Part 2 Our future options
Victoria has extensive energy resources. As we move away from high emissions forms of energy, we have to decide how to best use these resources and what mix of options will best meet our energy needs. Exploring these options poses difficult questions and requires us to make tough choices. Shifting to renewable energy, developing low emissions coal 2 technologies and reducing our use of high emissions forms of transport will bring opportunities for new industries and jobs. But we also need to deal with the challenges that accompany change. Changing our behaviour and adopting new ways of doing things to save energy will be essential to supporting these changes to energy supply.
23 Part 2 Our future options
2.1 Renewable energy
There is great potential for renewable energy to contribute to Victoria’s future economic prosperity. But we have to overcome some significant challenges before renewable energy can play a major part in meeting our energy needs.
Renewable forms of energy are set to play a greatly However, we face a number of challenges in producing expanded role in meeting Victoria’s future energy needs. and using more renewable energy. To reduce emissions from transport and electricity, Many new forms of renewable energy are much more renewable energy must be a substantial part of our new expensive than fossil fuels, even taking into account energy mix. Victoria will not be alone in making this a price for carbon. transition; the shift to renewable energy is a global trend, In addition, power from sources such as wind and solar with the use of renewable energy for electricity growing is variable. Because we need to have a continuous supply rapidly worldwide. of electricity, we need to deal with reliability through the Victoria has an abundance of renewable energy sources. complementary use of coal and gas-fired power, and in the long term by finding ways of storing this energy. The national target of increasing energy from renewable sources to at least 20 per cent by 2020 will see a massive Some renewable energy sources, like geothermal, do growth in renewable energy over the next ten years (see offer the promise of providing baseload power. But the Box 4 – p25). A carbon price (put in place by an emissions geothermal resource and the technology itself need further trading scheme) would also make energy from fossil testing and development. fuels more expensive, making renewable energy more This means that until renewable energy costs reduce, competitive. carbon prices increase, and renewable baseload power and The growth in this sector will create new industries across large scale storage options become available, renewable the state that will stimulate local economies and generate energy will work alongside – and not replace – fossil fuels thousands of skilled jobs – making a substantial as our major source of energy. contribution to Victoria’s future economic prosperity.
24 Box 4. How renewable energy production Renewable energy resources in Victoria could change in Victoria Renewable energy is generated using resources that can be rapidly replaced by ongoing natural processes. This means Wind is likely to see the most growth over the next ten harnessing resources such as the sun’s radiation or heat, years. After this time, solar and new technologies such as the wind, the tides or heat stored underground to make geothermal may progressively play a larger role. Biomass electricity and heat. and hydro are low cost forms of renewable energy but their overall growth is likely to be limited. Hydro is limited In almost every case, carbon is not burnt in order to release by the need for dams and biomass is likely to be most energy (bioenergy is the exception). Therefore, generating suitable for local or niche applications. renewable energy emits little or no greenhouse gas. The main sources of renewable energy that could be harnessed to create electricity in Victoria are shown in Figure 8. Wind, bioenergy and hydroelectricity currently account for over 99 per cent of renewable energy generation in Victoria, compared with around 0.5 per cent for solar power. It is likely that the supply of renewable energy will further diversify over time as new renewable technologies emerge to suit different user needs. All potential renewable energy resources pose potential challenges for Victoria. Overcoming these challenges and ensuring renewable energy is able to be part of our future energy mix will require a comprehensive, systematic approach. All levels of government will need to work 2.1 with industry and the community to ensure that measures are put in place to deliver an effective, long term plan for the deployment of renewable technologies.
25 Part 2 Our future options
Wind Generating electricity from wind uses established technology and provides intermittent generation. Generally, electricity grids are able to accept up to 20 per cent of energy supply from variable power sources before extra provisions are needed to maintain the security of the system. At February 2010, Victoria had a cumulative capacity of 428 megawatts (MW), generating about 1,125 gigwatt hours (GWh) of electricity per year (almost 2 per cent of all electricity generation). A further 1,554 MW of projects have been approved. Offshore wind power will be much more expensive than onshore, so it is unlikely to be developed for some time. Wind resources in Victoria
Potential for growth
Advantages Challenges to be overcome UÊ /iV }ÞÊÃÊ«ÀÛi UÊ Ê7`ÊÃÊ>ÊÛ>À>LiÊÀiÃÕÀViÊÃÊiiVÌÀVÌÞÊÃÊÞÊ}iiÀ>Ìi`Ê UÊ "iÊvÊÌ iÊV i>«iÃÌÊvÀÃÊvÊÀiiÜ>LiÊiiÀ}Þ when the wind blows. This makes it difficult to manage UÊ LÕ`>ÌÊ«ÌiÌ>ÊÜ`ÊÀiÃÕÀViÃÊÊ6VÌÀ> the reliability of electricity UÊ Ê iÃÊÌÊÀiµÕÀiÊ>ÊÜ>ÌiÀÊÃÕ««Þ]ÊV«>Ài`ÊÌÊÃiÊÌ iÀÊ UÊ Ê7`ÊiiÀ}ÞÊÃÊ>Ê`ëiÀÃi`ÊÀiÃÕÀViÊ>`ÊÃiÊÀiÃÕÀViÃÊ renewable sources are located away from the existing electricity grid UÊ Ê Ã«iÀÃi`ÊV>ÌÃÊvÊÜ`Ê}iiÀ>ÌÀÃÊÀi`ÕViÃÊÌ iÊÀÃÊvÊ UÊ Ê7`ÊÌÕÀLiÃÊ>`ÊiÜÊÌÀ>ÃÃÃÊiÃÊ>ÞÊ >ÛiÊ no supply visual amenity impacts on the landscape, which may cause community concern in some locations. UÊ Ê iÜÊ«Ài`VÌÊÌiV }ÞÊV>Ê>ÜÊÌ iÊÕÌ«ÕÌÊvÀÊÜ`Ê power to be better managed by the network operator. Solar Energy from the sun can be used to generate electricity directly (solar-electric or photovoltaic) or heat (solar-thermal) which can be used to generate electricity. Large scale solar plants are expected to supply in excess of 300 GWh of electricity in Victoria by 2015 as a result of Victorian Government support for large scale solar generators. Small scale photovoltaics could produce around 30 to 50 GWh by 2020. Solar resources in Victoria
Potential for growth
Advantages Challenges to be overcome UÊ Ê-}wV>ÌÊiViÃÊvÊÃV>iÊ>iÊ>À}iÊÃV>iÊÃ>ÀÊÕV Ê UÊ Ê ÕÀÀiÌÞÊiÊvÊÌ iÊÃÌÊiÝ«iÃÛiÊvÀÃÊvÊÀiiÜ>LiÊ less costly than small scale (rooftop) solar energy (significantly more expensive than wind) UÊ ÀÌ iÀÊ6VÌÀ>Ê >ÃÊiÝViiÌÊÃ>ÀÊÀiÃÕÀVià UÊ Ê->ÀÊ«À`ÕViÃÊiiÀ}ÞÊ>ÌÊ>ÊÛ>À>LiÊÀ>ÌiÊ«ÜiÀÊÃÊÞÊ UÊ Ê->ÀÊiiÀ}ÞÊÃÊiÃÃÊÌiÀÌÌiÌÊÌ >ÊÜ`Ê>`Ê } iÀÊ generated when the sun shines) generation occurs between 12:00 pm and 4:30 pm which UÊ Ê/ iÊLiÃÌÊÃ>ÀÊÀiÃÕÀViÃÊ>ÀiÊv>ÀÊvÀÊ««Õ>ÌÊViÌÀiÃÊ>`Ê coincides with part of the peak demand period in summer at the margins of existing transmission infrastructure UÊ Ê->ÊÃV>iÊÃ>ÀÊV>Ê«ÀÛiÊ`ÛiÀÃÌÞÊÊiiÀ}ÞÊÃÕ««ÞÊ>`Ê UÊ Ê->ÊÃV>iÊÃ>ÀÊÃÊÃÕLÃÌ>Ì>ÞÊÀiÊiÝ«iÃÛiÊÌ >Ê>À}iÊ in the long term may reduce peak demand. scale solar.
Potential for growth over the next 20 years. Substantial potential – could be used in more than 15% of our electricity supply Significant potential – could be used in between 2% and 15% of our electricity supply 26 Limited potential to expand – unlikely to be used in more than 2 % of our electricity supply iÌ iÀ> iÌ iÀ>Ê i>ÌÊvÀÊÌ iÊi>ÀÌ ½ÃÊÌiÀÀÊV>ÊLiÊÕÃi`ÊvÀÊÃ>Ê>`Ê>À}iÊÃV>iÊ>««V>ÌÃ°Ê >À}iÊÃV>iÊ>««V>ÌÃÊV>Ê ÕÃiÊ i>ÌÊvÀÊÀVÃÊÀÊÕÃiÊ ÌÊÜ>ÌiÀÊ>`ÊÃÌi>Ê}iiÀ>Ìi`ÊÊÌ iÊ}ÀÕ`°Ê Ì ÊiiÀ}ÞÊÃÕÀViÃÊV>ÊLiÊÕÃi`ÊvÀÊ`ÀiVÌÊ i>ÌÊ >`Ê«ÜiÀÊ}iiÀ>Ì° Geothermal resources in Victoria
Potential for growth ??
