election?

It's the absence.

It is as if climate change is nearly completely absent from the campaign. When climate change does pop up, it's portrayed in simplistic soundbites.

NZ Climate Change Minister Nick Smith says anthropogenic climate change is real and complex and 'wicked'. But promises more moderating, balancing and delaying of the NZ ETS. The NZ Labour party says anthropogenic climate change is real and we will fiddle with some NZ ETS details for agriculture slightly earlier than National as farmers don't vote for us anyway. The NZ Greens say anthropogenic climate change is real and we have a detailed wonk-friendly exposition on our website, but for this election we are running with "jobs, kids, rivers". oh no..... MEGO....

What's happened is that climate change, the 'elephant in the room', has been swallowed up whole by the 'snake in the room' -- politics. Along with all other serious political issues.

This snake is the real theme of the election. Commentator Russell Brown calls it the politics of absence. Brown says "cultivated political absence...shapes the almost unprecedented popularity of John Key". Prime Minister John Key's political success is because of this successful strategy of "de-politicising" himself. Key's politics-free radio chat show was the perfect example.

The NZ media have largely just played along with the politics of absence. The election is discussed as a poll-driven horse race. Or a rugby game "of two halves" with "kicking for touch". Who looked confident? Who had the best sound bites? Who mispronounced his/her New Zild the least or most. Restructure or "reeshrukcha"?

The NZ media have trivialised and objectified political debate. I give this example. The most discussed electoral contest in 2011 appears to be Auckland Central which the Herald calls "the battle of the babes" as the candidates, Jacinda Ardern and Nikki Kaye, are both relatively young women, whose shared Herald columns are called "Broadsides". Do I need to say more?

After the snake has swallowed the elephant in the room, the snake becomes the dead horse that needs some more flogging.

Climate change has been politically institutionalised. Its now "flogging a dead horse". Everyone has a policy (a horse). Everyone talks their policy. No one does anything.

These policies all have a narrative that explains the problem (the horse is under-performing) and a 'narrative' solution (keep flogging the horse).

It is here that the metaphor of "flogging the dead horse" fits so well. Firstly, the probability of the two main political parties really acting to reduce our emissions of greenhouse gases is the same as the probability of the flogged horse springing back to life.

The second reason is that the best dead horses can be repeatedly flogged.

Take NZ's main planning law, the Resource Management Act (RMA). It's the ultimate flogged dead horse of NZ politics. In its 20 years of life, it has been in an almost eternal state of being vilified from all sides: for environmental failures and for economic inefficiency.

Both National and Labour have both been subjecting it to interminable reviews and amendments. The basics remain the same. Plans are written with lofty goals. Plans don't reflect consent practice. But then consent decisions rarely reflect plan goals. Consents are needed for some activities not others. Some consents need more evidence and take longer than others.

The NZ ETS is the new dead horse in the flogging stable. Its perfect. Like RMA issues, the NZ ETS is fiendishly complex. To most people, the NZ ETS is a MEGO topic. My Eyes Glaze Over. A recital of any of the detail of the NZ ETS is usually enough to induce that response. Thus deflecting most criticisms.

Being complex, if not incomprehensible by design, the NZ ETS can be fitted, usually negatively, into any political viewpoint. Farmers can still oppose it with vitriol despite their generous treatment. It is just as good a political punching bag as the RMA.

The National Party's 2009 amendments institutionalise that most Kiwi of practices -- a five yearly review by committee. To me this is the statutory recognition of the near-permanent state of "fixing" the RMA is subject to. Labour have said they will continue the 5-yearly reviews if they become Government. Thus they have bought into Nick Smith's approach of eternal moderating of the NZ ETS. Labour get a payoff of needing less specific policies.

So debates on the NZ ETS, like this one, between Nick Smith's soundbites and Greens Co-leader Russel Norman's observations on perverse price incentives, on TV One's Q and A programme, don't really matter politically. The debate itself is just more MEGO. The snake swallows the elephant.

