With the cost of energy generated from wind and solar now less than coal, the share of Australia’s electricity coming from renewables has reached 23%. The federal government projects the share will reach 50% by 2030.
It is at this point that integrating renewables into the energy system becomes more costly.
We can add wind and solar farms at little extra cost when their share is low and other sources – such as coal and gas generators now – can compensate for their variability. At a certain point, however, there comes a need to invest in supporting infrastructure to ensure supply from mostly renewable generation can meet demand.
But by 2030, even with these extra costs, adding new variable renewable generation (solar and wind) to as high as a 90% share of the grid will still be cheaper than non-renewable options, according to new estimates from the CSIRO and Australian Energy Market Operator.
Calculating energy costs
International research, including from the International Renewable Energy Agency, suggests solar and wind power are now the cheapest new sources of electricity in most parts of the world.
Our estimates, made for the third annual “GenCost” report (short for generation cost), confirm this is also now the case in Australia.
We compare the cost of new-build coal, gas, solar photovoltaics (both small and large scale), solar-thermal, wind and a number of speculative options (such as nuclear).
What we’ve been able to more accurately estimate in the new report is the cost of integrating more and more renewable energy into the energy system, as coal and gas generators are retired.
The two key extra integration costs are energy storage and more transmission lines.
For any system dominated by renewables, storing energy is essential.
Storage means renewable energy can be saved when it is overproducing relative to demand – for example, in the middle of the day for solar, or during extended windy conditions. Stored energy can then be used when renewables cannot meet demand – such as overcast days or at night for solar.
Among options being considered for large-scale investment in Australia are batteries and pumped hydro energy storage (using excess renewable power to pump water back up to dams to again drive hydroelectric turbines).
Pumped hydro sites can provide storage for hours or days. There are three schemes in Australia: Talbingo and Shoalhaven in New South Wales, and Wivenhoe near Brisbane.
Battery costs have been falling steadily and tend to be most competitive for storage electricity for less than eight hours. South Australia’s big battery (officially known as the Hornsdale Power Reserve) is the most obvious example.
The other key cost to integrate more renewable energy generation into the electricity grid is building more transmission lines. Right now those lines mostly run from coal and gas power stations near coal mines.
But this not where new large-scale renewable generation will be. Solar farms are best placed inland, where there is less cloud cover, and in the mid to northern regions of Australia. Wind farms are generally better located in elevated areas and in the southern regions. We’ll need to build new transmission links to these “renewable energy zones”.
Transmission links between the states in the National Electricity Market (Queensland, New South Wales, Australian Capital Territory, Victoria, Tasmania and South Australia) will need to be improved so they can better support each other if one or more are experiencing low renewable energy output.
Total integration costs
So how much extra will it cost for Australia to have a higher share (up to 90%) of electricity from wind and solar (variable renewable energy)? The following graph summarises our findings based on 2030 cost projections.
The cost of generating energy from wind and solar (shown in light blue) is about A$40 per megawatt-hour (MWh). This is is slightly below current average market prices.
A higher share of renewable energy adds storage costs (in black) and transmission costs (grey and dark blue). These integration costs increase from A$4/MWh to A$20/MWh as the variable renewable energy share increases from 50% to 90%.
At 90% renewable energy, the total cost is A$63/MWh. But that’s still cheaper than the cost of new coal and gas-fired electricity generation, which is in the range of A$70 to A$90/MWh (under ideal assumptions of low fuel pricing and no climate policy risk).
The 2020-21 GenCost report is now in the formal consultation period with stakeholders including industry, government, regulators and academia. The final report is due to be published in March 2021.
Australia is on track to meet its 2030 Paris climate targets without resorting to carryover credits and could exceed them with the aid of the recently-announced technology roadmap, according to projections to be released on Thursday.
Australia has pledged to reduce emissions by 26-28% on 2005 levels by 2030.
The annual update of emissions projections shows that to meet the 26% cut, without using carryover credits, a further reduction of 56 million tonnes would be needed over the decade to 2030.
To reach the higher target of a 28% cut without the credits, a reduction of 123 million tonnes would be required over the decade.
Neither of these scenarios includes the technology investment roadmap – which is the government’s policy to support new and emerging energy technologies to a price that is comparable with higher emitting alternatives.