Advantages Challenges to be overcome UÊ ÊiÌ iÀ>Ê >ÃÊÌ iÊ«ÌiÌ>ÊÌÊ«ÀÛ`iÊ>ÊÃ}wV>ÌÊ«ÀÌÊvÊ UÊ iÌ iÀ>ÊiiÀ}ÞÊÃÊ>ÊÞÕ}Ê`ÕÃÌÀÞÊ}L>Þ L>Ãi>`ÊiiÀ}ÞÊqÊ>ÊVÌÀ>LiÊ>`ÊVÌÕÕÃÊÃÕ««ÞÊ UÊ ÊVViÃÃÊÌÊvÀ>ÌÊ>LÕÌÊ6VÌÀ>½ÃÊ}iÌ iÀ>ÊÀiÃÕÀViÃÊ vÊ«ÜiÀ is limited 2.1 UÊ Ê6VÌÀ>Ê >ÃÊiÝ«À>ÌÊ>`Ê`iÛi«iÌÊ««ÀÌÕÌiÃÊ UÊ Ê Ý«À>ÌÊvÊ«ÌiÌ>ÊV>ÌÃÊvÊÌ iÊÀiÃÕÀViÊÃÊ Ê}iÌ iÀ>ÊiiÀ}Þ]ÊÜÌ ÊVÃiÊ«ÀÝÌÞÊvÊ«ÌiÌ>Ê ÛiÀÞÊiÝ«iÃÛi° geothermal energy sources to the electricity grid UÊ ÊiÌ iÀ>ÊiiÀ}ÞÊ >ÃÊLiiÊÕÃi`Ê>ÌÊ>ÊÃ>ÊÃV>iÊvÀÊ`iV>`iÃÊ in Victoria. Hydroelectricity Hydroelectricity is generated through the conversion of flowing water into electrical energy, often using dams to store the water. Victoria’s hydroelectricity is sourced from the State’s major dams, including Lake Eildon, Hume and Dartmouth. Hydroelectricity resources in Victoria
Potential for growth
Advantages Challenges to be overcome UÊ ÊÞ`ÀiiVÌÀVÌÞÊÃÊ>ÊÃÌÀ>LiÊvÀÊvÊÀiiÜ>LiÊiiÀ}ÞÊqÊÜ>ÌiÀÊ UÊ Ê} ÞÊ`i«i`iÌÊÊÀ>v>ÊÊ Þ`ÀiiVÌÀVÌÞÊ}iiÀ>ÌÊ >ÃÊ V>ÊLiÊ«Õ«i`ÊÌÊ`>ÃÊvÀÊiÝ>«i]ÊLÞÊÕÃ}Ê«ÜiÀÊvÀÊ Ài`ÕVi`ÊÛiÀÊÌ iÊ«>ÃÌÊ`iV>`i]Ê`ÕiÊÌÊiÃÃÊÌ >Ê>ÛiÀ>}iÊyÜÃ Ì iÀÊÀiiÜ>LiÊÃÕÀViîÊ>`ÊV>ÊLiÊÀii>Ãi`Ê>ÃÊii`i` UÊ Ê Ìi`ÊvÕÌÕÀiÊÃÌ>>ÌÃÊvÊÃÌiÃÊLiV>ÕÃiÊvÊÌ iÊÌi`Ê UÊ Ê >Ê«ÀÛ`iÊ>ÊVÌÀ>LiÊÃÕ««ÞÊvÊ«ÜiÀ]ÊÜ V ÊV>ÊLiÊÕÃi`Ê ÕLiÀÊvÊÃÌiÃÊ>`ÊÌ iÊÛiÀi̽ÃÊVÌiÌÊÌÊÌÊ ÌÊ>ÌV Ê«i>Ê`i>`ÃÊ LÕ`ÊiÜÊ`>à UÊ Ê7 iÊÜ>ÌiÀÊÃÕ««ÞÊÃÊ>LÕ`>Ì]ÊÌÊ«À`ÕViÃÊ>À}iÊ>ÕÌÃÊvÊ UÊ ÊvÀ>ÃÌÀÕVÌÕÀiÊV>ÊV>ÕÃiÊ>iÌÞ]ÊÀiVÀi>Ì>Ê>`Ê iiVÌÀVÌÞÊÛiÀÞÊV i>«Þ° iÛÀiÌ>Ê«>VÌð
27 Part 2 Our future options
Bioenergy Organic matter, or biomass, can be converted into bioenergy (heat, electricity and biofuels) using a variety of technologies. Bioenergy generators tend to be small scale and are best suited for local applications such as municipal waste facilities or for on-farm applications. Bioenergy resources in regions across Victoria
Potential for growth
Advantages Challenges to be overcome UÊ Ê >Ê«ÀÛ`iÊ>ÊVÌÀ>LiÊ>`ÊVÌÕÕÃÊÃÕ««ÞÊvÊ UÊ Ê >ÃÃÊÃÕ««iÃÊ>ÞÊLiÊÌi`ÊÀÊV>Ìi`ÊÊëiVwVÊ «ÜiÀÊqÊÜÌ Ê«ÌiÌ>ÊÌÊ}iiÀ>ÌiÊiiVÌÀVÌÞÊÓ{Ê ÕÀÃÊ locations, making it most suitable for local uses a day (baseload energy) UÊ Ê viÊVÞViÊ}Àii ÕÃiÊ}>ÃÊiÃÃÃÊvÊLvÕiÃÊ UÊ ÊÃÊV«iÌÌÛiÊÊÃiÊÃÌÕ>ÌÃÊÌ`>Þ]ÊiëiV>ÞÊÜ iÊ Û>ÀÞÊÃ}wV>ÌÞ using a waste product to create energy UÊ Ê >ÞÊÀiÃÕÌÊÊ>iÌÞÊÃÃÕiÃ]ÊÃÕV Ê>ÃÊ`ÕÀÊ>`Ê UÊ Ê/ iÀiÊ>ÀiÊ>ÞÊ`vviÀiÌÊÃÕÀViÃÊvÀÊLiiÀ}Þ° airborne emissions UÊ / iÊVÃÌÊ>`ʵÕ>ÌÞÊvÊL>ÃÃÊ«ÕÌÊÛ>Àià UÊ Ê >ÊV«iÌiÊÜÌ Êv`Ê«À`ÕVÌÊvÀÊ>`]Ê unless based on waste products. Wave and tidal Wave energy is captured by turbines that are either fixed to the shore or sea bed or float on the water’s surface. Tidal energy is captured from the flooding and ebbing tide through the use of either tidal turbines or tidal barrage systems, which trap large areas of water and require larger tidal currents. Wave and tidal resources in Victoria
? Potential for growth
Advantages Challenges to be overcome UÊ Ê/ iÀiÊ>ÀiÊÃiÊ«ÌiÌ>ÊÜ>ÛiÊ>`ÊÌ`>ÊÀiÃÕÀViÃÊÊ6VÌÀ> UÊ Ê7>ÛiÊ>`ÊÌ`>ÊÌiV }ÞÊÃÊiÜÊ>`ÊÀiµÕÀiÃÊvÕÀÌ iÀÊ UÊ Ê >ÃÌ>Ê>Ài>ÃÊ>ÀiÊÀi>ÌÛiÞÊVÃiÊÌÊiÝÃÌ}ÊÌÀ>ÃÃÃÊ research, development and commercial demonstration infrastructure (both intermediate and high voltage lines) UÊ Ê/ iÊÃV«iÊvÀÊÜ>ÛiÊ>`ÊÌ`>ÊÌiV }iÃÊÌÊ`iÛiÀÊ«ÜiÀÊ UÊ Ê/`>Ê«ÜiÀÊV>ÊLiÊÃV i`Õi`Ê`>ÞÃÊÊ>`Û>ViÊqÊLiV>ÕÃiÊ ÌÊ6VÌÀ>Ê >ÃÊÞiÌÊÌÊLiÊ`iÌiÀi`]ÊLÕÌÊÌÊÃÊÕiÞÊÌÊLiÊ we know when the tides will occur a major contributor in the near term UÊ Ê-iÊ`iÛViÃÊV>ÊLiÊVÃÌÀÕVÌi`ÊÕ`iÀÊÜ>ÌiÀÊÃÊÌ iÀiÊÃÊ UÊ ÊvÀ>ÃÌÀÕVÌÕÀiÊ>ÞÊÌiÀviÀiÊÜÌ ÊÌ iÀÊViÀV>ÊÀÊ no visual impact. recreational activities UÊ ÊÃÌ>>ÌÊ>`Ê>Ìi>ViÊÃÊV«iÝÊLiV>ÕÃiÊÌ iÊ}iiÀ>ÌÀÊ is located offshore in a challenging environment.
Potential for growth over the next 20 years. -ÕLÃÌ>Ì>Ê«ÌiÌ>ÊqÊVÕ`ÊLiÊÕÃi`ÊÊÀiÊÌ >Ê£x¯ÊvÊÕÀÊiiVÌÀVÌÞÊÃÕ««Þ -}wV>ÌÊ«ÌiÌ>ÊqÊVÕ`ÊLiÊÕÃi`ÊÊLiÌÜiiÊÓ¯Ê>`Ê£x¯ÊvÊÕÀÊiiVÌÀVÌÞÊÃÕ««Þ 28 Ìi`Ê«ÌiÌ>ÊÌÊiÝ«>`ÊqÊÕiÞÊÌÊLiÊÕÃi`ÊÊÀiÊÌ >ÊÓʯÊvÊÕÀÊiiVÌÀVÌÞÊÃÕ««Þ Research and development into Bringing new technologies to market renewable energy Compared to traditional energy generation sources, many Encouraging development of new technologies is a global renewable energy technologies are expensive (see Figure 9). effort. Many technological breakthroughs can be adopted This means that a major challenge is to ‘prove’ these globally. As a result, renewable energy sources benefit from technologies – bringing down costs and demonstrating the research and development undertaken in other parts their potential commercial viability. This includes techniques of the world. to store energy. Australia and Victoria have a role to play in this When developing new technologies, the business involved effort, focusing on areas of research, development and must bear the costs of taking action from which other commercialisation that favour our comparative advantage business can easily generate benefits. Whether it is and national interest. We also need to look for clever ways knowledge, skills or the expenses involved in lobbying a to quickly adopt technologies developed overseas and government to make new regulations, the original business apply them to Victorian conditions. is disadvantaged compared to its competitors. To overcome this problem of bringing technologies from Over time, less mature technologies can be expected their initial research and development to the stage where to decrease in cost as a result of economies of scale and they are ready to be commercialised, funding support as more is learned about applying these technologies from governments is required. effectively. Further, a rising carbon price would increase the costs of fossil fuel electricity generation, making renewable Victoria’s Energy Technology Innovation Strategy energy (particularly mature technologies such as wind) more (ETIS) is designed to reduce the costs of renewable competitive. Finally, the Renewable Energy Target (RET) energy technologies. is already providing a steady additional revenue steam to renewable energy projects, allowing them to compete 2.1 in today’s energy market.
29 Part 2 Our future options
Integrating more dispersed and intermittent Many forms of renewable energy produce intermittent sources of power electricity. Their output will vary depending on whether it is cloudy or sunny, windy or still. This variable character of Compared to coal-fired energy generation, which renewable energy may limit the proportion of electricity occurs primarily in the Latrobe Valley, renewable energy that it can securely supply into the network. generation will increasingly be sourced from different parts of Victoria and interstate. Until large scale storage options become viable, planning for complementary forms of power generation (such as As these resources are developed, we are likely to see gas) will need to account for potentially rapid fluctuations renewable energy projects clustered in geographic areas in renewable electricity generation. Increased capacity to that are remote from the majority of consumers and the transmit electricity between states may also help to existing transmission network. In limited instances, this mitigate this risk. Sophisticated forecasting capability to may create opportunities for renewable energy facilities improve the accuracy of wind generation forecasts can to provide electricity directly to nearby communities. This also help the network operator manage the changing may assist in moderating peak demand loads, delaying output levels. system upgrades and reducing transmission losses. Geothermal and some marine sources will have the However, the scale of the coming growth of renewable advantage of delivering continuous and reliable electricity. energy means there will be an increase in applications for Commercialisation of these technologies would allow the connection to the electricity grid and many new sources proportion of renewable energy in the network to increase will be located in relatively remote areas. The appearance to much higher levels. of structures such as wind turbines and power lines will be markers of Victoria’s movement to a cleaner energy system, Part 3 of this statement describes Victoria’s approach but will cause concern to some local residents. to addressing these and other issues to develop our renewable energy potential.
