Renewable Energy & Greenhouse
Renewable Energy & Greenhouse Update: February 2005
28 February 2005
Kyoto Protocol enters into force
On 16 February 2005 the Kyoto Protocol entered into force. The protocol is designed to slow down global warming by lowering greenhouse gas (GHG) emissions by, among other mechanisms, introducing an international carbon trading scheme. The protocol requires developed countries signatory to the treaty to lower their GHG emissions by at least five per cent below 1990 levels in the period 2008 to 2012, with specific targets varying from country to country. Developing countries are not required to set emissions targets, although they are able to participate in the protocol's market-based mechanisms.
The entering into force of the protocol reignited debate in Australia about the Federal Government's climate change policy. Although the protocol has been ratified by 141 nations, Australia, together with the United States, has repeatedly refused to ratify the protocol.
The central reason provided by the government is that the protocol does not impose targets on developing nations, and developing nations are, in many key sectors, direct competitors to Australia. Although the government has refused to ratify the protocol, it has affirmed its aim to achieve the target for Australia under the protocol of 108 per cent of 1990 levels of GHG emissions in the period 2008 to 2012. In recent times, the government has also introduced incentives to reduce emissions and to develop new technologies, such as the Greenhouse Gas Abatement Programme, the Greenhouse Challenge, and the Mandatory Renewable Energy Target (MRET).
However, the government's climate change policy has been the subject of extensive criticism. The number and scope of measures taken to respond to climate change in Australia have been relatively small. In terms of the protocol, critics have highlighted the fact that by committing itself to meet its obligations under the treaty without ratifying, the Federal Government is making a financial commitment without entitling Australia to any of the corresponding benefits of participating in the protocol's trading scheme.
Recently, independent analysts, Point Carbon, estimated that the value of the global emissions trading markets is likely to reach €34 billion (A$58 billion) in 2010. As the Federal Government has not ratified the protocol, it will be excluded from this potentially lucrative global market. In addition, to a certain extent Australian business will also be disadvantaged. With international negotiations for climate change targets beyond 2012 due to commence this year, it will be fascinating to see the Federal Government's future policy on this important issue.
For more detailed information on the Kyoto Protocol and its implications for Australian business, please see our recent article Kyoto Protocol now in force: implications for Australian business.
ICCT releases report on climate change
The International Climate Change Taskforce (ICCT) has released its report on climate change. The ICCT was established in 2005 by the Institute for Public Policy Research in the United Kingdom, the Center for American Progress in the US, and the Australia Institute. It aims to identify ways to encourage Australia and the US to participate in international action to tackle climate change.
The report emphasises that the US and Australia should aim to join the international framework after 2012, and to begin preparations as soon as possible. Other recommendations made include that a long term objective be established to prevent global average temperature from rising more than 2°C, and that G8 governments should establish national renewable portfolio standards to generate at least 25 per cent of electricity from renewable energy sources by 2025.
A full copy of the report is available at http://www.tai.org.au/WhatsNew_Files/Whats_New.htm.
NSW attempts to access European carbon trading scheme
According to The Sydney Morning Herald (18 December 2004), the New South Wales Government is trying to circumvent the Federal Government's refusal to sign the Kyoto Protocol by opening up state access to the European Union's new carbon trading scheme. An EU official was reported as saying, 'We have had some contacts with NSW and we have also heard Victoria is quite interested ... This interest has been spotted by the European Parliament and it has come up with a review clause which says we should have a look at whether there is a possibility of including state governments'.
ACT Greenhouse Gas Abatement Scheme commences
The Australian Capital Territory Greenhouse Gas Abatement Scheme commenced on 1 January 2005. The scheme requires electricity retailers in the ACT to achieve greenhouse benchmarks. The scheme will be administered by the New South Wales regulator, the Independent Pricing and Regulatory Tribunal (IPART), and will be integrated with the NSW scheme.
Two Victorian wind farm proposals dropped
Melbourne-based company Wind Power has dropped plans to construct wind farms at two locations in Victoria after determining that the projects were not viable. The first wind farm, to be located at Clarkes Hill, north-east of Ballarat, involved 22 wind turbines at a cost of $60 million. The second project, planned for the Macedon Ranges, east of Woodend, involved at least 200 wind turbines mounted on a 70 metre high ridge. According to a spokesman, the Clarkes Hill project was dropped because the two per cent MRET was inadequate, and also because of feedback from local people and other stakeholders. The Macedon Ranges site was deemed to not be wind-swept enough. Wind Power has indicated that it will definitely continue with plans to construct wind farms at Wonthaggi, and Bald Hills in Gippsland.