The Minister for Emissions Reduction, Angus Taylor, said if the roadmap was taken into account, “Australia is projected to beat its 2030 target by 145 million tonnes”.
This would be without relying on the credits which have been gained from exceeding earlier targets.
“Under this scenario, Australia’s emissions are projected to be 29% below 2005 levels by 2030,” Taylor said.
Scott Morrison has flagged the government won’t use the carryovers if they are not necessary to meet Australia’s commitments.
He is set to confirm this when he addresses a Pacific Islands Forum virtual climate summit on Friday. This precedes the Climate Ambition Summit hosted by Britain, France and the United Nations at the weekend to mark the fifth anniversary of the Paris accord.
The Pacific summit is aimed at putting pressure on the weekend meeting, which is being called “the sprint to Glasgow”, the delayed climate conference to be held in a year’s time.
There has been argy bargy over whether Morrison could get a speaking role at the weekend meeting, where leaders are being asked to make new commitments. As of Wednesday, he was not expected to be a speaker.
The update in the Australia’s emissions projections 2020 report shows Australia’s position against the 2030 target has improved by more than 300 million tonnes since the 2019 projections, and by 639 million tonnes since 2018.
The improvement since 2018 is equivalent to taking all of the country’s passenger vehicles off the road for 15 years.
Emissions are projected to decline to 478 million tonnes in 2030 which is 22% below 2005 levels. Incorporating the technology investment roadmap, emissions are forecast to be 436 million tonnes in 2030 – 29% below 2005 levels.
The update says the downward revision in the 2020 projections reflects:
the inclusion of new measures to speed up the development and deployment of low emissions technologies in the recent budget
a further reduction in projected emissions from the electricity sector due to continued strong uptake of renewables – especially small and mid-scale solar – by households and businesses; and
the temporary effect of COVID-related restrictions on the economy.
Climate Explained is a collaboration between The Conversation, Stuff and the New Zealand Science Media Centre to answer your questions about climate change.
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Is humanity doomed? If in 2030 we have not reduced emissions in a way that means we stay under say 2℃ (I’ve frankly given up on 1.5℃), are we doomed then?
Humanity is not doomed, not now or even in a worst-case scenario in 2030. But avoiding doom — either the end or widespread collapse of civilisation — is setting a pretty low bar. We can aim much higher than that without shying away from reality.
It’s right to focus on global warming of 1.5℃ and 2℃ in the first instance. The many manifestations of climate change — including heat waves, droughts, water stress, more intense storms, wildfires, mass extinction and warming oceans — all get progressively worse as the temperature rises.
Climate scientist Michael Mann uses the metaphor of walking into an increasingly dense minefield.
Good reasons not to give up just yet
The Intergovernmental Panel on Climate Change described the effects of a 1.5℃ increase in average temperatures in a special report last year. They are also nicely summarised in an article about why global temperatures matter, produced by NASA.
The global average temperature is currently about 1.2℃ higher than what it was at the time of the Industrial Revolution, some 250 years ago. We are already witnessing localised impacts, including the widespread coral bleaching on Australia’s Great Barrier Reef.
Limiting warming to 1.5℃ requires cutting global emissions by 7.6% each year this decade. This does sound difficult, but there are reasons for optimism.
First, it’s possible technically and economically. For example, the use of wind and solar power has grown exponentially in the past decade, and their prices have plummeted to the point where they are now among the cheapest sources of electricity. Some areas, including energy storage and industrial processes such as steel and cement manufacture, still need further research and a drop in price (or higher carbon prices).
Second, it’s possible politically. Partly in response to the Paris Agreement, a growing number of countries have adopted stronger targets. Twenty countries and regions (including New Zealand and the European Union) are now targeting net zero emissions by 2050 or earlier.
A recent example of striking progress comes from Ireland – a country with a similar emissions profile to New Zealand. The incoming coalition’s “programme for government” includes emission cuts of 7% per year and a reduction by half by 2030.
Third, it’s possible socially. Since 2019, we have seen the massive growth of the School Strike 4 Climate movement and an increase in fossil fuel divestment. Several media organisations, including The Conversation, have made a commitment to evidence-based coverage of climate change and calls for a Green New Deal are coming from a range of political parties, especially in the US and Europe.
