The clock is ticking as Australia takes it first steps towards a renewable, distributed and integrated energy system. With a federal mandate for 20 per cent renewable electricity by 2020 through the recently enhanced Renewable Energy Target (RET), as well as a target for reduction of green house gas emissions of 5 per cent below 2000 emission level by 2020, the success of these measures will be determined by the adoption rates of clean energy production, energy efficiency technolgies, and smart grid technologies. The RET, the $100 million Smart Grid, Smart City project, smart meter rollouts as well as other independent trials will have major implications on the energy network infrastructure and distributed load management in the coming decades. As the clock ticks and time runs out, government frameworks incentivising energy investment will likely prove crucial in hastening the speed of renewable uptake.
Attempting to provide the facts for an ideal national energy framework is Siemens Australia strategic marketing and emergent technologies executive manager, Michael Bielinski. The 48-year-old technologist and a team of Siemens researchers recently released their Picture the Future report, a year’s worth of research combining technology analysis and economic modeling. A collaboration of over 22 validation partners and 85 research groups assessing over 150 reports, the future analysis starts from an ideal 2050 scenario and works backwards to develop a compelling vision of Australia’s future.
The first such study to be performed on an individual country by Siemens, the research attempts to model what needs to happen in the energy sector if Australia is to achieve its greenhouse gas reduction targets.According to Mr Bielinski, realistic government frameworks put in place to incentivise investment are necessary for the speedy uptake of renewable energy. Having predicted the technology and actions needed to reach future renewable targets, Mr Bielinski and Siemens have opened the door to public discussion in the hopes it will add to the momentum needed to remove the uncertainty plaguing the industry.
“We don’t have the regulation and economic frameworks in place to drive investment in this sort of technology,” Mr Bielinski explains to Energy Source & Distribution.
“What we have is a government doing some great work on grants in terms of things like Smart Grid, Smart City and Solar Flagships. They’re fantastic programs, they’re doing the things which governments are there to do. They say, ‘The technology is not proven yet, let’s help industry get technology up and running and proven so that when the economics can work, companies will come and invest in it’. But in parallel with that, we need governments to set up the regulations, framework and legislation that will encourage and drive companies to invest in this renewable technology. And those frameworks are not there at the moment.”
Siemens sees the regulatory uncertainty and the lack of a price on carbon as significant roadblocks for Australia as we attempt to decarbonise our energy generation and move to renewable and low carbon sources of power. The technology company hopes that the technology roadmap that has been developed will drive debate and result in an earlier resolution for government decision-making.
“Our key message has been… as technologists, the government set us a goal (and now) we’ve worked out a way to achieve the goal by the use of various new technologies. If the energy sector is to actually implement these technologies, it will require having investment certainty. It involves having some sort of price on carbon.
“We do not propose particular legislative mechanisms – this is up to the legislators and regulators to determine. But as a key principle, we need a price on carbon in order to drive investment towards the technology that will allow us to achieve our targets. If we don’t have that, real companies won’t invest in the technologies. And we need investment certainty. We need to get away from a situation where companies are unsure about investing in Australia.”
“Further, the price on carbon must be implemented in a way that fairly treats the existing industry and their capital investments. We cannot allow a situation where energy companies are unwilling to invest in Australia because they see the sovereign risk as being too high.”
While some companies may be willing to take the chance that there will be a price on carbon, Mr Bielinksi argues that banks are unwilling to lend money on that basis to large, billion-dollar projects in large-scale power generation.
“(An energy executive’s) job is to invest his company’s money on his shareholder’s behalf and to get a reasonable and safe return on that money. He’s not able to gamble on such issues. It’s that simple.
“At the end of the day, (utilities) will make investment decisions based on return on investment to their shareholder or state government that owns them. And they’re not going to invest in things where they don’t have surety, as a general rule.”
While far-reaching technology predictions to guide moral decision-making and economic development have often been relegated to the realm of science fiction, Siemens believes it has provided the groundwork for a very real sustainable energy future for Australia.
Mr Bielinski looked to the expertise of Siemens’ Munich-based corporate technology group for the technology component of his research, a group that has spent a decade developing a process for working out the likelihood of individual technology success. Engaging CSIRO’s assistance for the economic modeling, he also looked at the research and development projects currently occurring in a number of countries. The research has been distilled and made to fit two future energy pathways Australia must choose between.
