Proposed carbon tax to enable technology investment

The Federal Government revealed plans for pricing greenhouse gas emissions in July.

The carbon price package will see carbon priced at $23 a tonne from 1 July, 2012, and rising at 2.5 per cent a year. It will be replaced by an emissions trading scheme from 1 July, 2015.

Energy Networks Association (ENA) chief executive, John Devereaux welcomed the proposed introduction of a price on pollution, by way of a carbon tax, stating that it will enable investment in a range of technologies, including renewable generation, which would otherwise not be possible.

“The introduction of a price on carbon dioxide will mean that any reduction in the demand for electricity produced by high carbon emission-generating plant, such as brown coal, will deliver a measurable financial outcome. This outcome will help deliver a return on investment in the technology that assists in demand management,” Mr Devereaux said.

Such technology includes the mechanisms to inform customers of their energy use – how much is being used and at what cost – and the means to respond by shifting and reducing their consumption. This technology includes devices to measure and monitor electricity flows, as well as operate and control the electricity networks, and the communications and IT infrastructure that connects them. As well as better-informed customers, the technology will enable more rapid responses to disturbances across the electricity networks.

A price on pollution will also make locally connected renewable-electricity generation more viable and in turn contribute to overall electricity production.

“The introduction of a price on pollution will mean that where embedded generation is a viable alternative, renewable generation sources such as wind, solar and geothermal options, along with generation sources with relatively low carbon emissions, such as combined cycle gas turbines, will become more viable,” Mr Devereaux said.

“The combined effect of improved demand management and an increased percentage of generation being derived from renewable sources, through investment by electricity network operators in enabling technologies, will result in a reduction in carbon emissions. This reduction will come with the added benefits of more informed customers who are able to make decisions about when and how much electricity they use, and electricity networks that are more responsive to supply problems,” he said.

Energy Supply Association of Australia (esaa) CEO, Brad Page said there were some positive announcements for the stationary energy industry from the announcements, but risks remain for the stable, competitive delivery of secure energy supplies.

“For nearly five years esaa has called for the implementation of an efficient, equitable and enduring emissions trading scheme,” Mr Page said.

“The announcements… satisfy many of esaa’s principles for such a scheme, but important questions remain to be answered.

“An improved set of arrangements for the delivery of new renewable energy technologies and the commitment for a single, national set of arrangements to address energy efficiency obligations for energy retailers, are positive announcements.”

Mr Page said the carbon price package contained details the esaa will need to work through with members before providing full and considered comments.

“But, it is immediately apparent some significant issues remain for the industry,” he said.

“The decision to seek expressions of interest to close a limited number of highly emissive generation plants will help the sector reduce its emissions and could provide timely signals to new investors in lower emission generation, but the potential significant impairment of a greater number of generation assets could send a chilling message to future energy sector investors,” Mr Page said.

“This proposed assistance may mean a few electricity generators are less financially impaired compared to the Carbon Pollution Reduction Scheme, however, a significant number of generators under this arrangement will receive nothing, but still see their asset values diminished.

“This sends an unfortunate signal to investors about the security of investing in Australian energy assets.”

The Clean Energy Council (CEC) said the carbon price package is a “once in a generation” opportunity to transform Australia’s energy sector and create clean energy jobs and investment.

CEC director of strategy, Kane Thornton said putting a price on carbon pollution and directing a substantial portion of the carbon price revenue to renewable energy and energy savings would “turbo charge the clean energy sector”.

“It will create $100 billion in investment to 2050, creating new jobs for future generations,” he said.

“The carbon price scheme proposed should give renewable energy companies and investors the long- term certainty that investment in clean energy is an investment in the future. It will support the accelerated roll-out of proven clean energy technologies like solar power, wind power and bioenergy while also allowing Australia to develop new technologies like geothermal, ocean and large scale solar.

“Along with the existing 20 per cent Renewable Energy Target and arrange of other existing policies, the new initiatives announced… will give us what we need to deliver action on carbon pollution and transition Australia to a clean energy future.”


Bittersweet pill for energy users

The Energy Users Association of Australia (EUAA) is concerned about the impacts of the Government’s carbon tacx package on Australia’s energy users.

While the announcement may clear up some of the uncertainty that has existed about a carbon price, the EUAA said it will signifcantly add to energy users costs.

The EUAA estimates that the $23 per tonne of CO2 carbon price will add around $20 per MW hour to the price of electricity next year, an increase of around 50 per cent on current wholesale electricity prices and at least 10-20 per cent on top of retail electricity prices. These costs will increase over time.

“In that sense, the announcement is a ‘bitter-sweet’ pill for Australia’s energy consumers,” EUAA executive director, Roman Domanski said.

The carbon price and associated measures announced by the Federal Government would significantly increase electricity and gas prices at a time when these prices have already increased substantially in recent years, adding to the costs of doing business and living expenses, Mr Domanski said.

“The carbon price will now add further to these costs which are already set to increase significantly for the rest of this decade due to increases already in the pipeline, especially due to network charges and renewable energy schemes. The extra cost will be passed on by businesses and find its way into higher consumer prices. Businesses that compete internationally would be hard pressed to pass on the extra costs and risk losing competitiveness, with flow-on impacts to investment and jobs,” he said.

“(The tax will) put Australian energy users at a disadvantage vis-à-vis other countries with which we trade, as these do not have a carbon price in place and the compensation offered, whilst welcome, was limited in its coverage, in its extent and temporarily.”

The EUAA was especially concerned that some industries, including food processing, foundries and some chemicals and plastics manufacturers, as well as small businesses which compete internationally are acknowledged to be at risk but will only be provided with assistance to improve their energy efficiency.

The carbon tax provides compensation to coal-fired generators when their case is “far from clear cut”, having been rejected by Professor Garnaut in both Garnaut Climate Change Reviews. Their inclusion means less compensation for other, more deserving, recipients, Mr Domanski said.

The EUAA is also concerned that it will over-compensate some households and compensate some that are clearly not at the poorer end of the income scale.