Interestingly, TV One had former Greens col-leader Jeanette Fitzsimons as their 'pundit' for the Smith/Norman debate. She cut right through the snake punditry by analysing the NZ ETS on the meta level. Fitzsimons said the NZ ETS was now so weak and distorted that it no longer mattered what tinkering Smith did to it. "It's like driving a car fast towards a cliff and arguing whether to go in fourth gear or fifth".

Which is of course another way of saying the horse is dead and no amount of flogging will make it trot again.

Monday, November 14, 2011

Asian alternatives

A longish compilation of recent news from around Asia with a focus on SE Asia. Topics covered are climate change and renewable energy.
Climate change to bring more floods: World Bank
AFP (via Google) 11/11

HANOI — Climate change will bring more floods and extreme weather to Southeast Asia, a World Bank official said Thursday on a visit to the region, where hundreds have died in severe inundation.

"What we are seeing is there are more floods, more extreme weather events, higher temperature, more variable rainfalls and we believe that is caused by climate change. And we should expect this to increase, sadly," Andrew Steer, the World Bank's special envoy for climate change, told reporters in the Vietnamese capital Hanoi.

Thailand's worst floods in half a century have killed 533 people and damaged the homes and livelihoods of millions around the country.

In neighbouring Cambodia, the deadliest floods since 2000 have killed at least 247 people while more than 100 have died in Vietnam, mostly in the southern Mekong Delta.

Steer, who cancelled plans to visit Thailand on his regional tour because of the disaster, said the floods there were "consistent with what we know to be true about climate change."

UN chief hails poor nations over climate change
AFP via Google 14/11
"Some of the countries most affected by climate change should be an "inspiration" to rich nations on reducing their emissions, UN Secretary General Ban Ki-moon said on Monday.

"In this time of global economic uncertainty, let (these countries') commitment to green growth be an inspiration to more developed countries -- the major emitters," he said.

He said it was unfair to "ask the poorest and most vulnerable to bear the brunt of the impact of climate change alone" and called for the release of agreed funds to help poor countries to adapt to global warming.

The meeting in Dhaka of 18 countries most affected by climate change hopes to agree on a united front ahead of UN talks in Durban, South Africa, in December, where a "Green Climate Fund" will be negotiated.

The forum reflected the fact that the pace of international climate negotiations was "very slow and inadequate" said Bangladeshi Prime Minister Sheikh Hasina, speaking at the opening on Monday.

"We are bearing the brunt of the damage though we made negligible or no contribution to the menace. This constitutes a serious injustice... and demands immediate rectification and remedy," she said.

China registers sharp drop in carbon intensity
China Daily 11/11

BEIJING - China has become the top emitter of carbon in the world after its emissions of greenhouse gases increased by 33.6 percent from 2006 to 2010, according to a report released by Tsinghua University on Wednesday.

At the same time, China's carbon intensity - a measure of a country's emissions compared with each unit of its economic growth - dropped by 20.8 percent, partly because of the country's work to become more energy efficient and rely more on renewable sources of energy.

Sunday, November 13, 2011

The Declines Incline

Sceptical Science has a very nice graphic showing how a global temperature decline, or series thereof, is confected from the obvious long term trend.

Going Down the Up Escalator, Part 1

Right now we're in the  midst of a period where most short-term effects are acting in the cooling direction, dampening global warming.  Many climate "skeptics" are trying to capitalize on this dampening, trying to argue that this time global warming has stopped, even though it didn't stop after the global warming "pauses" in 1973 to 1980, 1980 to 1988, 1988 to 1995, 1995 to 2001, or 1998 to 2005 (Figure 1).