“When you look at the future of energy, there are two possibilities for Australia. The first is, ‘We’re not worried about climate change, we’re not worried about greenhouse gas emissions and we’ll keep doing what were doing, which is for Australia means burn more coal’. That gives us an economic advantage over other economies. The other future says, ‘We as a nation have set ourselves some goals for greenhouse gas emission reduction. And are actually going to try and achieve those goals’. Our study looks at and compares what those futures might look like.”
Looking at ways to achieve future greenhouse gas emission targets, Siemens’ first step was to determine what the renewable targets actually meant.
“In the press there’s much discussion about 5 per cent by 2020 and 60 per cent by 2060. And it’s really hard for anybody to get a feel for what all that means,” Mr Bielinski says.
“The summary is that we are supposed to reduce our greenhouse gas emissions from 2000 to 2050 by 60 per cent. During that period our population will grow by about 75 per cent. That becomes a very difficult thing to do. Even if you look to 2020, which is 10 years away, everyone talks about we’ve just got to reduce it by 5 per cent. Five per cent sounds like such a small number. Well, the problem is that for the last decade we’ve grown our emissions, not shrunk them. If we keep doing what we’re doing, by 2020 it will be about a 45 per cent drop that we will need to achieve. That’s a significant thing if you think about using half as much energy as you currently use.
“In doing our research, we reviewed many reports and papers. One of particular relevance by the Treasury which was done in 2007 called Australia’s Low Pollution Future.”
The 2007 government report, the largest economic modelling study ever done in Australia alongside a significant technological modelling study, was a key document for the CPRS legislation.
“It was the background paper for the ETS legislation. Its goal was to find the most economic way for Australia to achieve its greenhouse gas emissions reductions by 2050, assuming there is international trading of CO2 certificates. It assumes a price for all of those things. Basically their conclusion was, the smart thing for Australia to do would be to achieve around half the physical reductions and buy the rest as CO2 certificates on the international market. That would mean (by) 2050 spending $23 billion per annum on certificates.”
It is this reliance on foreign certificates that was the biggest concern for the Siemens team. A concept where $23 billion of the nations’ wealth is exported every year in order to pay people in other countries to build wind turbines, hydro plants and solar power stations was seen as a challenge by the technology experts.
“What was unclear from the (Treasury) study was how much more expensive the next step was going to be. They said, ‘Once the next step is more expensive than buying certificates we should buy certificates’. It wasn’t clear if it was a dollar more or a hundred dollars more.
“We looked at this challenge and saw that as a technology company, we might know more about the technology than Treasury, and secondly a few years had passed, and there had been significant technology and cost developments in that period.”
Siemens commenced its own technology modelling study and collaborated with the CSIRO’s Newcastle-based Energy Transformed Flagship group on an economic modelling study. Their aim was to see what they needed in order to meet emissions reductions fully and compare the costs with the Treasury model. They concentrated on low emission and efficient fossil power generation, renewable power generation, advanced transmission and distribution, electrified road transportation and energy efficiency.
“The thing we’ve found in our model – and don’t get me wrong I don’t want to be seen as criticising Treasury at all – all we’ve done is develop their work further with some more knowledge. What we did was we said, ‘Well, if we technologically achieve all of the emission reductions, what are the costs?’ There are a couple of very interesting things happening. One is, the Treasury model says spend quite a bit of money on capital in order to reduce your emissions and then spend the $23 billion per annum on certificates. And they say, ‘Keep buying petrol’, because they assume we keep using petrol cars. Our model says spend more capital on infrastructure, don’t spend any money on CO2 certificates and don’t spend any money on petrol because you have electrified the road transport fleet.”
The Siemens technology model sees carbon capture as commercially and technically viable by 2020 and progressively brought into commercial use, with all fossil fuel power plants carbon capture storage capable by 2050. The modelling shows the need for significant uptake of electric vehicles from 2025 in order to allow 25 years of transition to all electric vehicles. Only electric cars, using power generated from renewable sources or fossil fuels where the carbon is captured and stored, can drive the nation to a 60 per cent cut in greenhouse emissions within 40 years, the Siemens report suggests. The study predicts one in five vehicles will be electric by 2030 using the electricity generated from renewable sources.