Storing renewable energy
Renewable energy sources such as wind and solar are Energy storage in fuel form – A variety of possible variable in output and unpredictable to some degree. storage options are being investigated, including This can create problems for an electricity system if these hydrogen (an energy carrier which can be used as a sources are contributing more than about 20 per cent of transport fuel or for energy storage), converting total supply capacity. biomass to biofuel and storing it in this form until use, and storing solar energy in heated oil or salt solutions This is an issue shared by electricity grids all over the world. or in combination with a geothermal resource. As a result, there is global interest in finding low cost and reliable ways of storing electricity. Success in this area will The capacities of storage systems, the cost of their allow us to use a much higher proportion of power from construction and the overall costs per unit of energy vary variable sources. widely, according to the International Energy Agency. Options to store renewable energy include: Some examples of installations around the world include instalment of 34 MW of batteries at a 51 MW wind farm Hydro – Where this is available, it is a proven and in Rokkasho, Japan and 12 MW of battery storage in a reliable way of ‘storing’ power. Renewable energy 39 MW facility in Ireland. can be used to pump water up into storages for later ‘on-demand’ use. Unfortunately, this has limited application in Victoria. Batteries and mechanical storage – Batteries, capacitors, compressed air and flywheels represent forms of energy storage technologies that are presently available today for small scale applications. There are many forms under consideration for larger scale storage applications.
30 What we are doing now
Victoria is already developing renewable energy as a major part of our future energy mix. Renewable Energy Targets
UÊ Ê6VÌÀ>ÊÜ>ÃÊÌ iÊvÀÃÌÊ>`ÊÞÊÃÌ>ÌiÊÌÊÌÀ`ÕViÊ>Ê,iiÜ>LiÊ iÀ}ÞÊ/>À}iÌÊ6, /®°Ê iV}ÊÊÓääÇ]ÊÌ iÊ scheme sparked new investment in renewable energy across Victoria. Over 1,500 MW of wind projects worth around $2 billion have received planning approval. Renewable energy companies get an additional source of revenue from selling renewable energy certificates (which sell for between $30 and $50 per MWh). This financial support means they can compete with other forms of generation in the electricity market.
UÊ Ê6VÌÀ>ÊÜÊÌÀ>ÃÌÊÌ iÊ6, /ÊÌÊÌ iÊ Üi>Ì ½ÃÊi >Vi`Ê,iiÜ>LiÊ iÀ}ÞÊ/>À}iÌÊ, /®Ê«À}À>ÊÊÓä£ä°Ê The RET is predicted to result in an extra 7,000 GWh of large scale renewable energy in Victoria over the next ten years, including approximately 1200 new wind turbines, new large scale solar energy plants and new biomass generators. The result will be cleaner energy and billions of dollars of new investment in Victoria. Energy Technology Innovation Strategy and investment support
UÊ Ê*ÀiVÌÃÊÃÕ««ÀÌi`ÊLÞÊÌ iÊ iÀ}ÞÊ/iV }ÞÊÛ>ÌÊ-ÌÀ>Ìi}ÞÊ /-®ÊÛ>ÀÞÊvÀÊÃ>ÊÃV>iÊÀiÃi>ÀV Ê>`Ê`iÛi«iÌÊ to large scale pre-commercial projects. They include a $6 million grant to develop thin film organic solar cells.
UÊ fÇÓÊÊ >ÃÊLiiÊ>V>Ìi`ÊvÀÊ>ÊÃiV`ÊÀÕ`ÊvÊÀiiÜ>LiÊiiÀ}ÞÊ«ÀiVÌÃÊÕ`iÀÊ /-°Ê UÊ Ê ÌÀLÕÌiÊf£ääÊÊÌÊ>ÌÌÀ>VÌÊÃÕ««ÀÌÊvÀÊ>ÊiÜÊ>À}iÊÃV>iÊÃ>ÀÊ«ÜiÀÊÃÌ>Ì]ÊÃÕLiVÌÊÌÊ Üi>Ì Ê Flagships funding. 2.1 UÊ Ê/ iÊÛiÀiÌÊ>ÃÊv>VÌ>ÌiÃÊÀiiÜ>LiÊiiÀ}ÞÊÛiÃÌiÌÊÊ6VÌÀ>ÊLÞÊ«ÀÛ`}ÊV«>iÃÊÜÌ Ê>ÃÃÃÌ>ViÊ to access required information, approvals and support. Support for geothermal energy
UÊ Ê/ iÊÛiÀiÌÊÃÊ«ÀÛ`}ÊfÓxÊÊÌÊ«ÀÌiÊÌ iÊ}iÌ iÀ>ÊÀiÃÕÀViÊÊ6VÌÀ>ÊLÞÊÃÕ««ÀÌ}Ê>Ê`À}Ê program and encouraging small scale (then expanded) operations if the resource is proven. Project approvals
UÊ Ê/ iÊÛiÀiÌÊ >ÃÊ`iÌvi`Ê««ÀÌÕÌiÃÊvÀÊ«ÀÛ}ÊÌ iÊÀi}Õ>ÌÃÊ>`Ê«ÀViÃÃiÃÊÌ >ÌÊ >ÛiÊ>ÊLi>À}ÊÊ investment and approvals for renewable energy projects. This includes a review of Victoria’s environmental regulations, reviews of important environmental and planning legislation and a Parliamentary Inquiry into opportunities to reduce red tape in relation to renewable energy projects. Working with communities
UÊ Ê/ iÊ
UÊ Ê/ iÊÛiÀiÌÊ >ÃÊÌÀ`ÕVi`Ê>Ê«ÀiÕÊvii`ÊÌ>ÀvvÊvÀÊÀvÌ«ÊÃ>ÀÊ«>iÃÊ>`Ê>ʼv>ÀÊ>`ÊÀi>Ã>Li½Êvii`Ê tariff for other forms of renewable energy.
31 Part 2 Our future options
2.2 Gas and low emissions coal
While fossil fuels – coal and gas – have been a major cause of climate change, they can also be part of the solution. The development of commercially viable clean fossil fuel technologies will be particularly important to Victoria, given our large resources of brown coal, gas and carbon dioxide storage sites.
Victoria’s fossil fuels – coal and gas – currently meet over Because Victoria has extensive fossil fuel reserves located 95 per cent of our stationary energy needs and have close to potential carbon storage sites, CCS could be provided us with cheap and reliable power for nearly a particularly important. New technologies that convert century. Today, four large brown coal generators located brown coal to forms of energy other than electricity also in the Latrobe Valley continue to do most of the work hold great promise if CCS becomes commercially viable. (see Figure 10 – p33). These generators run continuously By comparison to current uses of coal, gas is a (except when closed for maintenance or unforeseen much lower emissions fuel for electricity generation outages), providing baseload power for Victorian homes (see Figure 11 – p33). Gas has the capability to be a and businesses. future source of baseload power and to complement While fossil fuels are a major cause of the climate the intermittent character of renewable energy. change problem, they must also be part of the solution. A carbon price would make gas-fired power stations The development of low emissions coal, and specifically more attractive investments. Consequently, gas will grow carbon capture and storage (CCS) technologies, will be in importance in Victoria as we transition to a low carbon an important part of the global response to climate economy (see Figure 12 – p33). change. The International Energy Agency estimates that The transformation of the energy sector over the coming achieving a 50 per cent reduction in global emissions by decades will present a range of opportunities for both 2050 will rely on CCS for one fifth of those reductions.ii these forms of fossil fuels – opportunities we will need to Without CCS the overall cost of reducing emissions to actively develop. 2005 levels by 2050 could increase by up to 70 per cent.iii
32 Box 5. How Victorian fossil fuel energy production could change
Coal now dominates our energy supply. But over the next two decades its contribution will decline substantially. In the short term, the gap will be made up by greater energy efficiency, gas and wind power. In the medium term, coal with carbon capture and storage (CCS) is expected to make a growing contribution and eventually, CCS technology may also be applied to gas.
2.2
33 Part 2 Our future options
Gas – an essential part of the transition to a low Victoria’s coal – a cleaner future carbon economy Victoria has one of the world’s largest brown coal reserves Gas currently plays a limited but important role in Victorian (23 per cent of the world’s known reserves). These reserves electricity generation. Gas-fired electricity generation is are very low in impurities such as heavy metals and sulphur, used largely to meet our peak energy demands in summer. reducing the need for expensive pollution control methods. As a result, although gas provided less than 5 per cent of But the high water content of our coal means it is expensive all our electricity in 2008, gas-fired power stations represent to export. It is also unstable to transport – brown coal can 20 per cent of the total installed capacity in Victoria. spontaneously combust. Gas may also help meet demand when electricity from More significantly, brown coal’s high water content means renewable energy falls unexpectedly (for example, when it produces high levels of carbon dioxide when burnt. wind speeds drop). These high emissions mean we must re-evaluate the We also use reticulated gas as an energy source for role brown coal will play in the future of Victoria and domestic and commercial applications such as heating particularly in the future of the Latrobe Valley, where and cooking, and for industrial uses. As with the electricity most of Victoria’s coal is found. sector, reforms over the last ten years have increased In the long term, the use of brown coal for electricity competition in the delivery of gas to consumers. generation in Victoria cannot continue without the Victorian gas supplies are now increasingly linked application of technologies to reduce carbon dioxide into an east coast market. emissions. The introduction of a cap on emissions, which Most of Victoria’s gas comes from Bass Strait. We buy would lead to a steadily increasing carbon price, would this gas at prices that are less than half the current make brown coal-based electricity generation – in its international market price. Our future access to gas current form – progressively less competitive. could come from new sources discovered locally or from As the carbon price rises, the older, least efficient brown greater access to the rapidly developing Queensland coal coal power stations would start to reduce output and seam gas industry (by expanded pipelines). close. To avoid disruptions to our energy supply, we need As this occurs, a range of factors will start to influence sufficient new capacity to be introduced in a timely way to our demand for, and the supply of, gas. replace the retiring plants. The extent to which Victoria’s coal reserves contribute to this new capacity will depend A carbon price added to the cost of gas would be expected upon our success in developing low emissions coal to slowly rise over time. But because gas is less emissions- technologies and the introduction of a carbon price intensive than other fossil fuels such as brown and black at the national level. coal, it would probably become more competitive, leading to increases in demand. Low emissions coal technologies A carbon price could also affect gas production. As we ‘Low emissions coal technologies’ commonly refers to the develop new gas fields, we may find higher concentrations various approaches used to reduce emissions from coal of naturally occurring carbon dioxide in the gas. This means powered electricity generation (see Coal drying, that CCS could find application in capturing and storing gasification and other processes – p39). These technologies gas from natural gas production. include coal drying and gasification, and CCS. The increase in demand for gas internationally may see For example, a new technology is available that dries and Queensland gas being developed for export. If this occurs, gasifies brown coal in an integrated process and generates because the east coast market will become increasingly electricity using hydrogen from the gas produced. Using interconnected, the local Victorian gas price could this technology as part of a process called Integrated approach international gas prices over time. Drying Gasification Combined Cycle (IDGCC) reduces The limitations of existing pipelines will create the need carbon dioxide emissions by 30 per cent. If combined with for capacity upgrades in Victoria and possibly greater CCS, it could lower carbon dioxide emissions to near zero. interconnectivity with gas supplies from Queensland. IDGCC has undergone extensive research and development and is planned for use in a new large scale demonstration Although potential price increases present long term plant in Victoria. challenges for gas, the greater use of gas in the medium term will create opportunities for regional growth and economic diversification. As with all mature energy sources, further expansion of gas markets will not be determined by governments. The private sector will make its investment decisions according to its assessment of the various risks and rewards that operating in the gas sector offers.