As Figure 1 shows, over the last 37 years one can identify overlapping short windows of time when climate "skeptics" could have argued (and often did, i.e. here and here and here) that global warming had stopped.  And yet over the entire period question containing these six cooling trends, the underlying trend is one of rapid global warming (0.27°C per decade, according to the new Berkeley Earth Surface Temperature [BEST] dataset).  And while the global warming trend spans many decades, the longest cooling trend over this period is 10 years, which proves that each was caused by short-term noise dampening the long-term trend.

Other Physical Evidence of Continued Warming

It's also important to point out that global temperature measurements aren't our only evidence of the long-term global warming trend.  We've observed many physical indicators of global warming (Figure 2).
warming indicators
Figure 2: Physical Indicators of a Warming World

See the original post for a detailed account.

Saturday, November 12, 2011

100% renewables, no hot air

Zero Carbon Australia's Matthew Wright has a response to a recent competing proposal for 100% renewable energy from UNSW's Mark Diessendorf - 100% renewables, no hot air.
The Zero Carbon Australia Stationary Energy project has paved the way for Australian researchers to contribute their best scenarios for transitioning to a 21st century renewable powered economy in a decade.

When we first set out on the momentous task to write the plan, recruiting dozens of engineers, physicists and scientists, we really hoped that we would create a competition around the goal on who could write the best scenarios for transition. We wanted to see reports like ours being written by state and federal governments, public and private research institutions and universities. We congratulate UNSW for being the first institution to take up the challenge.

As the community partner in the ZCA project, Beyond Zero Emissions welcomes the UNSW’s contribution with its soon to be released scenario for taking the economy to 100 per cent renewable energy.

Before we can discuss the merits of their proposal, we need to consider the two schools of thought on how to achieve a completely decarbonised economy: those who think we should have a fossil fuel powered "transition;" and those who think that transition using fossil fuel “lite” technologies – namely fossil gas – is a diversion, not a shortcut. Beyond Zero Emissions fit into the latter category while the UNSW fit somewhere in between.

Based on what is known about the UNSW plan, the research recommends building gas peaker plants to generate 14 per cent of Australia’s electricity needs. These plants would run on fossil gas – which would include petroleum gas and coal seam gas – and switch to gasified biomass at an unspecified point in the future.

We believe that it is simplistic and naïve to believe that fossil gas feedstock will be replaced with biomass feedstock, and think that future scenarios from universities and environmental organisations will send a green light to oil and gas companies Origin Energy, AGL, Santos, etc, to proceed with their massive expansion of coal seam gas in the food producing areas and forests of NSW and QLD; not to mention their intentions for Tasmania, Victoria, West Australia and their shale gas dreams in SA.

Even if the switch to biomass was contemplated on the studies' proposed scale, BZE’s research team had already looked seriously into biomass burning for the specific task of addressing reduced solar and wind resources in the winter. After diligent analysis, it was decided that a combination of overcapacity and biomass co-firing would be the best, least environmentally damaging and cheapest way to meet the more challenging winter demand.

The UNSW team, by their own admission, hasn’t done the economics on their transition plan, and so Beyond Zero Emissions can’t actually comment on the costs directly. What we do know is that our researchers ruled out the gasification of biomass due to the lack of demonstrated commercial-scale projects, the lack of project pipeline and known cost curves, and the fact that storage wasn’t demonstrated on any scale.

The UNSW use of biogas or biomass gasification was investigated, however research found that no technology existed on the scale needed and the costs quoted were as much as 10 times the cost of transporting biomass pellets. Palletisation as chosen by the Zero Carbon Australia team is a very well known process, with a significant scale industry operating in Europe and the US.

The challenge for the UNSW team is to either size their gas production for the maximum peak demand of their turbines, which I would expect would be in the order of 20-50GW of capacity, or to add storage for their gasified biomass, which is a costly option. The UNSW proposals might combust hydrogen and carbon monoxide directly, or alternatively reform the gasified biomass into methane, but both these options would prove to be very expensive. We are confident that our plan will be cheaper than the UNSW plan if they decide to stick to their choice of gasified biomass.

