Alternative to Carbon Pricing

Guest Post by Peter Lang. Peter is a retired geologist and engineer with 40 years experience on a wide range of energy projects throughout the world, including managing energy R&D and providing policy advice for government and opposition. His experience includes: coal, oil, gas, hydro, geothermal, nuclear power plants, nuclear waste disposal, and a wide range of energy end use management projects.

Below are suggestions for an alternative policy to the CPRS (the Carbon Pollution Reduction Scheme — an emission cap-and-trade system proposed by the Australian Labor government). This is not a complete energy policy, but simply some fragments for possible inclusion in a complete policy.

Aim:

1.To reduce Australia’s greenhouse gas (GHG) emissions consistent with international efforts;

2.To increase, not decrease, Australia’s international competitiveness; this will result in:

a.more jobs and better remuneration for workers

b.more wealth and better standard of living for all; and

c.more revenue to support all the things we want; such as: better Health, Education, infrastructure and fixing our most pressing environmental problems such as the Murray Darling Basin.

Increasing the cost of energy has serious negative consequences for humanity, especially the poorest peoples on the planet. A policy such as the CPRS that sets out to increase electricity costs for little or no overall reduction in world GHG emissions is negligent.

The proposed alternative would help the world by supplying products and services with less embodied emissions than now. For example, the policy proposed here would maintain Australia’s aluminium industry and its jobs and provide the aluminium with less embodied emissions than other countries can. This is just one example to illustrate the benefits of this policy, but an important one.

We do not rule out an ETS or some alternative instrument in the future, but we will not impose an ETS on Australia before the USA and we will not impose an ETS that does not protect Australia’s industry and jobs to a similar extent as the USA’s legislation. (It is not clear that the USA will implement an ETS. There are signs the USA may not take this approach to cutting its GHG emissions).

What is the policy and how will it be implemented in practice?

Electricity generation will have to do the “heavy lifting” in cutting our GHG emissions. Electricity generation causes 34% of Australia’s greenhouse gas emissions, but is capable of displacing around 50% of our emissions by 2050. It is easier to make large cuts in emissions from electricity generation than anywhere else. Furthermore, if clean electricity is low cost (as proposed here), electricity will more rapidly displace gas for heating and oil for land transport over the coming decades. Electricity will replace, to some extent, oil for land transport both directly as in electric vehicles and indirectly through synthetic fuels produced using electricity. But it is essential that clean electricity be low cost for this transition to take place as quickly as possible and to avoid the need for massive, high-cost policy interventions by future governments.

Specific policies for reducing emissions from Electricity, Heat and Land Transport are outlined below.

Electricity

To cut our GHG emissions from electricity generation we will change the “Renewable Energy Targets” to “Clean Energy Targets”.

Instead of ‘20% of energy generated by renewable energy by 2020’, the target will be: ‘20% clean energy by 2020’.

‘Clean Energy’ means a mix of electricity generators that emits less than 200 kg CO2-e/MWh (kilograms of carbon dioxide equivalent per megawatt hour) by 2020 decreasing to 10 kg CO2-e/MWh by 2050 (that is about 1% of Australia’s current emissions from electricity generation).

A ‘mix of electricity generators’ means a combination of generators that can supply power on demand.  Examples of generation systems that can deliver power on demand are:

1.fossil fuel

2.nuclear

3.hydro

4.biomass

5.wind with fossil fuel back-up, energy storage and enhanced grid

6.Wind and solar with fossil fuel back-up, energy storage and enhanced grid

Some examples of generator mixes that would meet the 2020 criteria of 200 kg CO2-e/MWh are:

1.50% hydro and 50% high efficiency Combined Cycle Gas Turbine

2.50% biomass and 50% high efficiency Combined Cycle Gas Turbine

3.50% geothermal and 50% high efficiency Combined Cycle Gas Turbine

4.50% nuclear and 50% high efficiency Combined Cycle Gas Turbine

Wind and solar cannot meet the criteria because of the emissions from fossil fuel back-up generators (Lang, 2010). Australia has little more hydro capacity available. Biomass can make a contribution but at relatively high cost. Geothermal is not yet a proven technology in the Hot Fractured Rock configuration being proposed for and tested in Australia. Only nuclear can make a large contribution to meeting our energy needs and reducing emissions substantially and sustainably.