34 Syngas – a new product from cleaner coal
Syngas or synthetic gas is a gas that can be produced from brown coal. Syngas contains carbon monoxide, carbon dioxide and hydrogen, as well as other gases. Through the gasification process of producing Syngas (the conversion of the coal into a gas), carbon dioxide can be captured (a form of ‘pre combustion’ carbon capture). Prior to the carbon dioxide capture, the carbon monoxide is reacted with steam to give carbon dioxide and more hydrogen. The carbon dioxide is then separated leaving a hydrogen-rich fuel.
Industrial Uses
Gas Purification & Coal Gasification Fuel Cell Applications CO2 Separation
CO Compression 2 Electricity Generation 2.2 & Storage
Syngas has 50 per cent of the energy density of natural gas and can be burnt as a fuel source for electricity generation. However, as well as being a direct energy source, Syngas can provide hydrogen, liquefied natural gas (LNG), natural gas, chemical fertilisers and other petroleum based products. Syngas is not a new technology. During the oil crisis in the 1970s, countries experimented with the production of Syngas as an alternate fuel supply. However, at that time the process did not prove to be economically viable. But as energy prices start rise, Syngas could become an important new product derived from brown coal.
35 Part 2 Our future options
Carbon capture and storage In Australia, the Commonwealth Government is best placed to be the major funding source for these projects. Carbon capture and storage (CCS) technologies have the An ETS would create an ongoing revenue stream that potential to significantly reduce emissions from large scale could be directed towards supporting energy innovation. use of fossil fuels (see Box 6 – p37 ). As a result, these The Commonwealth also has the constitutional power technologies are of global importance and are a major to capture revenue from coal exports to ensure private focus of global research and development. sector support. The continued expansion of coal use worldwide means it Commercialisation of CCS would bring great benefits to will be much harder to achieve the necessary reductions in Victoria because our State appears to be uniquely suited global emissions if CCS is not successful. If this is going to to carbon storage. Victoria is recognised internationally be the case, the sooner we know, and can take alternative as holding some of the world’s most promising geological action, the better. carbon storage sites – made more significant because they Technologies for different components of CCS – capture, are within 200 kilometres of major coal deposits in the compression, transport, and storage – have been Latrobe Valley. demonstrated at the pre-commercial level in various parts The depleted oil and gas fields of the offshore Gippsland of the world, but successful commercial demonstration of Basin are large enough to potentially store several decades integrated CCS at a large scale is yet to occur anywhere of carbon dioxide emissions, with hundreds of years of (although it is used commercially as part of enhanced storage potential even deeper under the seabed. With its oil recovery). proximity to the principal source of fossil fuel emissions, There are major barriers to be overcome before integrated carbon storage in the Gippsland Basin could have lower CCS can be implemented at a commercial scale. CCS costs than other sites around Australia. technology is costly and highly energy intensive, and The Commonwealth’s Carbon Storage Taskforce estimates reliable long term carbon storage is still being tested. the storage capacity in the Otway Basin at over 14 billion The long term safe storage of carbon dioxide underground tonnes. As a comparison, Victoria’s total energy sector looks promising but technical challenges and community emissions are about 100 million tonnes per year. concerns need to be addressed. One of the world’s largest research and demonstration Even if the technical feasibility of CCS can be demonstrated projects of geological sequestration of carbon dioxide is at an industrial scale, it may be many more years before currently underway in the Otway Basin. This pilot project the technology can be applied economically. will contribute to global understanding of carbon storage technology (see case study – p71). Significantly, CCS will not develop without extensive support from governments. Early support for carbon capture technology will also be required. In Victoria, this is occurring through ETIS, which The market does not currently provide sufficient incentives supports research, development and demonstration of to overcome these significant risks for the private sector. several carbon capture projects. Support from governments will be needed to complement private sector investment in large scale CCS demonstration Technologies are also being developed to capture carbon until carbon prices increase and risks reduce sufficiently emissions without the need for storage – by converting the to make CCS fully commercially viable. carbon dioxide to a solid (such as cement or aggregates) or liquid (such as biodiesel or fertiliser from algae). Victoria will also explore the potential use of these technologies.
CO2CRC/CSIRO Carbon capture project, Loy Yang
36 Box 6. What is carbon capture and storage and what will it mean for Victoria?
What is carbon capture and storage? But the costs associated with building new plants, retrofitting CCS technology into existing plants and Carbon capture and storage (CCS) involves collecting the building the infrastructure for capture, compression, large amounts of carbon dioxide (CO ) released by power 2 transportation and storage will be high. This means stations or other industrial plants and then storing these that CCS will not be commercially viable in the short to emissions securely – deep underground – just as oil and medium term. To overcome these problems, Australian gas have been stored naturally for millions of years. governments – and other governments around the CCS could help power stations around the world world – are contributing significant funds towards to drastically cut CO2 emissions while continuing to proving CCS technologies. produce electricity. Victoria is well placed to take advantage of these
There are three stages to CCS. First, the CO2 is collected technologies as the State’s electricity industry in the at its source. CO2 capture can take place either before Latrobe Valley is close to potential large storage sites (pre-combustion) or after (post-combustion) the fossil fuels in decommissioned oil and gas fields. are burnt. In post-combustion capture, instead of being What if carbon capture and storage is too expensive discharged directly to the atmosphere, flue gas is passed to be commercially viable? through equipment which separates out most of the CO2. If CCS is not successful, the complexity of reducing The CO is then compressed at very high pressures and 2 emissions may be even greater. The sooner we know pumped through a pipeline to a suitable storage site. this, the better. Finally, the CO is injected into secure natural rock 2 If CCS does not become viable, it will be because formations deep underground for permanent storage. alternative sources of low emissions baseload electricity 2.2 At the moment, this geological storage looks like being are available at a lower cost. These could include existing the most feasible option. technologies, in use here or overseas, or new technologies Will it be viable at a commercial scale? that are still under development. CCS has not been implemented as an integrated large We could also invest in greater capacity in the scale technology. However, components of the technology interconnecting high voltage power lines between have been operating in isolation for some time. As a result, the states. many experts believe that technological hurdles are likely to be manageable as larger projects are developed.
Figure 13 The carbon capture and storage process
37 Part 2 Our future options
Gas Gas-fired power stations may be an important transitionary source of electricity for Victoria. Currently gas represents 20 per cent of installed capacity in Victoria – about 1800 MW – but because some power stations are used mainly for peak supply, it supplies only about 4 per cent of our electricity.
Location of Victoria’s gas resources
Potential for growth
Advantages Challenges to be overcome UÊ Ê*ÀÛiÊÌiV }ÞÊÌ >ÌÊV>Ê«À`ÕViÊiiVÌÀVÌÞÊÛiÀÞÊivwViÌÞ UÊ Ê6VÌÀ>Ê >ÃÊÌi`Ê}>ÃÊÃÕ««iÃ]ÊÃÊÜÊii`ÊÌÊÃÌ>ÀÌÊ UÊ Ê ÕÀÀiÌÊLiÃÌÊ«À>VÌViÊVLi`ÊVÞViÊ«>ÌÃÊ >ÛiÊ>ÊiÃÃÃÊ importing gas at some point over the next decade (requiring expensive new infrastructure development) intensity of 0.35tCO2 /MWh (compared to 1.2–1.5tCO2 / MWh for existing brown coal power stations) UÊ Ê6VÌÀ>Ê}>ÃÊ«ÀViÃÊ>ÞÊÀÃiÊÊÌ iÊvÕÌÕÀiÊ>ÃÊ`i>`Ê UÊ >Ê«ÀÛ`iÊL>Ãi>`Ê>`Ê«i>Ê«ÜiÀ° for gas increases globally UÊ ÊL>ÊV«iÌÌÊvÀÊiÜÊ}iiÀ>ÌÀÊiµÕ«iÌÊÃÊiÞÊ to drive up costs UÊ 7ÊÀiµÕÀiÊ -ÊÛiÀÊÌ iÊ}ÊÌiÀ°
Potential for growth over the next 20 years. Substantial potential – could be used in more than 15% of our electricity supply Significant potential – could be used in between 2% and 15% of our electricity supply Limited potential to expand – unlikely to be used in more than 2 % of our electricity supply
38 Coal drying, gasification and other processes Coal drying uses various technologies and processes to reduce the water content of brown coal. Some form of coal drying is likely to be a component of any new technology using coal. Coal gasification can be used to increase the energy efficiency of coal use and can be applied as part of other conversion processes to make liquid fuels or fertilisers. Direct coal liquefaction converts coal to liquids without the gasification phase.
