Energy policy shake-up set to energise new technologies

Hot on the heels of the Federal Labor party's renewed commitment to net zero-CO₂ emissions by 2050, the federal coalition government has recently announced a significant shift in climate policy; a shift they describe as 'more gas and more tech — not taxation — as the way to support cheaper and low emission climate solutions without damaging the economy'.

It's already proving divisive.

Today, ABC reported:

Research programs into wind and solar could be dumped by the Federal Government in favour of emerging technologies in hydrogen, lithium and reducing or storing greenhouse emissions from major industries, the Energy Minister says.

Wind and solar advocates (the recipients of several decades of mandates and subsidies) are circling the wagons, clearly worried at the loss of 'guaranteed' returns, despite claims they're cheaper than coal and gas.

The rationale behind the shift?

According to the ABC article, the Commonwealth has invested $10.4 billion into more than 670 clean technology projects, but a change of direction was needed.

Why is the change in direction needed?

To date, there's been a heavy focus on tackling the largest source of CO₂ emissions; the electricity sector.

Mandates and subsidies for wind and solar have formed the centrepiece, helping establish wind and solar in the market, and achieving the scale necessary to bring their cost down.

The result has been a significant increase in wind and solar capacity.

Unfortunately, this has also coincided with an increase in electricity cost.

Wind and solar capacity deployment (along with the closure of Hazelwood brown coal power station in 2017) has undoubtedly helped reduce electricity sector CO₂ emissions.

But public support designed to develop and commercialise new technologies must eventually taper off and come to an end, either because they aren't performing as expected (failure), or because they've achieved commercialisation (success) and no longer need propping up.

In the apparent move away from wind and solar contemplated by this new policy, which is it; a failure or success?

The following comment from Energy Minister, Angus Taylor suggests financial support for wind and solar has reached the point of diminishing returns.

"We must be comfortable changing horses mid-race if they don't perform as expected."

However, the CSIRO and AEMO claim new wind and solar are cheaper than new coal and gas projects, indicating success.

“Our data confirms that while existing fossil fuel power plants are competitive due to their sunk capital costs, solar and wind generation technologies are currently the lowest-cost ways to generate electricity for Australia, compared to any other new-build technology,"

CSIRO chief energy economist Paul Graham

The Climate Council, referring to a report by Bloomberg New Energy Finance (BNEF), takes it one step further, claiming new wind and solar are as cheap as existing coal and gas.

This is a critical inflection point. Due to the continued fall in the cost of wind and solar, as well as the higher international price for black coal, it is now the same cost or cheaper to build a new wind or solar plant in Australia than to continue operating old coal power stations in New South Wales and Queensland.

That is a highly qualified statement. If black coal export prices fall (as they often do across the commodity cycle), then the claim is invalid. And it doesn't hold true for brown coal generators, because brown coal prices aren't export-linked.

Having said that, if new wind and solar is cheaper than existing coal and gas or new coal and gas, then fantastic! It means the past several decades of mandates and subsidies have achieved their goal. Wind and solar are now commercially mature and able to stand on their own, right?

In this case, the government's decision to switch the policy focus away from established or underperforming technologies and onto emerging technologies that can facilitate the development of solutions for new challenges such as hydrogen industry advancement, or tackling agricultural emissions, makes complete sense.

But judging by recent comments from some well-known renewable energy advocates, it appears they are critical of the new policy focus.

Yet given claims that wind and solar are as cheap as coal and gas, wind and solar advocates can't demand ongoing mandates and subsidies without calling these claims into question. They need a different angle of attack to keep mandates for wind and solar. The 2050 zero-emission target is just the ticket.

Simon Holmes à Court, senior advisor to the Climate and Energy College at Melbourne University and a member of the board of the Smart Energy Council penned a scathing attack on the policy shift late last week.

At the crux of his argument was that the government's new policy lacked targets and without a target of zero net CO₂ emissions by 2050, it means we're not serious about keeping global warming under 2°C.