There is also a growing understanding that to ensure a safe future we need to consume less overall. If these trends continue, then I believe we can still stay below 1.5℃.
The pessimist perspective
Now suppose we don’t manage that. It’s 2030 and emissions have only fallen a little bit. We’re staring at 2℃ in the second half of the century.
At 2℃ of warming, we could expect to lose more than 90% of our coral reefs. Insects and plants would be at higher risk of extinction, and the number of dangerously hot days would increase rapidly.
The challenges would be exacerbated and we would have new issues to consider. First, under the “shifting baseline” phenomenon — essentially a failure to notice slow change and to value what is already lost — people might discount the damage already done. Continuously worsening conditions might become the new normal.
Second, climate impacts such as mass migration could lead to a rise of nationalism and make international cooperation harder. And third, we could begin to pass unpredictable “tipping points” in the Earth system. For example, warming of more than 2°C could set off widespread melting in Antarctica, which in turn would contribute to sea level rise.
But true doom-mongers tend to assume a worst-case scenario on virtually every area of uncertainty. It is important to remember that such scenarios are not very likely.
While bad, this 2030 scenario doesn’t add up to doom — and it certainly doesn’t change the need to move away from fossil fuels to low-carbon options.
While Australia is coming to terms with yet another new prime minister, one thing that hasn’t changed is the emissions data: Australia’s greenhouse gas emissions are not projected to fall any further without new policies.
Australia, as a signatory to the Paris Agreement on climate change, has committed to reduce its total emissions to 26-28% below 2005 levels by 2030, and reach net zero emissions by 2050.
New analysis by ClimateWorks Australia has found Australia has three times the potential needed to reach the federal government’s current 2030 target, but this will not be achieved under current policy settings.
Energy is not the only sector
Australia’s emissions were actually falling for more than half a decade, but have been steadily increasing again since 2013. If Australia sustained the rate of emissions reduction we achieved between 2005 and 2013, we could meet the government’s 2030 target. But progress has stalled in most sectors, and reversed overall.
Emissions are still above 2005 levels in the industry, buildings and transport sectors, and only 3% below in the electricity sector. It is mainly because of land sector emissions savings that overall Australia’s emissions are on track to meet its 2020 target, and are currently 11% below 2005 levels.
Despite the current focus on the energy market, electricity emissions comprise about one-third of Australia’s total greenhouse emissions. So no matter what policies are proposed for electricity, other policies will be needed for the other major sectors of industry, buildings, transport and land.
Fortunately, Australia is blessed with opportunities for more emissions reductions in all sectors.
ClimateWorks’ analysis assessed Australia’s progress on reducing emissions at the halfway point from the 2005 base year to 2030, looking across the whole of the economy as well as at key sectors.
We found emissions reductions since 2005 have been led by reduced land clearing and increased forestation, as well as energy efficiency and a slight reduction in power emissions as more renewable energy has entered the market. But while total emissions reduced at an economy-wide level, and in some sectors at certain times, none of the sectors improved consistently at the rate needed to achieve the Paris climate targets.
Interestingly, some sub-sectors were on track for some of the time. Non-energy emissions from industry and the land sector were both improving at a rate consistent with a net zero emissions pathway for around five years. The buildings sector energy efficiency and electricity for some years improved at more than half the rate of a net zero emissions pathway. These rates have all declined since 2014 (electricity resumed its rate of improvement again in 2016).
Looking forward to 2030, we studied what would happen to emissions under current policies and those in development, including the government’s original version of the National Energy Guarantee with a 26% emission target for the National Electricity Market. Our analysis shows emissions reductions would be led by a further shift to cleaner electricity and energy efficiency improvements in buildings and transport, but that this would be offset by population and economic growth.
As a result, emissions reductions are projected to stagnate at just 11% below 2005 levels by 2030. Australia needs to double its emissions reduction progress to achieve the federal government’s 2030 target and triple its progress in order to reach net zero emissions by 2050.
So, while Australia is not currently on track to meet 2030 target, our analysis found it is still possible to get there.