Coal resources in Victoria
Potential for growth* ? * Used in association with coal-fired power generation (can be used in other processes). 2.2
Advantages Challenges to be overcome Coal drying General UÊ Ê*ÌiÌ>ÊÌÊLiÊ>ÊivwViÌÊi>ÃÊvÊÀi`ÕV}Ê}Àii ÕÃiÊ UÊ ii`ÊÌÊiÃÕÀiÊ>ÀÊ>`ÊÜ>ÌiÀʵÕ>ÌÞÊÃÌ>`>À`ÃÊ>ÀiÊiÌ
gas emissions from power generation (from 1.3tCO 2 /MWh UÊ iÜÊ«>ÌÊii`ÃÊÌÊVÃ`iÀÊÜ>ÌiÀÊ>Û>>LÌÞ to 0.8tCO /MWh) 2 UÊ Ìi`ÊvÕÌÕÀiÊÜÌ ÕÌÊ -°Ê UÊ VÀi>ÃiÃÊiiVÌÀVÌÞÊÕÌ«ÕÌÊvÀÊÌ iÊÃ>iÊ>ÕÌÊvÊV> Coal drying UÊ Ê7>ÌiÀÊiÝÌÀ>VÌi`ÊVÕ`ÊLiÊÌÀi>Ìi`Ê>`ÊÀiÕÃi`ÊÀÊ>``i`ÊÌÊ UÊ Ê/ iÊ«ÀViÃÃiÃÊÕÃi`ÊÌÊ`ÀÞÊV>Êii`ÊÌÊLiÊ«ÀÛiÊ>ÌÊ>Ê Victoria’s water supply industrial scale and the efficiency factors need to be improved UÊ ÊÌÊÃÊ>Êi>L}ÊÌiV }ÞÊvÀÊivwViÌÊV>ÀLÊV>«ÌÕÀiÊ UÊ ÊÊÃ}iÊ`ÀÞ}ÊÌiV }ÞÊ>ÞÊÌÊLiÊÃÕÌ>LiÊvÀÊ>ÊV>Ê and storage (CCS) implementation. types or applications. Coal gasification Coal gasification UÊ ÊVÀi>ÃiÃÊivwViVÞÊiëiV>ÞÊÜÌ ÊVLi`ÊVÞVi®ÊvÊ«ÜiÀÊ UÊ ÕÃÌÊÃÌÊÛiÀViÊÌiV V>Ê>`ÊVÃÌÊL>ÀÀiÀà generation and can lower to 0.8tCO /MWh (without CCS) 2 UÊ ,iµÕÀiÃÊÛiÀÞÊ`ÀÞÊV>ÊvÀÊ } ÊÌi«iÀ>ÌÕÀiÊ}>ÃwV>Ì UÊ ÊÜÃÊVÀi>ÌÊvÊiÜÊ«À`ÕVÌÃÊ-Þ}>Ã]ÊviÀÌÃiÀÃ]ʵÕ`ÃÊiÌV® UÊ 7Õ`ÊÀiµÕÀiÊÌ iÊÀiÌÀ>}ÊvÊÌ iÊiÝÃÌ}ÊÜÀvÀVi° UÊ Ê`>«Ì>LiÊÌÊÌ iÀÊ«À`ÕVÌÃÊ«>ÀÌVÕ>ÀÞÊÌÀ>ëÀÌÊvÕiîÊÜÌ Ê Direct coal liquefaction potential to create products for export. UÊ ÕÃÌÊÃÌÊÛiÀViÊÌiV V>Ê>`ÊVÃÌÊL>ÀÀiÀà Direct coal liquefaction UÊ Ê*À`ÕViÃÊ>ÊÃÞÌ iÌVÊVÀÕ`iÊÊÌ >ÌÊÀiµÕÀiÃÊvÕÀÌ iÀÊÀiwiiÌ UÊ ÜiÀÊV>ÀLÊ`Ý`iÊiÃÃÃÊÌ >Ê}>ÃwV>ÌÊ«ÀViÃÃià UÊ Ê ii`ÊÌÊ>``ÀiÃÃÊÌ iÀÊiÛÀiÌ>ÊVViÀÃÊiÊÜ>ÃÌiÊ`ëÃ>° UÊ Ê>ÃÊÌ iÊV>«>VÌÞÊÌÊvvÃiÌÊÊ«ÀÌÃÊ>`ÊÃÌÀi}Ì iÊÃiVÕÀÌÞÊ of supply UÊ `>«Ì>LiÊÌÊÌ iÀÊiiÀ}ÞÊÃiVÌÀÃ]Ê«>ÀÌVÕ>ÀÞÊÌÀ>ëÀÌ°
39 Part 2 Our future options
Carbon capture, transport and storage Carbon capture will be a critical technology to the ongoing development and use of brown coal in Victoria. Without the successful demonstration and commercialisation of this technology, the future uses of coal will be limited. It can be applied to multiple processes, including those in coal-fired power stations and other coal technologies (like gasification) as well as natural gas extraction (as in the Gorgon Gas project off the coast of Western Australia) and gas-fired power stations. Transport of carbon dioxide is a proven commercial process. But as with carbon capture, the safe and economic storage of carbon dioxide needs to be demonstrated in Victorian conditions.
Potential storage sites for carbon dioxide
Potential for growth* ? * Used in association with coal-fired power generation (can be used in other processes).
Advantages Challenges to be overcome Carbon capture Carbon capture UÊ Ê-}wV>ÌÞÊÜiÀÃÊ}Àii ÕÃiÊ}>ÃÊiÃÃÃÊvÀÊvÃÃÊ UÊ ÊÃÊVÕÀÀiÌÞÊ>ÊÛiÀÞÊiÝ«iÃÛiÊV«iÌÊvÊV>ÀLÊV>«ÌÕÀiÊ fuels (with storage) and storage process (especially for existing power plants) UÊ Ài>`ÞÊViÀV>ÊÊÃiÊ«>ÀÌÃÊvÊÌ iÊ}>ÃÊ`ÕÃÌÀÞ UÊ Ê >À}iÊiiÀ}ÞÊ>`ÊVÃÌÊ«i>ÌÞÊ>ÌÊi>ÃÌÊÎäÊ«iÀÊViÌÊvÊiiÀ}ÞÊ UÊ Ê-iÊV>«ÌÕÀiÊiÌ `ÃÊÌ >ÌÊ«À`ÕViÊ«À`ÕVÌÃÊÌ >ÌÊ`½ÌÊ output) require storage show promise. UÊ Ê,iµÕÀiÃÊÌiV V>ÊLÀi>Ì ÀÕ} ÃÊÌÊ>V iÛiÊÃV>iÊÀiµÕÀi` Transport and storage UÊ Ê-«iVwVÊiÌ `ÃÊ>ÞÊÌÊÜÀÊ>VÀÃÃÊ>ÊÌÞ«iÃÊvÊV>Ê UÊ Ê*ÌiÌ>ÊÃÌÀ>}iÊÃÌiÃÊÊ««Ã>`Ê >ÃÊVÃiÊÌÊ«ÜiÀÊ and technology. stations in the Latrobe Valley (about 100 –200 kilometres) Transport and storage UÊ -ÌÀ>}iÊ>ÌÊi`ÕÊÃV>iÊÃÊVVÕÀÀ}ÊiÃiÜ iÀiÊ UÊ ÕÌÞÊVViÀÃÊÛiÀÊÃ>viÌÞ UÊ Ê iV>`iÃÊvÊÃÌÀ>}iÊ>ÀiÊ>Û>>LiÊÊÌ ÃÊ>Ài>½ÃÊ`i«iÌi`ÊÊ UÊ ÛÛiÃÊ>ÊVÃÌÊ>`ÊiiÀ}ÞÊ«i>ÌÞÊ and gas fields UÊ Ê,iµÕÀiÃÊiÜÊ>`ÊiÝ«iÃÛiÊÌÀ>ëÀÌÊ>`ÊiVÌÊvÀ>ÃÌÀÕVÌÕÀi UÊ Ê ii«ÊÃ>iÊ>µÕviÀÃÊ>ÀiÊ«ÌiÌ>ÞÊ>À}iÊiÕ} ÊÌÊÃiVÕÀiÊ UÊ 1ViÀÌ>ÌÞÊÀi}>À`}Ê}ÊÌiÀÊi>>}iÊ several hundred years of carbon emissions. UÊ 1ViÀÌ>ÌÞÊ>ÀÕ`Ê«ÌiÌ>ÊÃÌÀ>}iÊÛÕià UÊ ,iµÕÀiÃÊ}ÊÌiÀÊ`iÃÌÀ>Ì UÊ Ê/À>ÃviÀÊvÊ>LÌÞÊvÀÊÌ iÊÃÌÀi`ÊV>ÀLÊ`Ý`iÊÌÊÌ iÊ-Ì>ÌiÊ in the long term UÊ Ê*ÌiÌ>Ê>VViÃÃÊ`ëÕÌiÃÊLiÌÜiiÊV>ÀLÊ`Ý`iÊiVÌÊ and storage licences, and oil and gas extraction licences.
Potential for growth over the next 20 years. Substantial potential – could be used in more than 15% of our electricity supply Significant potential – could be used in between 2% and 15% of our electricity supply Limited potential to expand – unlikely to be used in more than 2 % of our electricity supply
40 Managing Victoria’s coal resources New commercial opportunities are emerging for coal to be converted to products such as diesel, ammonia (urea), Victoria has good access to fossil fuel resources that methanol, hydrogen and fertilisers. These technologies have generated wealth and economic opportunities for could also provide the early streams of carbon dioxide the State. necessary to support the commercialisation of CCS. However, circumstances have changed and a carbon price If these applications are commercially viable in a carbon would mean the future uses of coal will look dramatically constrained global economy, Victoria could create a different to its past. There is no doubt that less coal will number of new domestic and international markets for be used for power generation in Victoria as gas and coal products. The Government will ensure the export renewable energy expand. Future uses of coal for power of brown coal products is subject to an assessment of its or other products will be dependent on the successful contribution to achieving a low carbon global economy. demonstration of new technologies that lower its emissions or convert it to other products. For example, new technologies are being tested that take brown coal through a heating process to create diesel. A task for the Government across all these options will be This product would be readily exportable and may find a to make sure that all Victorians benefit from using coal in growing market as oil prices start to rise. There is potential an environmentally sustainable way. The potential to create to capture the carbon dioxide produced in the transformation an ongoing source of competitive advantage for Victoria is and store it underground, making the process more viable one we cannot afford to overlook. as we reduce our carbon emissions. To do this, we must be aware of the opportunities that The long term export potential of these new products will may become available, have a clear idea of how land depend on the cost of local emissions (that occur during use decisions could affect future access to coal, and ensure production) and any subsequent costs from the emissions the processes for allocating and approving coal-based released when these products are used overseas. If emissions projects meet the needs of investors and the community. 2.2 regulations overseas are tightened as part of an effective Development will also need to consider local environmental global regime, the need to reduce emissions at the point issues such as water quality and availability. of use will grow in importance.
41 Part 2 Our future options
What we are doing now
Victoria is playing a leading role in exploring low emissions coal technologies. Energy Technology Innovation Strategy
UÊ Ê iÀ}ÞÊ/iV }ÞÊÛ>ÌÊ-ÌÀ>Ìi}ÞÊ /-®ÊvÕ`}ÊÃÊ>VViiÀ>Ì}Ê>ÊÀ>}iÊvÊ«ÀiViÀV>ÊiiÀ}ÞÊÌiV }iÃÊ by supporting the research, development, demonstration and deployment of these technologies. Low emissions projects supported by ETIS are: Low emissions demonstration plant (HRL) – A $750 million dual-gas plant is being developed in Victoria. It will demonstrate IDGCC at a commercial scale, reducing carbon dioxide emissions from brown coal electricity generation by 30 per cent. The Victorian Government will contribute $50 million. Carbon storage demonstration – To demonstrate carbon storage under Australian conditions, a major carbon dioxide storage pilot project is underway in the Otway basin (see case study – p71). The Victorian Government has contributed $6 million. Low emissions demonstration projects – The Victorian Government will provide $110 million to support new, large-scale, pre-commercial CCS demonstration projects. Successful projects will be announced in 2010, with projects expected to commence in 2011. Low emissions research and development – $12 million is being provided for brown coal research and development grants to investigate new brown coal applications and to advance low emission technologies associated with power generation. In addition, $1.2 million has been allocated for brown coal research and development post doctoral fellowships to leverage input from industry and research institutions. Carbon capture and coal drying – International Power is developing a large, commercial scale coal drying and combustion plant at Hazelwood, which will include a 25 tonne per day carbon capture plant to demonstrate the latest carbon capture technology. The Victorian Government will contribute $30 million. Clean Coal Victoria Clean Coal Victoria (CCV) began work in May 2009. It will play an important role interacting with local communities, local planning authorities and the coal industry on issues such as land use, infrastructure and the capture, transport and storage of carbon dioxide emissions. A critical priority for CCV is the development of a strategic resource plan for the management of brown coal resources. This plan will more accurately define the coal resource, consider the mining sequence of future projects, and analyse the potential value-add from new uses of coal. Geoscience Victoria
UÊ Ê7Ì ÊÌ iÊ>ÃÃÃÌ>ViÊvÊÌ iÊ -,"]ÊiÃViViÊ6VÌÀ>Ê-6®ÊÃÊÀiÃi>ÀV }ÊÌ iÊ«ÌiÌ>ÊvÊÌ iÊ««Ã>`Ê >ÃÊ for carbon storage in Victoria. The Victorian Government has contributed $5.2 million. Legislative reform for carbon capture and storage
UÊ ÊÊ"VÌLiÀÊÓään]ÊÌ iÊÛiÀiÌÊ«>ÃÃi`Êi}Ã>ÌÊi>L}ÊÃ ÀiÊV>ÀLÊV>«ÌÕÀiÊ>`ÊÃÌÀ>}i°ÊThe Victorian Greenhouse Gas Geological Sequestration Act 2008 establishes a property rights and access regime to ensure that competing rights and interests are managed and public health and environmental risks are addressed.