Gas generation is the most notable difference between the Zero Carbon Australia plan and the UNSW scenario but it’s not the only one.

The ZCA included a significant energy efficiency program, the most ambitious one proposed to date, which shows how we can deliver half the end use energy we currently deliver. How we do that is being comprehensively detailed in the work of the Zero Carbon Australia Buildings plan, which will be published in February next year.

Then there’s our plan to link the main electricity grids in Australia: the Mount Isa mine grid in the north and the eastern seaboard grid with the West Australian grids. This proposed updating of infrastructure is on par with what’s happening in China, in South America, and serious plans to connect North Africa and the Middle East to Europe. Our plan to link eastern and Western Australia with HVDC, creating a national grid, is consistent with the recommendation of Siemens Australia. The cost of this technology has come down since we researched and produced our report.

In his article last month, UNSW's Mark Diesendorf questioned whether Australia has the available labour force to build the renewable energy system, even though it is adequately addressed in the ZCA plan. When the coal industry is set to triple in size, we hear a bit about capacity constraints, but nobody concludes it’s a showstopper. When the gas industry decides its going to build $100, $200 or even $400 billion worth of LNG trains, no one says that it can’t be done because of capacity constraints. Not only does the same logic apply to a rapid rollout of renewables, but workers are crying out for jobs in the renewable powered cleantech economy.

Friday, November 11, 2011

“If we don’t change direction soon, we’ll end up where we’re heading”

That is the prominent quote headlining the English language executive summary of the World Energy Outlook Report of the International Energy Agency released Wednesday.

The following are selected passages from the projections made by the IEA. Bolding is as in the original, underlining and [text ] added.
There are few signs that the urgently needed change in direction in global energy trends is underway. Although the recovery in the world economy since 2009 has been uneven, and future economic prospects remain uncertain, global primary energy demand rebounded by a remarkable 5% in 2010, pushing CO2 emissions to a new high. Subsidies that encourage wasteful consumption of fossil fuels jumped to over $400 billion.