Let's examine if this is the case.

He paints a picture of global action to imply we're breaking stride with the rest of the world:

"So far, at least 77 countries have committed to the target..."

We look at why this statement is misleading, in a moment. Meanwhile, it's important to understand why Holmes à Court attacks Bjorn Lomborg:

The greatest proponent of the frame is Danish political scientist Bjorn Lomborg, one of a small cadre of almost respectable climate obfuscationists.

Lomborg is a leading critic of the effectiveness of the Paris agreement and a vocal proponent of the technology investment approach being adopted under the government's new policy.

Considering that both Holmes à Court and Lomborg agree on the cause of climate change, why does Holmes à Court resort to name-calling?

Simply, Lomborg diverges on what the most appropriate, cost-effective policy response may be. But rather than argue Lomborg's actual position, Holmes à Court takes aim at the man. Such attacks are a sign of a weak argument.

Holmes à Court does try to appear to argue Lomborg's position by referring to a 2009 proposal by Lomborg. But upon closer inspection, this is just a strawman in the context of discussing the government's current energy and emissions policy shift toward technology-led solutions, rather than tax-led solutions.

The point Holmes à Court should be arguing is presented in Lomborg's 2015 paper, Impact of Current Climate Proposals.

In that paper, Lomborg uses IPCC models to assess the Paris agreement targets, concluding that success results in a mere 0.17°C less warming and is, therefore, a highly costly treaty that will change little in terms of temperature by 2100.

He logically claims it’s more cost-effective to invest in R&D and adaptation.

Conversely, Holmes à Court is very selective in presenting information to support his opinion, omitting important elements that are crucial to context.

For example, when he mentions 77 countries have “committed to the [2°C] target”, he fails to explain that the commitments are non-binding and, according to Climate Action Tracker, only Morocco is on track to meet a commitment that’s compatible with 1.5°C and only Costa Rica, Kenya, Ethiopia, India, Bhutan and the Philippines have commitments deemed compatible with 2°C.

Quoting the 77 number to lead the reader to believe there is overwhelming action in support of the Paris agreement target is meaningless when you consider only 7 are deemed to be taking action that’s compatible with the Paris agreement 2°C target.

But even the notion of what constitutes ‘compatible action’ is often misunderstood.

Bear with us while we dive into some of the detail.

The Paris agreement seeks to limit warming to 2°C, with efforts to achieve 1.5°C. This entails stabilising CO₂ at 450ppm. We're currently at 414ppm.

A global budget of 1700Gt CO_2e between 2000 and 2050 is projected to give a 67% chance of keeping temperature rise below 2°C.

Stabilisation at 450ppm in the context of a population expected to grow from 7.8 billion to 9.7 billion entails lowering CO₂ emissions per capita to 1.5t per year. For context, the global average CO₂ per capita is currently around 5t.

Australia’s fair share of the 1700Gt CO₂ budget was determined to be 10.1Gt (0.6%) over the 2013-2050 period. We currently account for 1.3% to 1.5%.

Australia’s Climate Change Authority identified a 'modified contraction and conversion' approach designed to achieve our share of the effort in delivering equal-per-person emissions of 1.5t globally by 2050. A meagre ration in the context of Australia's current ~12t CO₂ per capita.

Under the Paris agreement, the rest of the world is meant to take a similar approach to identify targets to achieve the same 1.5t CO₂ per capita outcome, with developing nations allowed to emit more in the short term, to catch up.

But, as Climate Action Tracker and Lomborg’s analysis suggest, while the targets may be able to deliver equal-per-person carbon emissions, they won't deliver the 2C limit objective of the Paris agreement.

Which brings us back to Holmes à Court's argument against the shift in policy and against Lomborg, for his ability to rationally articulate the case for the technology investment approach which the government seeks to adopt:

If you’re committed to the Paris agreement – to keep the increase in global average temperature to well below two degrees above pre-industrial levels, and pursue efforts to limit the increase to 1.5 degrees – then at a minimum, logically, scientifically, you’re committed to net-zero carbon emissions by 2050.