UÊ Ê/ iÊ6VÌÀ>ÊÛiÀiÌÊÃÊÜÀ}ÊVÃiÞÊÜÌ ÊÌ iÊ Üi>Ì ÊÛiÀiÌÊÌÊiÃÌ>LÃ Ê>ÊÀi}Õ>ÌÀÞÊÀi}iÊ for Victoria’s offshore waters that is consistent with the national regime.
42 2.2
43 Part 2 Our future options
2.3 Transport energy
Our transport sector will also see major changes over the coming decades and we will need to take action to reduce greenhouse gas emissions from transport – especially from road transport.
Like the stationary energy sector, Victoria’s transport sector To make a real difference we must work to reduce the will see major changes over the next few decades as we emissions intensity of road transport. That is, each vehicle move into a low emissions future. In transport, we face travelling on Victorian roads must be more fuel efficient the dual challenges of reducing greenhouse gas emissions and produce fewer emissions per kilometre travelled. while ensuring the long term security of transport fuel New technologies and alternative transport fuels could supplies as the global demand for oil increases. help to reduce emissions from the transport sector and Our transport sector is heavily dependent on oil, with improve our energy security. Electric vehicles, for example, oil-based fuels supplying over 90 per cent of our transport could reduce our long term dependence on oil and provide energy needs. Our demand for transport continues to a pathway to near zero emissions from transport as we increase, while domestic supplies of crude oil are in decline. move towards using electricity from renewable sources and This means we are increasingly reliant on imported oil clean coal (see case study – p47). to meet our transport energy requirements. New fuels, such as next generation biofuels, may also But unlike electricity, which is produced and used provide economic development opportunities, especially for domestically, crude oil and derived petroleum products regional Victoria, where they could be produced and used. are internationally traded commodities. Petroleum prices in Victoria are linked to the world price, so our best avenue to maintain a secure supply of transport energy at competitive prices is to promote fair and open international markets. We must also ensure efficient and competitive domestic markets for transport energy across all parts of the supply chain. The transport sector is responsible for around 16 per cent of Victoria’s greenhouse gas emissions, making it the second largest contributor of these emissions after the stationary energy sector. Road transport, both passenger and freight, is responsible for the bulk of these emissions (see Figure 14). As set out in The Victorian Transport Plan, released 2008 (see Box 7 – p45), we can reduce transport related emissions through a combination of actions, including:
UÊ ,i`ÕV}ÊÌ iÊi}Ì Ê>`ÊÕLiÀÊvÊÛi ViÊÌÀ«ÃÊÌ>iÊ UÊ Ê VÕÀ>}}ÊÌ iÊÃ vÌÊÌÊÀiÊivvViÌÊÌÀ>ÛiÊ`iÃ]Ê such as from single driver cars to public transport, cycling and walking
UÊ Ê*ÀÌ}ÊÌ iÊÌ>iÕ«ÊvÊÜÊiÃÃÃÊvÕiÃÊ and vehicles.
44 Box 7. Victorian Transport Plan
Decisions made now about transport infrastructure UÊ Ê,i}>ÊÀ>ÊÃiÀÛViÃÊqÊfÈääÊÊÌÊÀiÌÕÀÊ will shape Victoria for the rest of the 21st Century. train services to Maryborough and for up to 74 The Victorian Transport Plan uses the best population new V/Line carriages and travel demand forecasts available to set strategic UÊ Ê ÜÊiÃÃÊÛi ViÊÌÀ>Ã]ÊV>À«}Ê>`ÊiV`ÀÛ}Ê directions for transport to 2020 and beyond. initiatives, and $105 million for bicycle lanes and paths. The Victorian Transport Plan is a 10 year, $38 billion See www.transport.vic.gov.au investment plan to develop a sustainable and lower emissions transport system for Victoria. It is unprecedented * These projects have been submitted to Infrastructure in scope and scale, and includes: Australia for funding. UÊ ÊÊvÀ>iÜÀÊvÀÊvÕÌÕÀiÊ>`Ê`iÛi«iÌÊÌÊÀi`ÕViÊ the demand for travel by bringing where we work and where we live closer together
UÊ Êʼ««ii½ÊvÊ>ÀÊÌÀ>ëÀÌÊ«ÀiVÌÃÊÛiÀÊÌ iÊà ÀÌ]Ê medium and long term to respond to current demands and shape a responsible, sustainable transport system for future generations of Victorians. Major initiatives under the plan include:
UÊ Ê iÜÊÌÀ>ÃÊ>`ÊiÜÊÌÀ>VÃÊqÊ>ÊÛiÃÌiÌÊvÊÀiÊ than $2.6 billion 2.3 UÊ Ê ÀiÊÌÀ>ÃÊ>`ÊLÕÃiÃÊqÊf£°xÊLÊvÀÊxäÊiÜÊ low-floor trams and up to 270 new low-floor buses
UÊ Ê,i}>Ê,>Ê ÊqÊÀiÊÌ >Êf{ÊLÊvÀÊ>ÊiÜÊ track from West Werribee to Southern Cross Station
UÊ Ê iLÕÀiÊ iÌÀIÊqÊ>ÊiÜÊÀ>ÊÌÕiÊLiÌÜiiÊÌ iÊ city’s west and east, costing more than $4.5 billion
UÊ ÊÊ>ÌiÀ>ÌÛiÊÌÊÌ iÊ7iÃÌÊ>ÌiÊ À`}iIÊqÊÀiÊ than $2.5 billion to build a new tunnel under the Maribyrnong River
Oil and petroleum products However, there is agreement that global demand will Historically, Australia has been a significant producer of oil. continue to grow, and that oil-based transport fuels will In the mid 1980s, we produced levels of oil equivalent continue to be the predominant source of our transport to 80 per cent of our domestic consumption. However, energy needs at least until 2030.v As growing demand domestic reserves have peaked and Australia, like many places increasing pressures on available supplies, prices other developed countries, now depends on oil imports will inevitably rise. to meet our growing domestic demand. A small proportion of Victoria’s transport energy consumers Petroleum markets in Australia are mainly regulated already take advantage of our well established liquefied under national laws that aim to ensure consistency and petroleum gas (LPG) distribution network. Australia is a net competition at a national level. The price of petrol or exporter of LPG, which has the potential to produce lower diesel at a local service station in Victoria is largely set emissions than petrol. Better vehicle efficiencies and even by international market conditions and national taxes. lower emissions could be achieved with vehicles specifically Globally, crude oil is a finite resource. Opinions vary on designed for LPG, rather than simple conversions. Factory when the world’s reserves will peak and begin to decline. fitted LPG vehicles are already on the market and some A recent Commonwealth Government study reported that vehicle manufacturers are investigating advanced LPG our liquid fuel security is likely to remain sound for at least technology and developing car models designed specifically the next 15 years.iv for LPG use.
45 Part 2 Our future options
Alternative fuels Electric vehicles To complement oil-based fuels, and to help reduce Electric vehicles also appear promising, particularly for transport-related greenhouse gas emissions, the use passenger travel. They have zero emissions at the tailpipe of alternative transport fuels could be encouraged. with significant benefits to air quality, but their overall emissions depend on the source of electricity used to There are a number of possible alternative fuels and charge the car battery. With the emissions intensity of vehicle technologies, each with particular advantages electricity expected to fall significantly in the future – and and disadvantages, as well as suitability for particular uses. because electric motors tend to be very efficient – they Natural gas may provide a significant avenue for greenhouse gas emissions reductions (see case study – p47). Australia has an abundance of natural gas and an existing system that distributes natural gas to many homes Victoria needs to be in a position to benefit from the in Victoria. Natural gas can be used as a transport fuel in research occurring around the world on these technologies. the form of compressed natural gas (CNG) or liquefied That means adopting the right environmental and natural gas (LNG) for heavy vehicles used in regular short regulatory settings to enable the use of electric vehicles. runs. It has potentially lower emissions than petroleum For example, it will be important to encourage the or diesel. CNG is used already for forklifts and other establishment of recharging infrastructure that will applications where vehicles are able to regularly return promote competition between different makers of to a refuelling base. electric vehicles. Natural gas could be used more widely as a fuel for cars, The impact of the increased demand for electricity on buses and trucks. Several companies are investigating the electricity distribution network will also need to be the use of LNG for their trucks. For example, the Murray investigated. For example, it is possible that as the use Goulburn Cooperative trialled the use of LNG in four milk of electric vehicles grows, the networks will have to be collection trucks in 2004. Cost savings achieved have been upgraded to cope with the increase in electricity demand. so convincing that the cooperative has since invested in Indicative scenario modelling suggests that if 25 per cent two refuelling facilities to supply a fleet of 54 trucks of passenger and light vehicles were electric by 2030, now running on LNG, with plans to increase this Victorian electricity demand would be about 5 per cent number further. higher. We also need to better understand the potential for smarter electricity grids to use the combined storage power Biofuels of electric vehicle batteries to act as a viable means of Biofuels are another group of alternative fuels that could storing power and returning it back into the grid when contribute to the diversity of transport energy sources. it is needed. Biofuels are currently supported through the Victorian Coal-to-liquids Government’s Driving Growth biofuels action plan, as well as through Commonwealth Government assistance Victoria has very large brown coal reserves. As already (including an excise rebate). discussed in the gas and low emissions coal section, when combined with low emissions coal technologies, such as First generation biofuels are generally made from products CCS, these reserves could be converted to synthetic fuels. like grains or seed that could be used for food for humans or animals. By contrast, second generation biofuels use Using these technologies, Victoria could create new ‘waste’ products that do not compete with food crops. economic development opportunities by exporting these fuels to growing global markets. The competitiveness of There is a limit to the amount of biofuels that can be these products will depend on the costs of CCS and the produced in Victoria using first generation technology. success of the technologies. The crops used as inputs are often too expensive to produce commercially viable biofuels. Because the opportunities for current biofuels are limited by the availability and the low energy density of existing crops, they are best applied to local production. Victoria may have many more opportunities in next generation biofuels than in first generation biodiesel and ethanol. This could have many benefits for regional Victoria, including increased fuel security, generating new jobs and adding value to waste materials.