Enviromission purchases land for solar tower
Melbourne-based company Enviromission has signed an agreement to buy a 10,000 hectare plot of land at Buronga, NSW, for its proposed solar electricity power plant. Plans for the plant feature a 1000 metre reinforced concrete tower, with a transparent solar collector at its base. The project is expected to produce up to 200 megawatts of electricity. The cost of the project is estimated at hundreds of millions of dollars. Enviromission is currently in the final feasibility phase of development, with construction expected to be completed by the end of 2009.
In brief — government and NGOs
- Emissions data on Australian Industries released. Minister for the Environment and Heritage Ian Campbell has released new emissions data for many Australian industries on the National Pollutant Inventory, see http://www.npi.gov.au/index.html.
- New MRET percentage. The Federal Government has introduced the Renewable Energy (Electricity) Amendment Regulations 2005 (No 1). These Regulations set the Renewable Power Percentage (which when multiplied by the amount of electricity purchased by a 'liable party' determines the number of renewable energy certificates that must be paid by the party under the Mandatory Renewable Energy Target) at 1.64 per cent for 2005. This percentage is effective from 15 Februrary 2005. The percentage for 2004 was 1.25 per cent.
- NSW Government takes control of large scale wind farm developments. According to The Sydney Morning Herald (21 January 2005), the Minister for Infrastructure and Planning Craig Knowles has announced that he will take over control of all 'large scale wind farm approvals from local councils'.
- New Victorian geothermal energy bill introduced. The Geothermal Energy Resources Bill 2004 (Vic) aims to encourage large scale commercial and sustainable exploration and extraction of Victoria's geothermal energy resources. Small-scale uses will continue to be regulated by existing planning, environmental and water laws. The Bill was read for a second time on 1 December 2004.
- SA Government halts issuing of new renewable energy licences. According to Project Finance International (Thompson) (26 January 2005), the South Australian Government will temporarily stop issuing new licences for renewable energy. It claims that the state's significant peaking capacity shortage is not being alleviated by renewable plants.
- South Australian Greenhouse Neutral Strategy. The SA Government has released the Greenhouse Neutral Strategy, which sets targets for containing greenhouse gas emissions in Adelaide. Under the scheme, there will be a target of zero net emissions from buildings by 2012, and transport by 2020.
- Significant interest in future Western Australia power projects. According to a government press release, a Western Australian Government plan to secure additional power supplies over the next decade is moving forward, with 14 companies expressing interest in providing extra power capacity in 2007. The Minister for Energy said that the government had sought expressions of interest from power generators in October 2004 to supply up to 420 MW in 2007, and had received 2742 megawatts in offers.
- Power companies audited. An audit of Australia's 16 biggest power companies commissioned by WWF Australia has found that the sector is failing to upgrade to new clean power generation technologies. The audit gave electricity companies a score out of 10 for the way in which they are moving towards renewable energy sources. A copy of the audit is available at http://www.wwf.org.au/News_and_information/Publications/PDF/Report/powerswitch_generator_scorecard_2004.pdf.
- Hazelwood Power plant to continue operation for at least 20 more years. The Victorian Government has decided to allow Hazelwood Power to mine more coal, which will enable it to stay open beyond 2009 to 2031. The power plant is Victoria's second largest electricity generator, and produces higher levels of greenhouse gas emissions per megawatt than any other power station in Australia. In return for allowing Hazelwood Power to extend the life of the power plant, the government has demanded a reduction in the plant's greenhouse gas emissions. This reduction is likely to be 25 million tonnes spread over 20 years, a 6.8 per cent reduction on current levels.
- AGL proposes integrated gas-fired and wind farm operation. The Australian Gas Light Company (AGL) plans to construct a 90-135 megawatt wind farm to add capacity to its existing gas-fired peaking power plant in Hallett, South Australia. The two facilities would be integrated so that the existing gas-fired facility can provide back-up support to the wind farm. The cost of the project is estimated to be more than $100 million. AGL is currently evaluating competitive contracts for the turnkey design and construction of the wind farm, with work scheduled to commence around July 2005.
- Southern Hydro considers new hydro power station. According to ABC News (7 February 2005), Southern Hydro has begun looking into the feasibility of building a large hydro power station on Lake Guy, in the Victorian Alps. According to Southern Hydro, the station would reinstate flow in the Pretty Valley Creek using water from Rocky Valley Dam. The power station could potentially be commissioned by the end of 2008.