Despite the priority in many countries to increase energy efficiency, global energy intensity worsened for the second straight year. Against this unpromising background, events such as those at the Fukushima Daiichi nuclear power plant and the turmoil in parts of the Middle East and North Africa (MENA) have cast doubts on the reliability of energy supply, while concerns about sovereign financial integrity have shifted the focus of government attention away from energy policy and limited their means of policy intervention, boding ill for agreed global climate change objectives.
The assumptions of a global population that increases by 1.7 billion people and 3.5% annual average growth in the global economy generate ever-higher demand for energy
services and mobility. A lower rate of global GDP growth in the short-term than assumed in this Outlook would make only a marginal difference to longer-term trends.
The age of fossil fuels is far from over, but their dominance declines. Demand for all fuels rises, but the share of fossil fuels in global primary energy consumption falls slightly from 81% in 2010 to 75% in 2035; natural gas is the only fossil fuel to increase its share in the global mix over the period to 2035. In the power sector, renewable energy technoogies, led by hydro-power and wind, account for half of the new capacity installed to meet growing demand.
We cannot afford to delay further action to tackle climate change if the long-term target of limiting the global average temperature increase to 2°C, as analysed in the 450 Scenario, is to be achieved at reasonable cost. In the New Policies Scenario, the world is on a trajectory that results in a level of emissions consistent with a long-term average temperature increase of more than 3.5°C. Without these new policies, we are on an even more dangerous track, for a temperature increase of 6°C or more.
Four-fifths of the total energy-related CO2 emissions permissible by 2035 in the 450 Scenario are already “locked-in” by our existing capital stock (power plants,  buildings, factories, etc.). If stringent new action is not forthcoming by 2017, the energy-related infrastructure then in place will generate all the CO2 emissions allowed in the 450 Scenario up to 2035, leaving no room for additional power plants, factories and other infrastructure unless they are zero-carbon…  Delaying action is a false economy: for every $1 of investment avoided in the power sector before 2020 an additional $4.3 would need to be spent after 2020 to compensate for the increased emissions.
In the 450 Scenario, we need to achieve an even higher pace of change, with efficiency improvements accounting for half of the additional reduction in emissions. The most important contribution to reaching energy security and climate goals comes from the energy that we do not consume.
Rising transport demand and upstream costs reconfirm the end of cheap oil. All of the net increase in oil demand comes from the transport sector in emerging economies, as economic growth pushes up demand for personal mobility and freight.
Four-fifths of oil consumed in non-OECD Asia comes from imports in 2035, compared with just over half in 2010. Globally, reliance grows on a relatively small number of producers, mainly in the MENA region, with oil shipped along vulnerable supply
Coal has met almost half of the increase in global energy demand over the last decade. Whether this trend alters and how quickly is among the most important questions for the future of the global energy economy. Maintaining current policies would see coal use rise by a further 65% by 2035, overtaking oil as the largest fuel in the global energy mix.
China’s consumption of coal is almost half of global demand and its Five-Year Plan for 2011 to 2015, which aims to reduce the energy and carbon intensity of the economy, will be a determining factor for world coal markets. China’s emergence as a net coal importer in 2009 led to rising prices and new investment in exporting countries, including Australia, Indonesia, Russia and Mongolia.
India’s coal use doubles in the New Policies Scenario, so that India displaces the United States as the world’s second-largest coal consumer and becomes the largest coal importer in the 2020s.
If the average efficiency of all coal-fired power plants were to be five percentage points higher than in the New Policies Scenario in 2035 … CO2 emissions from the power sector [would be lower] by 8%
…CCS plays a role only towards the end of the projection period…
…If CCS is not [or can not be] widely deployed in the 2020s, an extraordinary burden would rest on other low-carbon technologies…
 For further detail go to the website. There is a 6 page factsheet

Coincidentally the following job ad appeared in my inbox:
A Singapore-based leading Energy Broking firm with world-wide market coverage is looking for an Energy Broker with qualifications as follows:
  • Excellent command of English (both speaking and writing), Bahasa Indonesia and ability to speak and understand Mandarin (Chinese language ability is not crucial but will be an advantage)
  • Preferably experienced in Coal industry.

Thursday, November 10, 2011

Agricultural emissions out of NZETS and Nick Smith fails ETS basics

Robin Johnson's Economics Web Page cross-posts on the New Zealand decision to indefinitely defer the entry of agricultural emissions into the NZ emissions trading scheme

New Zealand Climate Change Minister Nick Smith has confirmed that agriculture will be unlikely to enter the New Zealand Emissions Trading Scheme. The news has as they say gone around the world with coverage in the NZ Herald, Reuters, Bloomberg and the Sydney Morning Herald.

Gareth of Hot Topic puts it this way.
"Hon Dr Nick Smith... explained the recent decision to indefinitely delay bringing agriculture into the scheme, stating the technology to do so practically does not yet exist"
Nick Smith yet again gets away with a soundbite of spin that is contradicted by the orthodox economic rationale for having an all-sectors all-units and all-gases international emissions trading scheme for greenhouse gases.

Just for the sake of argument, let's ignore the Sustainability Council's work on agricultural emissions reduction and assume that Dr Smith is correct that there are no practical technologies that will enable the agricultural sector to reduce emissions.

Let's go back to basics. Why do we even have emissions trading including all greenhouse gases across all sectors and across national borders?

The whole point is so that 'cheaper emissions reductions' can, in the short to medium term, largely carry the can for 'expensive emissions reductions', in meeting emissions limits or caps.

In economics speak, a sector of an economy with 'expensive emissions reductions' options is more or less just the same as a sector without practical technologies to enable reductions of emissions. Agriculture, for example, according to Nick Smith!