46 Driving the future today
Over the past two years Trentham publisher Alan Gray has The Sustainability Fund, managed by Sustainability racked up just over 20,000 kilometres in his all-electric car, Victoria, has also provided funding to Maribyrnong City produced by Victorian green industry start-up firm Blade Council for a project to assess the performance of BEV Electric Vehicles (BEV). as fleet cars. Alan produces and edits Earth Garden Magazine, and BEV Managing Director Ross Blade said the company chuckles when he hears predictions that “in the future relocated from Sydney to Castlemaine because their we’ll all be driving electric cars”. research showed that Victoria’s support for new green technologies offered the best opportunities for their “Well, I’ve been driving the future every day since 2008, business to grow. and I have to say, my electric car is absolutely fantastic,” Alan said. “I feel like George Jetson.” While the electric drive system currently uses off-the- shelf components, the development of a uniquely “You just plug it into a normal power point, it costs around Australian drive system is underway in conjunction one cent per kilometre, and if you use 100 per cent with the CSIRO. This coupled with BEV’s proprietary renewable energy, there are no greenhouse gas emissions.” electronic control system means additional The car is called the Electron, re-manufactured by hand manufacturing and licensing opportunities. at BEVs’ Castlemaine production factory. The control system allows rapid one-hour charging, BEV converts Hyundai’s Getz vehicles into the Electron optimises battery life and drive system performance, by replacing the existing internal combustion engine, and will soon enable the cars to interact with the exhaust system and fuel tank with a battery box and electricity grid. 2.3 electric drive system. “Blade is not just about the technology but also safety. With a range of 100 kilometres and a top speed of The Electron is the only Australian electric vehicle to be 110 kilometres per hour, the Electron is ideally suited successfully crash tested,” Ross said. to urban driving. Alan purchased the car in 2008 as a business vehicle, using a grant from the Victorian Government’s Enhancing Sustainability in New Investment program which assists businesses to access and assess new green technologies.
47 Part 2 Our future options
What we are doing now
The Government is already taking steps to help reduce transport related emissions, support transport energy security and create a more sustainable transport system. In addition to our actions under the Victorian Transport Plan, the Government has the following initiatives: Biofuels
UÊ ÊDriving Growth: A Road Map and Action Plan for the Development of the Victorian Biofuels Industry is promoting investor and consumer confidence in the Victorian biofuels industry by assisting the industry to plan for the future, attract investment and build critical mass.
UÊ Ê/ iÊ«>ÊVÕ`iÃÊfxÊÊvÀÊÌ iÊ vÕiÃÊvÀ>ÃÌÀÕVÌÕÀiÊÀ>ÌÃÊÌ>ÌÛi]ÊÜ V ÊÃÊ i«}ÊÌÊ`iÛi«ÊÌ iÊVÀÌV>Ê infrastructure needed by the biofuels industry in Victoria.
UÊ Ê/Ê`>ÌiÊ>ÊfÓÊÊÛiÀiÌÊ}À>ÌÊ >ÃÊLiiÊ}ÛiÊÌÊ i«ÊÊÌ iÊVÃÌÀÕVÌÊvÊ>ÊiÜÊL`iÃiÊLi`}Ê and storage facility in Melbourne that will enable Victorians to access locally produced biodiesel. Cleaner vehicles
UÊ Ê/ iÊÛiÀiÌÊÃÊÃÕ««ÀÌ}ÊÌ iÊ`iÛi«iÌÊvÊ>Ê/ÞÌ>Ê ÞLÀ`Ê >ÀÞÊ>`Ê >ÃÊVÌÌi`ÊÌÊLÕÞÊÓäääÊ ÞLÀ`Ê Camrys over two years. Production started at the end of 2009.
UÊ 6VÌÀ>ÊvviÀÃÊ>ÊfxäÊÀi}ÃÌÀ>ÌÊ`ÃVÕÌÊvÀÊ ÞLÀ`ÊÛi Við UÊ / iÊ6VÌÀ>ÊÛiÀiÌÊÃÊÜÀ}ÊÜÌ ÊiiVÌÀVÊÛi ViÊV«>iÃÊÌÊ>ÌÌÀ>VÌÊÛiÃÌiÌÊÌÊ6VÌÀ>°Ê UÊ Êfxää]äääÊÌÀ>ÊvÊ ÞLÀ`iiVÌÀVÊLÕÃiÃÊÜ>ÃÊ>ÕV i`ÊÊÕiÊÓää° Coal-to-liquids
UÊ / iÊÛiÀiÌÊÃÌÀ}ÞÊÃÕ««ÀÌÃÊÌ iÊ`iÛi«iÌÊvÊV>ÀLÊV>«ÌÕÀiÊ>`ÊÃÌÀ>}iÊÌiV }ið UÊ / iÊÛiÀiÌÊÃÊ>ÃÊÜÀ}ÊÜÌ Ê`ÕÃÌÀÞÊÌÊv>VÌ>ÌiÊÛiÃÌiÌÊÊV>̵Õ`ÃÊ«ÀiVÌð
48 2.3
49 Part 2 Our future options
2.4 Saving energy
In addition to the major changes that will take place in the way our energy is generated, there is substantial scope to significantly reduce our demand for energy and become smarter in the way we use energy.
Saving energy by becoming more energy efficient is an Our patterns of energy use are also changing. The area with the potential to achieve significant cost-effective increased use of domestic air conditioners, while not reductions in greenhouse gas emissions, as well as resulting in a large overall increase in energy use, creates contributing to the security of our energy supply. problems for our power supply on very hot days when peak demand occurs. For instance, in the summer of 2009, Population and economic growth, combined with other three days over 43 degrees Celsius led to local power factors such as the increasing use of high energy use outages throughout Melbourne. appliances (such as large screen televisions) and larger houses (often with fewer people living in them), has led Awareness of these issues has started to grow. Victorians to a steady increase in overall energy consumption. But now recognise that energy efficiency measures can help because Victorian energy has been cheap, there has been to reduce their energy costs, improve our overall energy little incentive for consumers to constrain their energy use productivity and lower the cost of addressing climate or for businesses to provide more efficient products. change. We are also realising that saving energy will contribute to a more stable energy system at times of peak demand and delay the need for expensive capacity upgrades to our electricity system.
50 Businesses are realising that using energy efficiently is good We know this because many of the cost-effective energy practice – it will save money and enhance competitiveness. efficiency gains that are currently available are not being Businesses and investors are also recognising that energy taken up by households or businesses. We miss these efficiency measures can create new jobs and industries in opportunities because there are barriers that stop us the emerging low carbon economy. changing our behaviour. These barriers include ‘split incentives’ (where the person buying a product is Despite the opportunities available to us, we are yet to different to the person using it – such as water heating fully tap into our energy efficiency potential. A study in a rental house), information failures (where consumers looking at options for reducing emissions in Victoria found do not have sufficient information to compare the energy that, based on conservative assumptions, greater energy efficiency, operating costs or emissions of products), efficiency could reduce emissions from the energy sector and limited access to upfront funds to purchase a more by over 20 per cent by 2025.vi efficient alternative. This finding is supported by a report prepared by ACIL These ‘residual barriers’ are likely to be most relevant in Tasman for the Victorian Government.vii This report found the residential and small business sectors. Commercial that there are significant energy savings to be made, and industrial sectors have much better access to capital beyond ‘business as usual’ practices, in the residential, and information, although split incentives may still play commercial and industrial sectors (see figure 15 – p50). a role in areas such as improving commercial building A report by the Nous Group for the Government suggests energy performance. similar savings can be achieved by improving the energy efficiency of our transport activity.viii If we are unsuccessful in capturing these readily available low cost emissions savings – and making significant gains Energy efficiency and a carbon price in energy efficiency – the costs of adjusting to a carbon price would be higher: for individuals, businesses and for A national emissions trading scheme would be the most the economy as a whole. 2.4 efficient and effective means of reducing greenhouse gas emissions in Australia. As noted in Part 1, such a scheme To overcome these barriers, the Victorian Government will drive a reduction in greenhouse gas emissions by has implemented, and will continue to implement, placing a cap, and therefore a price, on these emissions. effective, targeted policies and programs to support the take up of cost effective energy efficiency opportunities. But while a carbon price would provide some incentive for businesses and households to use energy more efficiently, These policies and programs will complement a future price changes alone may not address some energy use carbon price under an emissions trading scheme. behaviours – for a variety of reasons.
5-star rated Kangan Batman TAFE’s Automotive Centre of Excellence
51 Part 2 Our future options
Smarter energy use The Government is keen to encourage developments that benefit consumers in these and related applications. With electricity prices expected to rise for some time into the future, one simple way in which we can cut costs is The range of advanced functions that are incorporated by adjusting our electricity usage. in smart meters will steadily expand over time. This is a particularly attractive option because it can deliver We can combine these with targeted programs to give cost savings to families and businesses. When combined more detailed, personalised advice on how people, with additional zero or low cost information measures households and businesses can change their behaviours (see below), or by applying better building design and to reduce energy use. Activities such as home assessments, more efficient industrial processes, the benefits can be home retrofits, business energy audits, rebates and other even greater. incentive programs can help us to make these changes and will be particularly beneficial to low income earners. However, a major challenge exists in getting us to change our habits – precisely because they are ‘habits’ and are largely subconscious actions. Behaviours like turning off lights and appliances, or setting the heating and cooling to more moderate temperatures, take time to become part In-home displays of our daily lives. Another problem is that consumers do not have readily available information about how much An in-home display is an electronic display (usually a electricity or gas they are consuming. small LCD screen) which can monitor information about electricity use and communicate wirelessly with the Smart One important first step has been building awareness Meter and to the retailer. When used with compatible about how to reduce emissions from our energy use (many devices, some displays enable householders to remotely Victorians now recognise the Black Balloons campaign). control (turn on and off) appliances in the house. This will But achieving lasting change will require further action. allow consumers to see how much electricity they use at The roll out of smart meters across Victoria will be an specific times, and provide opportunities to save money important step in empowering consumers to monitor, and energy by changing behaviour. understand and adjust their energy use. Smart meters will enable retailers to create innovative pricing structures that provide incentives to change the timing of our energy use. They will also support more active ways of managing demand during peak periods and contribute to the overall security of our energy system. In addition to a number of other functions, smart meters incorporate advanced communications technology that can provide consumers with highly useful time-of-use information on the volume and cost of their electricity consumption. Energy retailers will provide customers with a summary of this new information through their normal bills. However, the technology also enables the use of ‘in-home displays’ (see box opposite) and internet-based measures that can monitor and display this information, and empower consumers to take even more beneficial actions.