Mr Bielinski feels his report and its results are a realistic technology blueprint for the future.
“We end up with a technological blueprint that says, ‘We think we can achieve by 2050 the C02 reduction targets the nation has set itself. We can do that at no more and potentially slightly less cost than the Treasury model and with a better overall result for Australia’. So we think that’s a good thing.
“And the net impact on the economy is nearly the same. The cost to the economy, and the cost of energy at the end of 2050 is basically the same as well. But with our solution we’re not exporting wealth we’re creating jobs in Australia and we disconnect ourselves from the reliance on oil suppliers. Our oil price modelling is based on the International Energy Agency’s modelling which is commonly viewed as very conservative. If the oil price increases at a faster rate than expected by the IEA, the Siemens model becomes a better solution for Australia.”
While the research has direct implications on public policy, Siemens is careful not to wade into the politics of climate change.
“We make no comment at all on what climate scientists say, we just say that the climate scientists have advised the government, the government as a result of that have set targets for emissions reduction.
“We’re technologists, we’ve worked out ways to achieve those targets. We do not comment on the climate science or the politics. All we’re saying is, ‘If we as a nation have publically said these are our goals, how are we going to reach them and how are we going to pay for it?’ And we’ve worked out a way to do it.”
Mr Bielinski believes his study provides a public good and is now working to increase public awareness of it. Siemens has launched media campaigns in every state and in September will join other industry members on a panel hosted by the Financial Review to discuss energy industry issues.
“We are trying to point out to people, that we as a nation have set ourselves goals for emission reductions. We are in the lucky situation, unlike most other countries in the world, that we have choice. We actually have all these renewable resources and we can choose to use them. We are a relatively wealthy nation, and consequently we have the ability to do it.”
Initiatives such as the Smart Grid, Smart City program and the integration of electric vehicles will play important first steps, but the sooner these initiatives are put in place and the more energy-users understand about the issues at hand the more achievable the renewable targets will be, Mr Bielinski says.
“We’re going to learn a lot, we’re going to learn how charging stations work, about how people think about it, how they act all those things. We’ll learn how to change their culture. But the regulators and legislators need to put in place frameworks that allow real companies to invest in this technology so that we can actually get on and do it.”
With some mainstream media reacting negatively to the smart grid’s shifting pricing model, a long-term cultural change will be required. While the message is “very complicated and difficult to explain to the man on the street in two or three sentences”, it’s importance means the communication must take place.
“When you’ve got (price increases) you tend to have things where initially people save and then over time they lose their enthusiasm for the whole thing and they go back to doing what they were doing. And that’s where we need to work out how to change peoples’ culture forever. That’s not a trivial thing.
An example is smart meter roll outs – a key issue is that people need to be able to see what the results of their actions are, and they’re not going to go out to their meter box and read the meter every day, are they? So you need an indicator panel inside their panels and you need to prepare them. You need to teach them about what’s happening so they know how to control their actions. And you need to explain to them, the idea of the meter is to encourage them to do things to reduce their energy bill. Smart meters are not there to increase their energy bill.”
According to Mr Bielinski, water savings is a good example of changing the culture of the population. With almost every major city in Australia in drought for the last decade, people have significantly reduced their water consumption as they can understand the concept of an empty dam.
“The visual image, the psychology is different. With electricity, you can’t see people using electricity other then when their lights are on. But the other is the underlying assumption that electricity cannot somehow run out’. So the challenge will be to drive change in behaviour on usage of electricity in a similar way to what has happened with water.
“Certainly governments providing grants for startup is fine technologies, but if the government can put in place the structures and frameworks to encourage industry to invest, that’s probably the best solution. If you put in place the economic framework to drive people to use renewable technologies, they’ll find the best technology to use. It really comes down to that and at the moment we don’t have that framework,” he says.
Much of this predicted technology is already available today, ready to be used.
“It’s not a matter of waiting for the next PC because the next one will be better. There are huge amounts of these technologies available today and we need to start using it. But the drivers are not in place to do that.”