The gap to the 2030 target could be more than covered by further potential for emissions reductions in the land sector alone, or almost be covered by the further potential in the electricity sector alone, or by the potential in the industry, buildings and transport sectors combined. Harnessing all sectors’ potential would put us back on track for the longer-term Paris Agreement goal of net zero emissions.
Essentially this involves increasing renewables and phasing out coal in the electricity sector; increasing energy efficiency and switching to low carbon fuels in industry; increasing standards in buildings; introducing vehicle emissions standards and shifting to electricity and low carbon fuels in transport; and undertaking more revegetation or forestation in the land sector.
The opportunities identified in each sector are the lowest-cost combination using proven technologies that achieve the Paris Agreement goal, while the economy continues to grow.
In the next two years, countries around the world, including Australia, will be required to report on the progress of their Paris Agreement targets and present their plans for the goal of net zero emissions. With so much potential for reducing emissions across all sectors of the Australian economy, we can do more to support all sectors to get on track – there is more than enough opportunity, if we act on it in time.
Generation Y has grown up in a rapidly warming world. According to the US National Climate Data Centre, every month since February 1985 has seen above average global temperatures, compared with the twentieth century. I have no memories of a “normal” month.
2016 is on track to be the hottest year on record, surpassing the previous records set in 2015 and in 2014. These are just a few of the flurry of recent record temperatures, which includes Australia’s hottest day, week, month, season and year.
The question now is what the future will look like. At some point in the decades to come, these record-breaking temperatures will not be rare; they will become normal. But when exactly?
In a new study just released in the Bulletin of the American Meteorological Society, I (together with co-authors Andrew King and Sarah Perkins-Kirkpatrick) find that on the current greenhouse gas emissions trajectory, global temperatures like 2015 will by normal by 2030, and Australia’s record-breaking 2013 summer will likely be an average summer by 2035.
While we still have time to delay some of these changes, others are already locked in – cutting emissions will make no difference – so we must also adapt to a warmer world. This should be a sobering thought as world leaders gather in Marrakech to begin work on achieving the Paris Agreement which came into force last week.
Today’s extremes, tomorrow’s normal
The recent record-breaking temperatures have often been described as the “new normal”. For example, after the new global temperature record was set in 2016, these high temperatures were described as a new normal.
What is a new normal for our climate? The term has been used broadly in the media and in scientific literature to make sense of climate change. Put simply, we should get used to extremes temperatures, because our future will be extreme.
But without a precise definition, a new normal is limited and difficult to understand. If 2015 was a new normal for global temperatures, what does it mean if 2017, 2018, or 2019 are cooler?
In our study we defined the new normal as the point in time when at least half the following 20 years are warmer than 2015’s record breaking global temperatures.
We examined extreme temperatures in a number of state-of-the-art climate models from an international scientific initiative. We also explored how different future greenhouse gas emissions impact temperatures.
We used four different greenhouse gas scenarios, known as Representative Concentration Pathways, or RCPs. These range from a business-as-usual situation (RCP8.5) to a major cut to emissions (RCP2.6).
It is worth emphasising that real-world emissions are tracking above those covered by these hypothetical storylines.
Our findings were straightforward. 2015’s record-breaking temperatures will be the new normal between 2020 and 2030 according to most of the climate models we analysed. We expect within a decade or so that 2015’s record temperatures will likely be average or cooler than average.
By 2040, 2015’s temperatures were average or cooler than average in 90% of the models. This result was unaffected by reducing greenhouse gas emissions or not – we are already locked in to a significant amount of further warming.
We also looked at the timing of a new normal for different regions. Australia is a canary in the coal mine. While other regions don’t see extreme temperatures become the new normal until later in the century, Australia’s record-breaking 2013 summer temperatures will be normal by 2035 – according to the majority of the models we looked at.
At smaller spatial scales, such as for state-based based temperature extremes, we can likely delay record-breaking temperatures becoming the new normal by committing to significant greenhouse gas cuts. This would clearly reduce the vulnerability of locations to extreme temperatures.
Living in a warmer world
If you like heading to the beach on hot days, warmer Australian summers seem appealing, not alarming.