52 Better design and processes While there are many cost-free behaviour changes that ->ÀÌÊ iÀ}ÞÊ<iÃÊ>`Ê
53 Part 2 Our future options
Ensuring best practice in energy efficiency major offices, with a view to applying it more broadly to buildings such as hospitals and schools. Individuals and Our own experience – and that of other places around the householders can also seek expert advice on how to world – gives us an indication of best practice in energy achieve energy savings through home energy audits. efficiency in many areas. For example, we know that substantial cost-effective emissions reductions can be We can also invest in innovative energy solutions at the achieved with positive pay back times by adopting best precinct scale (around 10,000 households). Precincts can practice across the built environment – in the design of demonstrate the substantial energy savings that can be buildings, in the materials and technologies we use to build achieved by combining energy efficiency and distributed and operate them, and in the way we plan our suburbs, energy generation technologies in one location. towns and cities. Best practice urban developments in Victoria are already One way in which businesses can adopt best practice in showing that such an approach can bring new housing energy efficiency is through energy performance contracts. and commercial areas onto the market that offer improved In these contracts, the upfront costs of undertaking energy energy efficiency for households, business and the broader efficiency improvements are offset against the future community compared to traditional approaches. But to savings delivered by these improvements, because the make a significant contribution to reducing emissions from contractor guarantees energy cost savings. The Victorian our built environment, these developments will need to Government is trialling energy performance contracting in become ‘standard’ best practice – not ‘unique’.
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54 Reducing stationary energy use at times High peak prices for electricity can create opportunities for of peak demand businesses that are able to reduce their energy use during peak periods. During these periods, a retailer could arrange Some benefits from energy efficiency accrue to the person to pay a large customer to not use electricity and, as a undertaking the activity – the consumer. But there are result, save money by avoiding the need to buy electricity other benefits that can be delivered to the system more at the very high market prices. Some businesses may also broadly. These are especially relevant during times of be able to negotiate similar contracts with electricity peak demand, when prices are high and capacity is distributors to reduce electricity usage during times of being stretched. peak network congestion. Because electricity cannot be efficiently stored in large Better information (for example, as provided via smart quantities, installed capacity must be sufficient to meet meters), appropriate incentives and more variable prices peak demand. During peak periods, wholesale electricity for electricity could help make these arrangements prices can rise from their normal levels of around more attractive. $40-50/MWh to $10,000/MWh.ix However, most customers, including householders, contract to buy their Other emerging technologies could play a role in reducing electricity at a low fixed rate. This means retailers must energy demand. For example, ‘load control devices’ can be continue to supply this electricity at the normal low rate and fitted in appliances that consume high levels of energy (like purchase electricity to meet this demand at the higher rate. air conditioners) so that they can be controlled remotely. By better reflecting the cost of electricity at a particular This technology has been trialled successfully in places such point in time, the level of overall peak demand could be as California and Western Australia, where energy network lowered. Successfully lowering these peaks would mean operators switch off air conditioners for brief, intermittent expensive new generation capacity (new power stations) periods (usually just a few minutes). This can reduce the could be deferred, and capacity upgrades to the transmission demand across the system significantly, while the people 2.4 and distribution systems could be delayed. This would using the air conditioners may not even notice that they lower the overall costs of the system for consumers. have been turned off (see Box 8). While there is no plan at this stage to trial this technology in Victoria, emerging technologies that offer new ways of helping to deal with peak demand will continue to be monitored.
Box 8. Managing peak demand
The use of air conditioners on hot days can cause problems for our electricity network. The capacity of our system to generate and distribute electricity must be sufficient to meet the peaks in demand that occur for a few hours on a small number of days each year. Any process that can help to limit the height of these peaks can help to delay expensive network upgrades. This will be of increasing importance as our supplies of electricity diversify to include more variable sources such as wind power. A Western Australian company has trialled ‘switching devices’ that allow the retailer to alter the air conditioner compressor’s regular pattern of switching on and off. Used only on the hottest days (over 36 degrees Celsius), the trial – which included over 1000 households – was able to reduce demand in participating households by 27 per cent (see figure 16 below), while the people using the air conditioners may not even notice they have been turned off.
55 Part 2 Our future options
Distributed micro-generation National regulatory bodies are now responsible for establishing the rules that deal with grid connection. Distributed generation generally refers to small scale and It will be important for them to ensure that the system is ‘micro’ types of generators that are connected directly to sufficiently adaptable to cater for new patterns of energy the distribution network – not to the transmission network generation where these bring broader social benefits. like most large scale generators. The most common forms in current use are solar photovoltaic panels on the roofs of Small scale operators may also have difficulties negotiating residential, commercial and community buildings and gas a feed-in tariff (if, like some non-renewable technologies, ‘cogeneration’ systems that produce electricity and capture they are not covered by current feed-in tariff regulations). the heat for local use – for example, in hospitals. Many of the benefits from these systems are derived locally. The price of electricity from these systems can vary However, some of the broader benefits are only likely to from being commercially viable (for some forms of occur when the take-up of distributed generation is far co-generation) to very expensive (for solar panels). greater than today. Currently, the limited take-up of these A key factor in increasing the use of these technologies systems (due to high upfront costs or specific operating is ensuring that operators have the ability to sell excess requirements) means this is expected to only provide a electricity back into the grid. The Victorian Government marginal source of supply in the near future. recently introduced a premium feed in tariff (a minimum Nevertheless, distributed generation could help to of 60c/kWh) for small scale solar panels (up to 5kW). Other moderate peak demand loads, delay the need for system small scale renewable energy generators (up to 100kW) upgrades and reduce transmission losses. These systems can attract a ‘one-for-one’ payment (15-20c/kWh). can also allow businesses to maintain operations while In some instances, technical and regulatory barriers may temporarily disconnecting from the network in times of limit the broader take up of these systems. In particular, high electricity prices or during times of network congestion. our distribution system was not designed to accommodate large numbers of small generators which intermittently feed electricity into the grid. As a result, capacity and management issues can constrain the potential for distributed generation.
56 What we are doing now
Victoria has introduced a number of measures to improve energy efficiency. More information is available at the You Have the Power. Save Energy website - www.saveenergy.vic.gov.au Black Balloons campaign
UÊ / iÊ >VÊ >ÃÊV>«>}Ê } } ÌÃÊëiÊi>ÃÕÀiÃÊv>iÃÊV>ÊÌ>iÊÌÊÀi`ÕViÊÌ iÀÊiiÀ}ÞÊLð Energy Saver Incentive scheme
UÊ Ê6VÌÀ>½ÃÊ iÀ}ÞÊ->ÛiÀÊViÌÛiÊ -®ÊÃV iiÊÃiÌÃÊ>ÊÌ>À}iÌÊvÀÊiiÀ}ÞÊÃ>Û}ÃÊÊÌ iÊÀiÃ`iÌ>ÊÃiVÌÀ°ÊÌÊÀiµÕÀiÃÊ energy retailers to help households implement energy efficiency activities at no or discounted cost, including installing efficient light bulbs, shower roses and window sealing, switching to less greenhouse intensive fuels and removing old refrigerators. Rebates and grants
UÊ Ê,iL>ÌiÃÊ>ÀiÊ>Û>>LiÊvÀÊÃ>ÀÊ ÌÊÜ>ÌiÀ]Êë>ViÊ i>Ì}Ê>`ÊÜ ÌiÊ}`ðÊÀ>ÌÊ«À}À>ÃÊVÕ`iÊÌ iÊiÊ7ÃiÊ program. The Energy and Water Taskforce program also provides free energy and water retrofits (like draft sealing and insulation) to concession card holders in disadvantaged areas and assists local jobseekers attain green skills. Specific programs to upgrade public housing are also being implemented. Smart Meters
UÊ ÊÊ-i«ÌiLiÀÊÓää]ÊÌ iÊÀÊÕÌÊvÊ->ÀÌÊ iÌiÀÃÊViVi`°Ê ÞÊÌ iÊi`ÊvÊÓä£Î]Ê>ÀÕ`ÊÓ°xÊÊ->ÀÌÊ iÌiÀÃÊ will be installed for all Victorian residential and small business electricity customers. 2.4 The roll out of Smart Meters represents the biggest investment in energy infrastructure in Victoria since the establishment of the poles and wires network. Smart Meters will allow:
Ê Ê UÊ VÃÕiÀÃÊÌÊLiÌÌiÀÊ>>}iÊÌ iÀÊiiVÌÀVÌÞÊÕÃiÊÌ ÀÕ} Ê}Ài>ÌiÀÊÛÃLÌÞÊvÊÕÃ>}iÊ«>ÌÌiÀÃ Ê Ê UÊ VÃÕiÀÃÊÌÊi>ÃÞÊÃÜÌV ÊiiÀ}ÞÊÀiÌ>iÀÃÊÀÊÌÊÛiÊ ÕÃi Ê Ê UÊ iiVÌÀVÌÞÊLÕÃiÃÃiÃÊÌÊÀi>`ÊiÌiÀÃÊÀiÌiÞ]Ê>`Êëii`ÊÕ«ÊÀiëÃiÃÊÌÊ«ÜiÀÊÕÌ>}ið Environment and Resources Efficiency Plans
UÊ Ê ÛÀiÌÊ>`Ê,iÃÕÀViÃÊ vvViVÞÊ*>ÃÊ >ÛiÊÃÕVViÃÃvÕÞÊ>ÃÃÃÌi`Ê>À}iÊ`ÕÃÌÀ>ÊV«>iÃÊÌÊÀi`ÕViÊiiÀ}ÞÊ and water use and waste generation. Government leadership on energy efficiency
UÊ Ê/ iÊÛiÀiÌÊÃÊ«iiÌ}Ê>ÊiiÀ}ÞÊ«iÀvÀ>ViÊVÌÀ>VÌÊÊ£ÈÊvvViÊLÕ`}ÃÊÊ iLÕÀi°Ê Energy efficiency measures taken as part of this project are expected to reduce energy use by up to 33 per cent. A trial is planned for a public health care facility and the program could also be rolled out to schools. Participation in the National Strategy on Energy Efficiency
UÊ Ê Õ`}ÊÊÌ iÊ >Ì>ÊÀ>iÜÀÊvÀÊ iÀ}ÞÊ vvViVÞ]Ê6VÌÀ>ÊÌ>ÌÛiÃÊVÕ`iÊiÝÌiÃÃÊÌÊÕÊiiÀ}ÞÊ performance standards for appliances and appliance labeling.
UÊ Ê7ÀÊÃÊÕ`iÀÜ>ÞÊÌÊ«ÀÛiÊLÕ`}ÊÃÌ>`>À`ÃÊvÀÊ iÃÊvÀÊÌ iÊiÝÃÌ}ÊxÊ-Ì>ÀÊÌÊÈÊ-Ì>À®ÆÊ`iÛi«ÊiÜÊÃÌ>`>À`ÃÊ for commercial buildings; and mandate disclosure of building efficiency when a building is sold or rented.
UÊ Ê7ÀÊÃÊ>ÃÊÕ`iÀÜ>ÞÊÊi>ÃÕÀiÃÊÌÊ«ÀÛiÊÌÀ>ëÀÌÊiiÀ}ÞÊivvViVÞ]ÊÊ«>ÀÌiÀà «ÊÜÌ Ê«ÀÛ>ÌiÊviiÌÃÊ>`Ê through eco-driving campaigns.
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