The electricity generator companies would compete to build the new generation capacity required knowing with certainly what will be the emissions requirements for the electricity generation system for the life of their investments.  They can factor this into their financial projections for the economic life of the plant. This would not be the case with the CPRS. The CPRS rules would be changed with every change of government, with spendthrift governments always needing to collect more revenue to pay for their economic mismanagement.

Land Transport and Heat

After electricity generation, the next two major sources of GHG emissions are from burning fossil fuel for heat and for land transport.

If we establish policies that keep the cost of electricity low, then low-cost, low-emissions electricity will progressively displace fossil fuels for heat and for land transport.  Land transport will be powered by electricity either directly (e.g. electric vehicles) and/or by synthetic fuels produced by electricity.

In short:

1.With these regulations we could reduce GHG emissions from electricity generation by 80% by 2050

2.Low-emissions electricity would be provided at least cost

3.Australia could continue to be competitive in world markets

4.We would avoid a large portion of our national wealth being diverted to financial fraud and to government churn and waste

5.The rate of reducing GHG emissions from heat and land transport will depend largely on how low is the cost of low-emission electricity.

How can we get low-cost, clean electricity?

One currently available technology that can provide this is nuclear energy. Other technologies, such as geothermal and solar energy may be able to in the future but are not economic now and are a high risk to base rational policy decisions on.

Nuclear energy provides low-cost electricity in many other countries. Russia is building new nuclear plants to provide electricity for aluminium smelting for the world market. This is a clear indication that nuclear generated electricity can be amongst the lowest cost electricity in the word. If it were not, they could not produce aluminium at a price they can sell it competitively on the world market. Another example is the United Arab Emirates which has just let contracts for 5,400 MW of nuclear power stations that they claim will provide electricity at ¼ the cost of electricity generated by gas. And this is in the centre of the world’s oil regions.

To achieve low cost nuclear energy in Australia our focus must be on providing low-cost, appropriately safe and environmentally benign electricity. Nuclear generation is already some 10 to 100 times safer than coal fired electricity generation, and far more environmentally benign, so achieving this requirement is not an issue.

The Australian Government cannot be taken seriously on climate change without adopting nuclear as part of its policy. But they are unlikely to implement good policy. If they implement policies that make it a high cost option, this will defeat the purpose.

Implementation Details

This policy:

1.will cut Australia’s GHG emissions from electricity generation by 8% of current levels by 2020 and by 80% by 2050;

2.is by far the least cost option to cut emissions; and

3.will give the least cost electricity of options to cut emissions.

How will this be achieved?

1.Coal power stations will be decommissioned at the rate of 1.4 GW per year.

a.They will be decommissioned as they reach their retirement age,

b.together with a small component of government buy back in a “Cash for Clunkers” scheme

2.They will be replaced with (mostly):

a.Natural gas generation until 2020, then with

b.Nuclear and efficient Combined Cycle Gas Turbines (CCGT) until 2025, then

c.Nuclear (mostly) to 2050.

3.Coal with Carbon Capture and Storage and geothermal may play a role if they become commercially viable.

4.Wind and solar power will have only a minor role unless major technological advances are achieved

5.Some Pumped-hydro will be built using existing dams – for example by connecting existing dams in the Snowy Mountains.

Implementation

1.A project like a modern version of the Snowy Mountains Scheme initially (to about 2025) to get it through about the first 15 years;

2.A Sir William Hudson type person in charge;

3.“Early Wins” – Establish research facilities in at least one major university in every state; and

4.Research – A significant component of the research will focus on how to implement nuclear energy at least cost in Australia. [For example, how will we avoid the political, NIMBY, regulatory and bureaucratic problems that have raised the cost of nuclear in USA and EU.]

Level playing field for electricity generators

What would be a genuine level playing field for electricity generators”?