But Australia’s position as a hot spot of future extremes will have serious consequences. The 2013 summer, dubbed the “angry summer”, was characterised by extreme heatwaves, widespread bushfires and a strain on infrastructure.
Our results suggest that such a summer will be relatively mild within two decades, and the hottest summers will be much more extreme.
My co-authors, Andrew and Sarah, and I all grew up in a world of above-average temperatures, but our future is in a world were our recent record-breaking temperatures will be mild. Our new research shows this is not a world of more pleasantly hot summer days, but instead of increasingly severe temperature extremes.
These significantly hotter summers present a challenge that we must adapt to. How will we protect ourselves from increases in excess heat deaths and increased fire danger, and our ecosystems from enhanced warming?
While we have already locked ourselves into a future where 2015 will rapidly become a new normal for the globe, we can still act now to reduce our vulnerability to future extreme events occurring in our region, both through cutting emissions and preparing for increased heat.
By 2030 renewable energy sources such as solar and wind will cost a similar amount to fossils fuels such as coal and gas, thanks to falling technology costs, according to new forecasts released in the CO2CRC’s Australian Power Generation Technology (APGT) Report.
The report also shows that technology costs will fall faster under climate policies that limit the concentration of carbon dioxide in the atmosphere to 450 parts per million. (The current CO₂ concentration is around 400 parts per million).
While the practice of forecasting is often derided, with multi-billion dollar assets that can last 50 years or more, the electricity industry and the policy-makers, academics and stakeholders who study it have no choice but to get involved.
Updating the data
A key input to all energy crystal-ball gazing is the cost of generating electricity, and performance data. However the last comprehensive update of electricity generation costs was the then Bureau of Resource and Energy Economics’ Australian Energy Technology Assessment (AETA) in 2012 (followed by a minor update to selected data in 2013).
The lack of consistent up–to-date data disadvantages technologies such as solar photovoltaic power systems whose costs have been improving rapidly since then.
To avoid misrepresenting the possible future role of fast-moving technologies, many analysts have had to slowly abandon use of the old data and create their own more up-to-date estimates.
While diverse opinions are sometimes useful, a proliferation of inconsistent alternative cost data sets creates confusion for the industry as it makes each published study less comparable.
The delivery today of a new and consistent electricity cost data set therefore is an important and long awaited addition to the electricity industry’s toolkit. The new report was conducted over the July-November period and utilised an electricity industry reference group of around 40 organisations to provide input and feedback along the way.
Given the often heated debates in Australia around energy sources, the CO2CRC recognised that it is crucial that studies like these are conducted in an open and unbiased manner.
The report includes key “building block” data such as capital and operating costs, and performance data such as emissions intensity, water usage and expected usage rates.
The cost of energy
Whenever a new electricity generation technology cost and performance data set is created there is an opportunity to update our view of the relative competitiveness of each technology.
This is calculated using a measure called the Levelised Cost of Electricity (LCOE). The LCOE captures the average cost of producing electricity from a technology over its entire life. It allows the comparison of technologies with very different cost profiles, such as solar photovoltaic systems (high upfront cost, but very low running costs) and gas-fired generators (moderate upfront cost, but significant ongoing fuel and operation costs).
The LCOE is the best technology comparison measure available but is not without limitations. It cannot recognise the different roles technologies might play in an electricity system (e.g. such as supplying everyday, baseload power, or power for periods of peak demand) or the relative flexibility of plant to increase or decrease power supply as needed.
Accepting the limitations, the updated LCOE analysis finds that in 2015 natural gas combined cycle and supercritical pulverised coal (both black and brown) plants have the lowest LCOEs of the technologies covered in the study. Wind is the lowest cost large-scale renewable energy source, while rooftop solar panels are competitive with retail electricity prices.
It is interesting to note that all 2015 LCOE estimates are higher than the current wholesale price of electricity of around A$40 per Megawatt-hour. The reflects reduced demand in the electricity network, which is putting downward pressure on electricity prices.
By 2030 the LCOE ranges of both conventional coal and gas technologies as well as wind and large-scale solar converge to a common range of A$50 to A$100 per megawatt hour. This outcome is consistent with observations from many commentators noting that the continuing reductions in wind and solar photovoltaic costs must inevitably lead to an intersection with the costs of the existing mature technologies before too long.
