Playing the power game

Herald Sun
Saturday 25/7/2009 Page: 74

As our industries squabble over emissions policy, global engineering giants are saving their energy for low carbon opportunities, writes Olga Galacho

THE FEDERAL Government is about to intervene in the energy sector like never before on the basis of what it describes as a market failure and to ensure the nation meets its need for energy security and its international obligations to reduce emissions. Energy Minister Martin Ferguson emphasised this strategy late last year after announcing an Energy White Paper would be developed to set new energy sector priorities.

The first round of consultations will close next month, with many industry and public submissions to a discussion paper on the issue already lodged. The process has allowed the taboo subject of nuclear energy for Australia to be floated by organisations such as Rio Tinto. But, curiously, the same corporate lobbyists who had never considered it taboo this week spoke publicly about giving up on their dream for a domestic nuclear industry.

Prominent businessmen Hugh Morgan, Ron Walker and Robert de Crespigny have deregistered a company which was to act as a go-between for organisations interested in building nuclear reactors here. Mr Ferguson is adamant that the Federal Government will not support domestic nuclear energy in the foreseeable future.

Mr Morgan told BusinessDaily Australia was now so far back in the queue, so far out of the supply chain, it was no longer worth his while to encourage policy makers to pursue a civil nuclear program. Any future lobbying for a nuclear industry could be left to another generation now, Mr Morgan said. But there are other industries which don't want to be energy sector losers and they are still lobbying hard for a winning position. The White Paper, an early draft of legislation, will be designed to find solutions to what the government has forecast will be a 44% increase in energy consumption by 2030.

In November, Mr Ferguson said: "The White Paper will be developed to ensure economic development is sustainable and efficient, and the need and scope for government intervention is clearly justified on the basis of market failure or to meet Australia's international obligations and interests."

THIS legislation will be a companion to two other Bills now being smacked around by our politicians - the carbon pollution reduction scheme and the Renewable Energy Target. Aluminium smelters, manufacturers, miners, exporters, the fossil fuelled power generators, the renewable energy companies - and the list goes on - all want a piece of this legislative action.

There is, however, one elite group of industrialists that will be winners regardless of how the Energy White Paper develops energy policy suppliers of power generation equipment. These engineering titans - namely France's Alstom, Germany's Siemens and US giant General Electric - are the world's largest manufacturers of the components of electricity plants, regardless of the fuels that run them.

While the world is their oyster, Alstom, Siemens and GE have stepped up their interest in Australia. All three companies have massive operations in the coal and gas fired power sector, wind, tidal power and solar energy production, nuclear and carbon capture programs.

One such opportunity they see will flow from the government's establishment of the Global carbon capture and storage Institute, of which each is a founding member. Together with the Group of Eight richest nations, Australia has committed to develop 20 carbon capture and storage demonstration plants worldwide by 2020. The institute, which the government will fund to the tune of $100 million a year, will act as a sort of co-ordinating hub for the projects.

Australia, whose economy still relies heavily on coal exports, is becoming more attractive to international companies that specialise in coal technologies, according to Alstom Power Systems vice-president Gwen Andrews. "We are very interested in the government's program and we are talking with several Australian generators now about retrofitting them with our carbon capture technologies," Ms Andrews told BusinessDaily.

"Alstom is very aware of Australia's greater potential for more penetration of low-carbon technologies now that it has agreed to have climate change policies." She said the government's decision to stretch the potential target of emission cuts out from 15% to 25% of 2000 levels could correspondingly increase the market size for Alstom. Emissions reduction is big business. Siemens alone collects 25% of its global annual sales from low or zero-carbon technologies. In 2007, those sales amounted to 17 billion ($A29.57 billion).

According to Siemens energy executive Michael Bielinski, a key challenge for Australia in coming years will be the conversion of existing infrastructure and the economy to achieve the targeted reductions in CO2 emissions. "Siemens offers a range of renewable energy solutions, such as wind turbines, solar and photovoltaic technologies and we are also developing technologies for effective CCS which will be of interest to Australia," he said.

General Electric is also increasing its focus on Australia's future energy infrastructure needs, according to GE energy executive Phil Solomon. "We believe GE's objective, that is, producing high efficiency and low emissions power generation equipment, aligns well with the Australian Government and the industry's desire to work towards a lower emissions future," Mr Solomon told BusinessDaily.

"Australia has vast coal resources and the government is driving a legislative and regulatory teamwork for CO2 reduction. "These things make the country well suited for carbon capture, a technology GE offers." While the loudest voices in the climate change debate complain about the costs of the imminent lowcarbon regime, Australia's new quiet achievers, albeit foreign owned, are salivating over the opportunities coming their way.