To paraphrase from another Nick, Lord Stern, in a well-functioning "deep and liquid" market for emissions permits, emitters with expensive mitigation options become buyers of permits and purchase permits from emitters with cheaper mitigation.

The role of the all-gases ETS, is to provide a wider variety of cheaper markets for emissions reductions, than would be the case in a single-gas ETS (such as a ruminant methane ETS, if there was one).

So the role of the emitting industries with fewer mitigation options (or more costly options) is to provide a flow of funds to reward those industries that have the cheaper emissions reduction options!

Logically, the lack of immediate practical mitigation technology in any one sector, is not a valid reason for leaving a sector out of an all-gases ETS.

Wednesday, November 9, 2011

24 Hours to Massive Change: Global Design Workshop

Massive Change is holding a workshop on Design thinking in Brisbane at the end of November - 24 Hours to Massive Change: Global Design Workshop.
How much can you really accomplish in 24 hours?

Find out in Bruce Mau’s 24HRS2Massive Change Workshop.

A great deal – in fact, a massive amount – if you bring together a group of entrepreneurial design thinkers. That’s the premise of a new workshop, aptly titled “24 Hours to Massive Change” – taking place from November 23 through 26, 2011, in Brisbane, propelled by Bruce Mau’s Massive Change Network. Participants will learn how to transform their businesses, organizations and institutions by thinking like designers, and tackle problems, develop solutions, and create new ways of innovating to move forward.

Tuesday, November 8, 2011

Oz Carbon Tax Passes Senate

The Australian "Carbon Tax" has been passed in the Senate and will become law. It remains to be seen if Tony Abbott, should he get elected, follows through with his hubristic and dogmatic threats of repealing the law.

The Greens are understandably pleased.

Mining interests and The Australian have predicted this will trigger the imminent demise of the entire Australian economy, even though the more likely threat is due to financial problems in Europe. Piers Akerman (hat tip Deltoid) dredges up the old Dark Ages analogy to describe the horror that is about to befall us all at the hands of  the "Green Cultists" who, for some unexplained reason want to rain doom on us all.

I guess we all have our own favourite falling sky to fret over... 
Finally, carbon tax becomes law
The Age, Nov 8.
The Labor government has finally got its carbon price plan through the Senate — on a vote of 36 to 32.

The carbon price begins with a tax, starting next July and will move later to a trading scheme. The issue has dogged Labor, contributing to Kevin Rudd’s fall from the leadership, after he backed off on his emission trading scheme, delaying it when he could not get it through the Senate.

‘‘The Gillard government has today secured a clean energy future for all Australians,’’ Ms Gillard said.

The carbon victory comes as Labor was heartened by an improvement in today’s Newspoll, with the ALP primary vote rising from 29 per cent to 32 per cent.

Supporters of the carbon scheme celebrated out of the Parliament, undeterred by torrential rain. 

Carbon facts: how the package will roll out

The Age, Nov 8.
How the clean-energy package will roll out:

Carbon emissions tax for the 500 biggest polluters starts on July 1, 2012.
Tax moves to an emissions trading scheme in 2015.
Tax begins at a fixed price of $23 a tonne and rise by 2.5 per cent a year until 2015.
Tax will not apply to agricultural emissions or light on-road vehicles.
Electricity generation, stationary energy, some business transport, waste, industrial processes and fugitive emissions will be covered by the initial tax.

Average households will see a $9.90 weekly cost rise.
Average households will receive assistance of $10.10 weekly.
Free carbon permits will be the given to the most emissions-intensive and trade-exposed industries.
The government wants to cut pollution by 80 per cent by 2050.
There are many tired phrases used by grumpy old men, and Piers hackneyed use of "The Dark Ages" should prompt the question, exactly how dark where they? Well, not much really. 