Of course, equality in LCOE will not necessarily translate to an equal competitive position in electricity markets, given differences in the flexibility of renewable and conventional coal and gas plants (which LCOE does not capture as already noted).
Falling technology costs
The convergence of conventional and renewable energy costs depends on the capital costs of these energy sources. These were modelled for the new report by CSIRO’s Global and Local Learning Model. This model is a relatively objective way of projecting costs based on historical learning rates. Learning rates show that for each doubling of installed capacity of an energy source, costs fall by a particular amount.
We can model these costs across different climate policies, as you can see in the chart below.
CSIRO’s projections included carbon price signals consistent with either concentration of 550 parts per million or 450 parts per million of greenhouse gas emissions. However, we found the total amount of cost reduction was fairly similar, but more accelerated in time, by approximately five years, in the 450 ppm case.
With the future policy environment of the electricity industry potentially becoming a little clearer after the COP21 meeting in Paris next week, the new report makes the job of understanding the role of different technologies in that future a little easier.
Opposition leader Bill Shorten has proposed an emissions reduction target of 45% below 2005 levels by 2030, based on recommendations from the government’s climate change policy advisory body, the Climate Change Authority. Shorten has also pledged zero net emissions by 2050, and ongoing reviews of the target.
In its review, the Climate Change Authority recommended that Australia adopt a target of between 40% and 60% by 2030 on 2000 levels.
Converting this to the 2005 baseline gives a target of around -44% to -63% on 2005 levels. So Labor’s target would match the very weakest within the Climate Change Authority’s range.
We plugged this target into our mitigation-contributions.org interactive webtool. The website allows the effectiveness of climate pledges from G20 countries to be assessed using different assumptions of what is a “fair” distribution of emissions reduction efforts.
What we found was that, first, Labor’s proposed 2030 target meets the Climate Change Authority’s recommended 2025 target of -30% below 2000 levels, as you can see in the chart below.
Second, Labor’s target may or may not be sufficient to keep the world within 2C, depending on what you consider a fair distribution of emissions between nations. Let’s unpack that a little more.
Most people agree that globally we should be striving for equal emissions per person. However, there are two broad views on how to get there:
Either we acknowledge historic emissions and “punish” those countries that have used a disproportionate amount in the past
Or we ignore past emissions and all countries strive for equal-per-capita emissions from now until some point in the future.
Under the latter option, Labor’s proposed target is sufficient to give the world a 67% chance of staying within 2C (see image below). This assumes that Australia adopts Labor’s target and all other countries match the effort of the target by using the same formula for calculating equal per-capita emissions.
However, if historic emissions are included we assume that because Australia has one of the highest per-capita emissions in the world it has a responsibility to reduce its emissions more rapidly and severely. Using this approach, Labor’s target does not do enough (see image below).
Here, again, we are assuming that Australia adopts Labor’s target and all other countries follow suit in a way that takes into account historic emissions and aims for equal, cumulative per-capita emissions. There is of course no guarantee that this will happen.
Essentially, Labor’s proposal improves on Australia’s current target of 26% to 28% below 2005 levels by 2030 and this is one step in the right direction. However, to be considered a good global citizen by factoring in past emissions as well as future emissions, Australia would need to commit to the tighter end of the Climate Change Authority’s target and do even more.
In fact, a target of -64% on 2005 levels by 2030 is what would be needed.
For more information on how to understand and use the mitigation-contributions website see this Briefing Note.
The Australian Greens this weekend announced a target of 90% renewable electricity by 2030 – pledging to go further than Labor, which has already backed a target of 50%. How hard is it to reach these targets?
Under this target, about 24% of electricity will come from renewable sources in 2020, comprising existing renewables (mostly hydro-electricity with some biomass) and new renewables (mostly wind energy and photovoltaic (PV) solar energy). It’s straightforward to calculate the annual additions (gigawatts, GW) of wind and PV required to hit a 50% or 90% RET in 2030.
First, let’s assume that Australia’s electricity demand remains static at about 200 TWh per year. Demand has been falling or static since 2008, caused by improving energy efficiency of buildings and appliances, reduced demand from heavy industry, and increased price of retail electricity, together with the rise and rise of behind-the-meter rooftop PV systems.
