Project expected to raise charges

Australian
Tuesday 22/5/2007 Page: 4
Matthew Warren Environment writer

MANDATORY targets for climate-friendly energy technologies, including new hydrogen clean coal, could be the most effective way of steering Australia to a low-emissions future. The new $2 billion Hydrogen Energy power station proposed by Rio Tinto and BP, which produces electricity at about the same cost as wind energy, will require a doubling of wholesale electricity prices if it is to proceed.

Hydrogen Energy chief executive Lewis Gillies said the Kwinana proposal would need a "technology-specific carbon price" if it were to get the go-ahead after a $50 million feasibility study concluded in 2011. He said electricity from the new clean coal technology was expected to cost about the same as wind energy, about $70 per megawatt hour, which is double the long-term price for base-load coal-fired electricity. This would require a price on greenhouse emissions of more than $30 a tonne to make this new power station competitive, doubling wholesale electricity prices and pushing up retail prices by about 30 per cent.

Mr Gillies said the joint venture should be lobbying the Howard Government to intervene in the market to make the technology competitive before the introduction of a long-term price on greenhouse emissions from either emissions trading or a tax. "Here is a new technology; let's not wait for a carbon trading system to get into place to enable it," Mr Gillies said. "There are a number of ways the Government can provide the enabling policy.

The key thing to note here is that with all forms of low-carbon power, they are more expensive than conventional power." The renewable energy industry yesterday welcomed the announcement, but warned that the new project would have to compete with even cheaper low emission technologies, including geothermal and solar thermal.

Renewable Energy Generators Australia chief executive Susan Jeanes said her industry was pushing the Howard Government for a wider mandatory target for low-emission energy technologies, which would include projects like this new clean coal technology. "We are happy to compete with clean coal on price and environmental grounds. We just need the market mechanism within which to compete," Ms Jeanes said.

"The Mandatory Renewable Energy Target was a market trading mechanism that allowed the cheapest renewable energy to come into the market. The renewable energy industry has no problem at all opening up that sort of mechanism to other energy sources like clean coal, and even nuclear, if the Government decides to go down that track." Federal Industry Minister Ian Macfarlane said the joint venture would need government co-investment in the upfront capital cost as well as continuing market intervention to support its higher electricity generation costs.

He indicated this market intervention would need to be open to competition to ensure it did not exclude improvements in rival low-emissions technologies, including renewable energy and nuclear power. "If you start producing electricity for $70 a megawatt hour, what do you do when someone comes along and says I can do that with nuclear for $65 to $70, can I have a share of this market as well, and can I have the same benefits as well?" he said.