Wikipedia suggests that this period of Western Culture was just a bit obscure to the scholars of the Renaissance - many of whom glorified Rome. So if you love empires, wars and conquests then I guess the relative peace in Western Europe during this time (at least until the Crusades) means yes it was "dark". The Byzantine and Islamic cultures on the other hand had a mostly rip roaring "dark ages" of a time.


 Markets Live: Stocks lose $37b on Italy fears

Those clever evil Greens... at must be their doing.

Election 2011 Two-facedness - Saving money good - saving fuel bad

All of the political parties agree New Zealand needs a long-term savings and investment plan . These elections there have been major policy announcements on Kiwisaver, reducing debt and the age of eligibility for National Superannuation. Saving money good.

But when confronted with arguably a more serious and immediate threat to New Zealand's economy, national well-being and security -- namely our dangerous exposure to oil price shocks, and oil supply disruptions and shortages, - all the main parties fail to articulate a coherent long-term plan to lower our dependence on ever more expensive imported oil. Saving fuel bad.

Monday, November 7, 2011

Wind like Spain? It's a no-brainer

The Climate Spectator has an article from Matthew Wright urging Australia to follow Spain's example in the adoption of wind power - Wind like Spain? It's a no-brainer.
Wind power has the support of the majority of Australians, so it's painful to hear a small minority, most of them backed by fossil fuel interests, undermining one of the great universally available energy sources to power the world out to 2100. It is telling that the technology has very few detractors in those countries that aren't big net fossil fuel exporters.
As of this year, Spain has 20,000 wind turbines. If these were transplanted to Australia they would easily power our biggest state. That’s because wind turbines in Australia produce twice as much electricity as those installed in Spain, due to our superior resource.

With over 21,000MW capacity installed, Spain is 18 per cent wind powered and, with annual electricity demand the same as Australia's, is doubling their wind capacity by 2020. It's still full steam ahead on Spain's renewables program, despite a housing boom/bust that has sent their economy into a tailspin and caused over a million construction workers to lose their jobs.
Spain enjoys lower wholesale energy prices thanks to wind power, due to the merit order effect. Wind power significantly drives down electricity prices – and Australians, in 2011, are still missing out on the benefits of the price-lowering effect that large-scale wind deployments can deliver.

Using a fleet of modern Enercon E-125 or Siemens 6MW wind turbines, for the same installed capacity we would generate twice the amount of annual electricity generated, and we'd get twice the annual contribution of wind to our electricity mix. In other words we'd be on 35 per cent renewable electricity today.

It's a no brainer; to achieve the same amount of electricity as Spain from wind would come at a 75 per cent discount to what the Spanish have invested. That's because of the combination of "buy one get one free" – our wind resource generates twice as much as theirs and we're starting in 2011, 15-20 years after the Danes, Spanish and Germans who have done the heavy lifting and got the technology down the cost curve. Add to that the bonus that comes from the much cheaper turbines coming out of China exerting downward pressure on European turbine prices and you have a very cheap, well tested renewable resource. Time to get on with the job.

I’d hate to call it bludging, but we are also benefiting from the heavy lifting of countries like Denmark, Germany and Spain through their deployment programs to date. These European leaders have really got wind turbines (along with other renewable technologies) down the cost curve through the optimum combination of deployment – learning through doing and public and private research and development.

Many of Spain's turbines are older models. The new ones are more efficient, taking up as much as a third less space on the ground than much of the fleet in Spain, leaving more area for existing uses such as cropping. Australia, with 15 times the land area, and a huge choice on wind resource, could achieve 50 per cent wind with as few as 7,000 modern turbines. Or, with the same installed capacity as Spain, we would be getting 40 per cent of our electricity from wind and at a 75 per cent discount.

The potential for Australian wind doesn't stop there. Spain is on target to double their wind capacity to 35 per cent by 2020. With a practical near-term target like that we know that Australia could easily be getting 50 per cent of our energy from wind in a similar timeframe, with our combination of favourable conditions, less turbines, better sites, twice the output, half the cost, much bigger land area, better opportunities geographical distribution leading to better meteorological diversity, as well as much lower density of population and easier to access sites.