Second, let’s assume that wind and PV will each constitute half of new generation. These two technologies constitute virtually all new generation capacity in Australia, and together are being installed at a greater rate worldwide than the combined amount of new fossil and nuclear capacity. They are set to dominate the world’s energy future because they are effectively unconstrained by energy resource, raw materials, greenhouse gas emissions, local pollution, security concerns, or price.
Third, let’s assume that the “capacity factors” of these technologies remain at their current typical values of 25% for tracking PV and 40% for wind. (Capacity factor is the effective proportion of time that an electricity generator operates at nominal full load.)
Under these assumptions, we would need about 3 GW of new PV and 2 GW of new wind power capacity each year to reach a 90% renewables target by 2030. This is about 5% of the current worldwide installation rates, which themselves are increasing at 10-20% per year.
The corresponding figures for Labor’s target of 50% by 2030 are 1.2 GW of PV and 0.8 GW of wind per year.
An achievable prospect
Labor’s target is a straightforward prospect. In years gone by, Australia has installed this much PV and wind in a year, and can readily do so again. It is not much more than the installation rate needed to meet the 2020 RET.
The Greens’ target, meanwhile, is about 2.5 times more challenging than Labor’s, but still readily achievable. The Australian Capital Territory and South Australia have shown the way by adding new renewable electricity capacity equivalent to 90% and 40% respectively of their annual electricity consumption – mostly over a period of about 5 years. There are no practical constraints in terms of land because of Australia’s vast solar and wind resources.
Australia’s electricity system is becoming increasingly renewable. From the greenhouse point of view, natural gas should be pushed out of the market in favour of electrically driven heat pumps for the supply of water heating and space heating and cooling. This may happen anyway for economic reasons.
Similarly, conversion of land transport to electric vehicles will eliminate another substantial source of greenhouse gas emissions. As heat pumps and electric cars are about three times more efficient than gas heating and petrol cars, only a few years of extra building of PV and wind would be required to meet the extra electricity demand. A combination of existing hydroelectric power stations, new off-river pumped hydro energy storage, and battery storage, allows stabilisation of a 100% renewable electricity system.
The most straightforward mechanism to achieve a 50% or 90% renewables target by 2030 is simply to extend and uplift the existing 2020 RET. However, recent experience shows how easily governments can create investment risk by seeking to reduce the target, and how this can inhibit investment. Various other mechanisms can be introduced to confer investment certainty, including reverse auctions to lock in prices for 20 years (as pioneered in Australia by the ACT Government).
How much will it cost?
This question is difficult to answer. At present, wind power costs about 8 cents per kilowatt hour (kWh), and PV about 12 cents per kWh in Australia when constructed on a moderate scale (less than a gigawatt per year). PV in particular is falling rapidly in price, and both are likely to reach 6-8 cents per kWh by 2020 when constructed at a scale greater than a gigawatt per year.
The overall wholesale price of electricity is currently 3-4 cents per kWh, but this is mostly from old fossil fuel generators for which the capital cost has already been repaid, and for which there is no longer a carbon price. Energy from new-build gas or coal generators would cost 8-12 cents per kWh – so it could potentially end up being more expensive than new renewables.
Most of Australia’s existing coal power stations will be retired over the next two decades in the ordinary course of business, perhaps replaced by cheaper PV and wind. In this sense, the conversion to renewables would cost nothing extra.
One way of measuring whether a rapid phase-out of fossil fuel generation will affect the economy is to observe that the carbon price during 2012-14 was 2.5 cents per kWh, and that this constitutes most of the difference in cost between old (sunk-cost) fossil fuel generators and the 2020 cost of electricity from PV and wind. That carbon price did not noticeably affect the economy.
Australia’s new emissions target is not “squarely in the middle of comparable economies” as the PM claimed. Towards the bottom of the pack of comparable countries, on key indicators. But Australia is coming to the party, and that counts for a lot.
It means the target is not obstructing international progress. And it will put the spotlight back on the opportunities for a lower carbon economy, and the policy instruments to get there.
Australia’s emissions target is a 26-28% reduction at 2030 in national emissions compared to 2005 levels. It can be viewed through different prisms and compared across different metrics.