1.Remove all mandatory requirements (e.g. the Mandatory Renewable Energy Targets)

2.Remove all subsidies for electricity generation

3.Remove all tax incentives and other hidden incentives that favour one generator technology over another

4.Ensure that regulations apply equally for all types of generators. Set up a system to allow electricity generator companies to challenge anything that is impeding a level playing field

5.Emissions and pollution regulations must be the same for all industries and should be based on safety and health effects on an equal basis.

Policy implications of “Emission Cuts Realities – Electricity Generation”

Some policy implications of the paper: “Emission Cuts Realities – Electricity Generation” (Lang, 2010)

1.Mandating renewable energy is bad policy

2.If we are serious about cutting GHG emissions, we’d better get serious about implementing nuclear energy as soon as possible

3.If we want to implement nuclear power we’ll need to focus on how to do so at least cost, not with the sorts of high cost regimes imposed in USA and EU

4.We should not raise the cost of electricity. We must do all we can to bring clean electricity to our industries and residents at a cost no higher than the least cost option

5.Therefore, ETS/CPRS is exactly the wrong policy

Schedule

Following is a proposed schedule for Australia’s federal Government, noting that our next Federal budget is in May 2010.

May 2010 – Federal Budget contains funding for the following to be implemented during 2010-2011:

1.Establishment of a modern version of the Snowy Mountains Authority. Terms of Reference: to implement low emissions electricity generation in Australia such that electricity costs less than from fossil fuel generation.

2.Funding for nuclear engineering faculties in at least one university in every mainland State

3.Funding of research will be largely for the social engineering aspects of implementing nuclear energy in Australia at least cost.

2010 – Government announces policies:

1.to allow nuclear energy to be one of the options for electricity generation;

2.to remove all the impediments that favour or discriminate one generator system or technology over another;

3.that 20% of emissions will be from low emissions generator mix by 2020 and 80% by 2050. A ‘low emission generator mix’ is a mix of generators that can provide power on demand and meet the emissions limits that will be phased in and become more stringent over time. For example, the limit might be 200 kg CO2-e/MWh in 2020 and 10 kg CO2-e/MWh in 2050. The rate would decrease progressively over time – but not necessarily linearly. The rate does not apply to a single generator. It applies to a company’s mix of generators. The 2020 limit could be achieved by a mix of 50% high efficiency CCGT combined with 50% of one of the following: nuclear, hydro, biomass, geothermal, solar thermal with its own energy storage. Wind cannot meet the 200 kg CO2-e/MWh for the reasons explained here: https://bravenewclimate.com/2010/01/09/emission-cuts-realities/

4.to buy back some old coal generators at a fair price in a “cash for clunkers” scheme

5.to conduct first public awareness forums throughout Australia.

2012 – Government announces policies to:

1.allow nuclear power plants to be established in Australia and under what conditions;

2.allow States to bid to host the first nuclear power station and the conditions for selection of the state – this will include a time frame for site selection to be complete by 2013 (I know its fast, but if its urgent we need to get on with it!). In the absence of states bidding and agreeing to meet the schedule the first NPP will be build on Commonwealth owned and controlled land.

3.Establish arrangements with IAEA to act as our Nuclear Regulatory Authority until we are ready to take over.

2013 –Source selection starts for our first four or five NPPs

2014 – Contract awarded for first four or five NPPs

2015 – Construction begins

2019 – First NPP commissioned.

2020 – Second NPP commissioned, and so on,

Regarding the rates assumed here for implementing nuclear power, remember that Hanford B was built in 21 months from first breaking of ground until the plant went critical (ASME (1976). That was in 1944. Admittedly this was not an electricity generating plant, but it was the first ever large nuclear plant. If we could do that 65 years ago with the first ever, why can’t we build nuclear power plants quickly now??

References

Lang, 2010. Emission Cuts Realities – Electricity Generation

https://bravenewclimate.com/2010/01/09/emission-cuts-realities/

(please click on the link to the pdf version because it contains the footnotes, references and appendices; these are not included in the abridged version on the web)

ASME (1976). Hanford B-Reactor

http://files.asme.org/ASMEORG/Communities/History/Landmarks/5564.pdf