Simon Holmes à Court

To appreciate where Holmes à Court is coming from it helps to understand what drives the 2C threshold.

This is where you need a little awareness of climate modelling. Specifically, Representative Concentration Pathways, or RCP's and what they mean for temperature projections.

Scenario	2100 Mean (likely range)
RCP2.6	1.0 (0.3 to 1.7)
RCP4.5	1.8 (1.1 to 2.6)
RCP6.0	2.2 (1.4 to 3.1)
RCP8.5	3.7 (2.6 to 4.8)

Basically, if we keep CO₂ concentration at no more than 450ppm as shown below in RCP2.6 we keep the temperature rise to 1°C i.e. the way it is right now. Not likely, given the Paris agreement commitments entail absolute increases from India and China.

In terms of meeting the Paris agreement target of 2°C, we have 1C of 'buffer' left, implying RCP4.5 is the limit.

So who is right, Holmes à Court or Lomborg? Can the Paris agreement deliver? Let's see what others may have to say.

The 'Breakthrough Institute' concludes:

The world is on a path to warm around 3C above pre-industrial levels by 2100 under policies and commitments currently in place. This is a far cry from the 1.5°C and 2°C targets enshrined in the Paris agreements, but is also well short of the 4°C to 5°C warming in many “business as usual” baseline scenarios that continue to be widely used.

They go on to note:

... the International Energy Agency (IEA) 2019 World Energy Outlook (WEO) and the UN Environment Program (UNEP) 2019 Emissions Gap Report — both reflect current trends in clean energy technology costs and deployment and make the case that global emissions will be relatively flat over the next few decades. These estimates are on the low end of those in the latest set of fully integrated baseline scenarios featured in the energy modeling literature that intend to depict a world without climate policy — the Shared Socioeconomic Pathways (SSPs), developed for the upcoming 2021 IPCC 6th Assessment Report (AR6).

In short, they find that IEA numbers imply that the most likely outcome of current policies is between 2.9-3.4C warming — which is reduced to around 2.7-3°C warming if countries meet their current Paris Agreement commitments. This suggests a more optimistic reduction of 0.2°C to 0.4°C, compared to Lomborg's analysis of 0.17°C.

There are uncertainties surrounding this projection, of course. For one, there are uncertainties in the sensitivity of the climate to rising CO₂ concentrations that mean emissions expected to produce warming of around 3°C could result in warming as little as 1.9°C or as much as 4.4°C.

But the conclusion does align with Lomborg's analysis that the Paris agreement commitments if met by all countries, will cost a lot and fail to keep the temperature rise under 2°C, while refuting Holmes à Courts insistence that sticking with the Paris agreement targets will keep temperature rise below 2°C.

The key is to invest in innovation.

Hydrogen technology development is flagged as the next big energy sector that can lead to deep cuts in transport emissions, provide storage for unreliable wind and solar and potentially replace natural gas.

Investment in technologies that can enable affordable, reliable hydrogen production, distribution and use in a manner that's competitive with current energy mainstays like petrol and natural gas, makes great sense.

Here at ECT, we have four technologies in various stages of development that we believe can help bridge the gap through the cost-effective mitigation of CO₂ emissions across a range of energy and resource applications:

1. Coldry: our unique zero-emission lignite drying process is the cost-effective gateway enabler for CCS hydrogen
2. COHgen: our unique low-emission process for generating hydrogen from lignite
3. HydroMOR: our unique low-emission iron-making technology that replaces expensive coking coal with abundant, affordable lignite
4. CDP-WTE: our recently acquired waste-to-energy process that converts low-value and waste hydrocarbons such as wood chips, end-of-life plastics and lignite, to diesel

Importantly, our technologies are designed to improve the economic benefits as well as the environmental outcomes of low-grade, low-value and waste resources as we transition to a low-emissions future.

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