Ratchet up later?
Fundamentals first. Australia’s 2030 target is not compatible with the internationally agreed 2C goal. It falls far short of what would be a commensurate Australian contribution to such an outcome. The Climate Change Authority in its Targets and Progress Review showed a 40-60% reduction at 2030 (relative to 2000 levels) as compatible with a 2C emissions budget.
Modelling done for our Deep Decarbonisation Pathways study, again for a 2C compatible scenario, showed Australia’s emissions cut in half at 2030.
That said, most other developed countries’ targets also fall short of the 2C mark, though generally by less than Australia’s target. The take-home message is that ambition will need to be ratcheted up in the years after the Paris climate conference.
And there is every reason to believe that this is possible. Time and time again, the experience has been that emissions reductions come cheaper than expected. Many emissions savings technologies have developed more rapidly and became cheaper more quickly than expected – just think of solar panels and LED lights.
Most existing emissions trading schemes achieve their targets at prices that are lower than was expected. Some have already lifted ambition in return.
We know that Australia can make the transition to a low carbon economy, by replacing coal in the power system with renewables (and in part nuclear if you wish, or carbon capture and storage if it works), harvesting the potential for energy efficiency across the economy, and modernising industries.
But how to get even a 26-28% reduction?
Australia currently has no credible plan for how the target could be achieved. The Renewable Energy Target has been slashed, and the Emissions Reductions Fund (ERF) in its present form will only have a marginal effect, at a big cost to the taxpayer.
It is far-fetched for the ERF subsidy mechanism to achieve significant absolute emissions reductions, and the discussion of new policy in Australia’s official statement is vague.
And so there is a risk Australia’s latest pledge will be seen as an empty promise because there is precious little to back it up.
To achieve reductions in domestic emissions will require significant and sustained policy effort. For reductions to be achieved cost-effectively, a consistent, broad-based policy effort is needed. And crucially, investors need to regain trust after many years of bruising political fights over climate change and the resulting policy uncertainty.
Then there is always the option of buying international emissions permits or credits, which could be part of a cost-effective solution or a cheap cop-out, depending on the rules and depending on your point of view. At the end of the day though, we need to get a transition underway domestically, and that means domestic action.
But back to the first question: where are we in the pack, on the way to Paris?
Australia’s target for reduction in absolute emissions is significantly weaker than that of the United States and the EU, a little weaker than Canada’s, and a little stronger than Japan’s.
The choice of 2005 as a base year results in a larger percentage reduction number than if the year 2000 or (say) 2012 was used. That is because 2005 was near the high-water mark for Australia’s emissions.
A key feature of the target is that the annual rate of emissions reductions to meet the target steps up during the 2020s, to 1.9% per year. This is slightly higher than the other countries in the comparison, except the US which are targeting a reduction of 2.8% per year during the first half of the 2020s.
In per capita terms, Australia’s target implies a halving of per capita emissions over a 25-year timespan, a similar reduction rate as expected in the US and Canada, and a much faster reduction than in the EU and Japan where populations are stable.
But Australia does of course have a long way to come down, from its position of highest emissions levels per capita among all major countries. And per capita emissions would remain higher than the other countries looked at here, assuming population growth continues at the rates observed over the last decade.
A full comparative analysis would include modelling of the economic effects of Australia’s emissions target and different ways of meeting it, in comparison to other countries targets. To date such modelling is not available – and it is a fair assumption that global views of Australia’s target will be formed without reference to any economic modelling.
Expectations and perceptions
The coming weeks and months will tell, but my expectation is that internationally, Australia’s target is likely to be perceived as falling short in its ambition relative to Australia’s opportunities to cut emissions. But at the same time it will not be seen as falling catastrophically short, nor as an active obstruction of the international process.
Indeed, given the widespread perception that the Australian government looks out for the interests of the fossil fuel industry ahead of all else, the target announcement could be seen as step towards meaningful engagement on climate change.
In the eyes of the world we might just have reclaimed our traditional position as laggard in international climate change efforts, moving up a rung or two from presumed recalcitrant. There’s still quite a way to go on that ladder.
A numerical comparison of targets is available here.