- Wind turbines pledged for Albany. According to The West Australian (11 February 2005), the Liberal Opposition Leader and Nationals Leader have pledged to expand the wind farm in Albany, Western Australia from 12 to 19 towers. The new turbines will cost $21 million and be funded from the capital works budget of the operator of the wind farm, state-owned Western Power.
- Pacific Hydro purchases stake in British renewable energy company. Australian renewable energy company Pacific Hydro has bought a 14.5 per cent stake in a newly listed British company Renewable Energy Holdings plc (REH). Pacific Hydro bought the stake by selling to REH its 49 per cent interest in Seapower Pacific, the owner of a wave power project being developed in Fremantle. REH has raised around €10 million, which will be used to invest in British renewable energy projects.
- Hydro Tasmania Consulting launches opens first overseas office. Hydro Tasmania Consulting has opened its first international office in Papua New Guinea. In 2004 it won a contract to provide consulting services to PNG power to refurbish a power station built in 1967 on the Laloki River near Port Moresby. General Manager Mike Brewster has announced that further overseas offices are likely to follow, with India, Sri Lanka and the Philippines likely locations.
- Application for wind farm in Clare Valley lodged. According to The Age, energy company Hydro Tasmania has announced that it has lodged a development application with two South Australian councils for a $180 million 117 megawatt wind farm in the Clare Valley, South Australia. Construction is expected to be completed by June 2007.
- Wind farm for Boorowa possible. According to ABC News (14 December 2004), the central NSW town of Boorowa could host a wind farm in the future if a suitable location is identified.
- Sydney Gas and C02CRC announce feasibility study. Sydney Gas has signed an agreement with the Cooperative Research Centre for Greenhouse Gas Technologies (CO2CRC) to undertake a joint feasibility study that will assess the effects of injecting CO2 into coal seam reservoirs in the Sydney basin.
- Trust Power to invest more in Australia. According to the Australian Financial Review (3 February 2005), New Zealand power generator Trust Power has announced that it is planning to put more wind farms in Australia as part of a major expansion. A further $276 million will be invested, in addition to the company's existing investment in wind farm projects in South Australia. Trust Power is New Zealand's fourth-largest electricity generator and retailer.
- Wind energy capacity in Australia doubles in past 12 months. According to the Australian Wind Energy Association, Australia's wind energy capacity almost doubled with 380 megawatts of wind energy capacity installed at the close of 2004. This is compared with 198 megawatts at the same time the previous year.
International
EU launches carbon trading scheme
The European Union carbon trading scheme commenced on 1 January 2005. The scheme regulates the carbon dioxide emissions of over 15,000 power plants and factories in Europe. These power plants and factories account for almost half the carbon dioxide emissions produced by Europe. The scheme is intended to ensure that Europe meets its Kyoto Protocol target, which is to cut its 1990 level of carbon emissions by eight per cent by 2012.
Under the scheme, each business is provided with an amount of carbon dioxide that they are allowed to emit, which was set by national governments, and has been approved by the European Union. Businesses must either cut their emissions or else purchase unused entitlements from more efficient enterprises. Some campaign groups have argued that the limits are too soft, and that some governments have knowingly set relaxed limits. The market is likely to be lucrative for a number of financial institutions. According to Point Carbon (30 December 2004), the market will be worth approximately €50 billion (A$85 billion) in the 2005–07 contract period, with five billion tonnes of carbon dioxide being traded.
BHP first buyer of carbon credits under EU Trading Scheme
BHP Billiton became the first buyer of carbon credits under the European Union Emissions Trading Scheme. BHP Billiton purchased the credits to offset carbon dioxide emissions from its Liverpool Bay and Bruce Oil gas fields in the Irish Sea and North Sea. It bought 5000 tonnes of carbon dioxide emissions credits at a price of EUR8.40 (A$13.87) per tonne. According to the Australian Financial Review (16 February 2005), while the deal was relatively small, it was one indication that the market in carbon credits could explode if emissions trading takes off.
China to surpass US as biggest GHG emitter by 2030
According to a report by Reuters, China is likely to pass the United States as the world's largest source of greenhouse gas emissions by 2030. China currently relies on coal for 70 per cent of its power and is the second largest oil consumer. Its economy, which grew by 9.5 per cent last year, is driving demand for fossil fuels higher, and more consumers are purchasing cars. As a developing country, China has no obligation under the Kyoto Protocol to cut carbon dioxide emissions during the first phase of the protocol between 2008 to 2012.
New renewable energy law considered in China
According to Point Carbon (11 January 2005), a new renewable energy law has been submitted to the Standing Committee of the National People's Congress. The draft code, which is currently having its first reading, aims to help China reach its targets on renewable energy use. It proposes to offer discount loans to renewable energy projects, value-added tax waivers to energy exploration equipment and products that consumer this kind of energy, and other tax preferences for projects.
