www.theaustralian.news.com.au
September 09, 2009
TALKING of energy: you name it and we've got it. The roll call of plenty runs from being the world's fourth largest producer and the largest exporter of coal to possessing caverns of natural gas and much uranium.
Having so much energy means we have splashed it about; our greenhouse gas emissions a head are the highest in the Organisation for Economic Co-operation and Development and four times the world average. Industrial and residential electricity prices are among the cheapest in the developed world, while gas prices are among the lowest.
Against such a background, the process of mitigating climate change with the recent passage of the renewable energy bill makes for a challenge for investors wondering where to position themselves. Much will depend on the process by which emissions are abated and the extent to which we go it alone in the world. Coal exports could become uncompetitive, for example, and uranium exports may be sidetracked as natural gas prevails, as flagged this week with PetroChina's $50 billion purchase of Gorgon gas.
Toss into the mix higher oil prices, which may slow world growth, and governments may be less willing to wear higher energy costs for consumers and businesses. At the very least, the state of the world's economy could lead to abatement policies being delayed or watered down. And all this before the start of the carbon pollution reduction scheme in 2011, if it passes. Carbon emitters will be the bogey, and as their presence is slimmed and squeezed by science and social pressures, so should the field expand for renewable energy generators. Big emitters and users of energy are the electricity generators, which in turn are likely to pass on higher charges to distributors, retailers, then households and businesses.
Managing this carbon risk is likely to drive increased investment in renewable energy technologies, Clean Energy Council chief executive Matthew Warren says. "We expect to see significant investment in renewable and energy efficiency over the next decade from many of the biggest greenhouse emitters," he says.
Big electricity retailers such as AGL, Origin Energy and TRUEnergy are already balancing their coal and gas-fired generation assets with increased investment in proven and emerging renewable technologies. Origin Energy and TRUEnergy have invested in the emerging geothermal sector, while AGL has Australia's biggest wind energy portfolio. The country's biggest wind player is Infigen Energy, the renamed Babcock and Brown Wind, which plans to triple its wind capacity to 1000 MWs in the next five years.
AGL Energy has $2.3bn invested in renewable projects including some under construction, to claim the title of the country's biggest across all forms of renewables. Managing director Michael Fraser likens the passage of the renewable energy target legislation to the dawning of a new era: "We have secured some of the best renewable projects in Australia and our portfolio will benefit."
Clean energy consultant Shaun Colley agrees that big power players are likely to benefit most in the short term. "That's due to their ability to bring major renewables projects online quickly, mainly wind, but later a move to solar thermal." Lesser lights include Solco, a small rooftop-solar producer and installer that should benefit from certainty in renewable energy targets, and Viridis Clean Energy, which plans to turn wind and waste-to-energy generation.
GeoDynamics and Petratherm are the two leading geothermal energy developers and Carnegie Corporation the leader in wave energy. Smaller players include KUth Energy, which has geothermal power projects in Tasmania and may benefit from new targets and access to the Bass Strait power distribution cable; MBD Energy, an unlisted company that recently raised capital for a first-stage algae to biofuels plant at Loy Yang in Victoria; and Hush Wind Power, also unlisted, which is developing small-scale wind generators for household and industrial use.
At Tullamarine, Willow Ware Australia, which makes the cooler boxes, has installed four Hush turbines at its facility towards a planned 30 that could provide about 10 per cent of its needs. Chief executive Ralph Wilson says Willow started 18 months ago to manage its carbon-neutral energy needs. "Wind power was the obvious choice thanks to our geographical location... We commissioned RMIT (University) to undertake a study early on to verify the amount of wind energy we could capture."
Carbon capture and other storage methods seem further down the track and subject to the timing and passage of the CPRS scheme and the price it sets on greenhouse gas abatement. Along with electricity prices, the other key emitting fuel, oil, is likely to see a price rise that will play on governments. Higher oil prices could mean fewer jobs, a tension with climate change policies, as shown by the federal government's commitment to offset any carbon tax on petrol by a reduction in the excise.
Yet higher fuel prices could lead to lower carbon emissions for each transport kilometre as cleaner fuels are adopted, vehicles use hybrid drive trains and fuel-cells, there is more public transport and trains, rather than trucks, carry commercial goods. "biodiesel may struggle until new oil crops such as Jatropha and Pongamia can be grown on a large scale on non-agricultural land and new harvesting technologies can be developed," Colley says. "A potential player is ENEnergy, a private Norwegian company with new, low cost cellulosic ethanol technology looking to launch vertically integrated biomass to energy and ethanol technology in Australia."
Solverdi Worldwide - - formerly Australian biodiesel industries - - is introducing new technology for low-cost renewable fuel to replace diesel in power generators. It plans to become a defacto clean power company. Further out, the Australian Bureau of Agricultural Resource Economics says there is likely to be a near 100 per cent rise in the use of non-hydro renewables, a 20 per cent to 30 per cent fall in coal, and a 5 per cent to 15 per cent drop in oil and gas. Overall energy use is expected to decline, too.
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