Flood of funds for clean alternatives

Australian
Thursday 2/7/2009 Page: 5

AUSTRALIA has said it will not pick winners in the shift towards clean energy technologies, but carbon capture and storage and solar energy will be by far the biggest recipients of direct government funding of the sector over the next 10 years. As part of the May budget, the Australian government announced $4.5 billion would be spent over the next decade on clean energy infrastructure, with nearly half of that going to CCS and a third to the development of large-scale solar energy plants.

The central components of the Clean Energy Initiative are the $2.45bn allocated to the CCS Flagships Program over nine years and $1.6bn to the Solar Flagships Program over six years. Both programs are designed to fund 1000 MWs of capacity in their respective technologies. The CCS Flagships Program is likely to comprise three installations representing various CCS options, such as coal gasification, post combustion capture and oxy-firing, which can be used to reduce emissions from coal-fired power stations.

The solar program is likely to comprise four installations testing two systems under the banner of solar photovoltaics, and two from solar thermal, as well as energy storage a critical component if the technology is going to meet more than just peak demand. Projects for both programs are expected to be chosen next year, and construction is expected to begin around 2012, with commissioning of the facilities in 2015.

The federal government also has a $300 million Renewable Energy Demonstration Program (REDP), which will allocate $1 for every $2 spent to fund commercial developments of new renewable technologies such as geothermal, ocean energy and biomass. Several dozen applications have made it to the final round of assessment, but only a handful of projects across the various technologies will be chosen.

Although these government allocations represent nearly the total of direct support, a far greater investment in clean energy infrastructure is likely to come from the government's proposed renewable energy target (RET), should it make its way through both houses of parliament.

The target of 20% renewable energy by 2020 is expected to generate more than $20bn worth of renewable energy infrastructure. Much of this, at least in the early years, will come from wind energy, which is the most mature of the clean energy technologies and can be quickly rolled out.

However, developers of geothermal and ocean energy technologies are also confident they will be in a position to build large facilities by 2020, with the geothermal industry predicting some $2bn of investment by 2020, and ocean energy producers more than $1bn. Indeed, many in the clean energy industry have argued that the RET could and should be expanded, possibly to 25%, to cater for the potential investment that could be made.

The same argument has been made for the REDP, with the government confirming that projects worth more than $15bn have been proposed. Developers have suggested that some projects, and their technologies, will move to more supportive jurisdictions overseas, particularly in Europe, if they fail to get REDP funding.

The power of government incentives was highlighted in the subsidy for solar rooftop installations, which was halted several weeks early last month after costing the government more than $700m some $500m more than forecast. The subsidy will be replaced by a solar credits program that will tie in with the RET.

Support for clean energy infrastructure as part of the separate nation-building stimulus packages was relatively limited, with the major item being $2.71-)n set aside for home insulation essentially the installation of pink batts. To put that in a global context, in a survey of 17 developed economies by HSBC, Australia ranked ninth in the allocation of economic stimulus funds to the green sector.

Australia's spending on green initiatives pales in comparison with the $US220bn ($275bn) announced in China, amounting to one third of its overall stimulus package, according to HSBC's definition of green and climate related projects. It estimated the Obama administration had announced $US94bn worth of green measures in its stimulus package and noted that more than 80% of South Korea's $US31bn stimulus went to green and climate-related initiatives and infrastructure.

Still, Australia's focus on green issues in its stimulus package was more generous than that of India, which directed none of its $13.7bn stimulus plan towards green ventures, according to HSBC, and Italy and Japan, which allocated just 1.3% and 2.6% of their packages respectively, making them the least green of the G7 member countries.

The Obama administration has gone further than its fiscal stimulus package and has pledged a strategic investment of $US150bn over 10 years in clean technologies and other green themes such as energy efficiency and building efficiency. US President Barack Obama has made energy security and reducing the reliance on imported oil a central policy.

China has also announced its intention to become the world leader in electric vehicle production, and the National Development & Reform Commission has said spending on renewable energy installations may top $US600bn by 2020. The commission said earlier this month it would soon release details of a long-term plan to develop renewable energy to replace coal and oil with cleaner burning fuels.

In Australia, various state governments are also providing incentives for renewable energy, with Victoria announcing in May it would commit up to $100m towards a large solar energy station for the state, subject to the receipt of matching funding from Canberra.

South Australia also has a renewable energy target of 20% by 2014, and announced in its budget for this year and next that it would increase that target to 33% by 2020 to stimulate additional investment in renewable energy and accelerate growth in green jobs. It allocated $20m over two years to its Renewable Energy Fund.

Queensland has set aside $9.3m for a new geothermal power station at Birdsville, and $7.5m for a solar gas project with the CSIRO. It has also committed $19m for the first year of a 3000 job Green Army, and its solar hot water program will offer solar and heat pump systems priced at $100 for pensioners and low-income home owners.