CDP encourages investment in GHG reduction projects
The Carbon Disclosure Project (CDP), which is a secretariat for 143 institutional investors, is requesting information from 500 of the world's largest companies about their greenhouse gas emissions. According to Point Carbon (2 February 2005), the purpose of the request is to encourage the companies to start thinking about their greenhouse gas emissions, and to provide the world's institutional investors with data. Australian financial institutions such as the BT Financial Group and the Vicsuper fund are among the institutional investors. There are eight Australian companies among the 500 being surveyed, including Rio Tinto, BHP, Telstra, ANZ, NAB, Commonwealth Bank, Westpac and News Corp.
In brief
United Kingdom
- According to The Guardian (14 February 2005), the Co-operative Insurance Society (CIS) will encourage companies in which it invests to support renewable power with supply deals that promote lower prices. The CIS wants firms to enter into contracts with green energy providers. CIS is approaching 40 companies, in which it collectively holds €1.5 billion.
- Energy company Entergy Corp has purchased two million tonnes of C02e from Mississippi oil company Denbury Resources. According to Point Carbon (26 January 2005), Entergy purchased the carbon in a bid to convince the US Congress that emissions trading will work. Entergy indicated that they do not intend to sell the credits.
- New York state has selected five renewable power projects to receive US$15.7 million for development. Two of the projects are for wind power plants, while the remaining three are hydroelectric.
- According to Point Carbon (19 January 2005), Canada and Sri Lanka have signed a Memorandum of Understanding (MoU) on Clean Development Mechanism (CDM) projects. The MoU is designed to smooth the process for Canadian investors wishing to participate in CDM projects in Sri Lanka and will remain valid for five years. Canada has signed similar agreements with a series of South American countries.
The Gharo wind power project was inaugurated on 15 February. The project will have a 50 megawatt capacity, which will be increased to 100 megawatt, and then to 800 to 900 megawatt by 2010. When completed, the power plant will meet more than 30 per cent of the energy requirements of Karachi. The cost of the project is approximately $875 million. Most of this cost is being born by the private sector, while the government has contributed 19,700 acres of land.
India
According to the Business Standard (17 February 2005), exports of solar power generation equipment from India are set to double in the next three years. In 2000, India exported Rs 100 crore (A$28 million) worth of solar power generation equipment per year. In the next three years exports are expected to be approximately Rs 1200 crore (A$330 million) per year.
South Korea
The Hyundai Research Institute has recommended that the Korean Government launch a domestic emissions trading scheme early, to prepare for the post 2012 period when the country will have emissions reduction targets under the Kyoto Protocol. South Korea is the world's ninth largest emitter of greenhouse gases.
China
According to The Canberra Times (7 February 2005), the State Environment Protection Administration, China's new environmental authority, has ordered the state-owned Yangtze River Three Gorges development corporation to halt construction at three new projects or face legal penalties. It has also ordered a halt to construction at 30 major projects around China because they had ignored laws requiring environmental impact assessments before work began.
Japan
According to Point Carbon (11 January 2005), carbon dioxide emissions from the 10 largest industries in Japan increased by almost one per cent in 2003. This puts the country's emissions at 0.3 per cent above 1990 levels. In related news, the Japanese Government has asked 11 power and industry sectors to increase their efforts to reduce greenhouse gas emissions.
Italy
According to the Economy Minister, Italy is likely to be 100 million tonnes of CO2e short of its Kyoto Protocol target annually. Italy's target is to reduce emissions by 6.6 per cent from 1990 levels, but in 2002 its emissions had climbed 8.8 per cent.
Spain
According to the Environment Ministry, Spain's greenhouse gas emissions levels have risen by three percentage points since 2004. The ministry warned that the drought that Spain is currently experiencing could reduce hydroelectric generation and make the figures for 2005 worse. Spain's greenhouse gas emissions currently stand almost 45 per cent higher than in 1990, which is three times higher than the country's Kyoto Protocol target of 15 per cent above 1990 in the period 2008–12.
Germany
The share of German electricity in 2004 that derived from renewable energy sources has increased to 9.3 per cent. In the previous year, the proportion was 7.9 per cent.
New Zealand
Christchurch firm Windflow Technology has received council approval for a 250 hectare wind farm near Palmerston North. The farm should generate 52 megawatts of power by the time it is fully commissioned at the end of 2008. The company plans to raise $80 million in three years to purchase 104 turbines for the site.
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