But Spain will actually have enough wind turbines to produce 70 per cent of our electricity by 2020. So what would happen if we installed that much capacity of wind here? Studies have already been done that give us an idea: they show that in the UK and Denmark, with 40 per cent penetration, 4 per cent of wind is actively curtailed and at 50 per cent, 7 per cent is to be curtailed.
That is, if we install wind turbines across the grid with an annual capacity factor so they are able, theoretically, to deliver 54 per cent of our electricity, due to a number of hours of oversupply and some transmission constraints, 7 per cent active curtailment would mean that 50 per cent of our energy would actually come from wind.

Wednesday, November 2, 2011

New Zealand Minister Nick Smith fails the smelter spin test

Robin Johnson's Economics Web Page cross posts about New Zealand Climate Minister Nick Smith's spin over emissions trading subsidies to an aluminium smelter.

What does New Zealand's Minister for Climate Change Issues, Nick Smith, say when the New Zealand Green Party accuses him of subsidising greenhouse gas polluters?

Well it seems he denies it and he produces instructive soundbites of spin. I am informed that at Wellington's Oxfam election and climate change debate he said that New Zealand's sole aluminium smelter at Tiwai Point is the only aluminium smelter in the world exposed to a carbon price.

He has said this soundbite a few times. For example, in response to NZ Green MP Kennedy Graham on 29 September 2011:
"..the aluminium smelter in Bluff is the only aluminium smelter in the world to face any price at all for its greenhouse gas emissions".
On TV One's 'Q and A' programme:
"the New Zealand Aluminium Smelter in Bluff, it is the only one in the world that pays any face at all for carbon pricing." (1)
In Parliament in September 2009,
"...the Bluff smelter, on 1 July next year, will be the very first to face a carbon price for its pollution. The European scheme excludes aluminium smelters until 2013..."
Does Dr Nick's soundbite stand up to scrutiny? Not really. The European Union Emissions Trading Scheme, which started in 2005, excludes the European aluminium smelters until 2013. But it included electricity generation from 2005. And aluminium smelting is very electricity intensive. As the International Energy Agency says: "Although the primary aluminium sector is not directly covered by the (EU) ETS, the impacts of the CO2 price are felt through increases in electricity prices" (p 8). (2)

So, Europe's smelters are exposed to a carbon price through their power bills.

Another example of a Smith soundbite is saying that the overly-generous free allocation of emissions units to industry in the NZ ETS is not a cost to the taxpayer. For example: Parliament on 29 September 2011:
"This member and other members make the gross error of trying to claim that not exposing industries or consumers to the full price of carbon over all their emissions is somehow a subsidy. A subsidy implies that there is a cost to taxpayers. That is not true.."
Unfortunately for Dr Nick, that's not what the New Zealand Auditor General, Lynn Provost, says in her accounting and auditing advice for emissions units in the public sector
"NZUs have a market value and the issue of NZUs without charge to participants is an expense to the Government and creates a liability".
Sorry Dr Smith, the Tiwai Point smelter is not the only aluminium smelter exposed to a carbon price in an ETS. And the European smelters probably pay a higher carbon price through their electricity costs as the Tiwai Point smelter owner is compensated for electricity costs as well as emissions through excessive free allocation of emissions units.

Sorry Dr Smith, you can't just create and give away a permit to emit greenhouse gases that has a clear market value and say there is no cost to taxpayers as Treasury did not write out a cheque. The Auditor General confirms what we taxpayers already know that there is a real cost to taxpayers of giving emissions units away to big emitters.

(1) NB By 'pay any face' I think he means 'face any price'.)
(2) IEA, 2008,'Climate Policy and Carbon Leakage - Impacts of the European Emissions Trading Scheme on Aluminium'