By Michele Muscillo, Partner and Ben Ricketts, Solicitor
The gradual decline of the Government's Carbon Pollution Reduction Scheme (CPRS), touted by former Prime Minister Kevin Rudd as the remedy to the "greatest moral challenge of our age", has given a new lease on life to Australia's renewable energy sector. This article takes a look at how the Government's Budget is redirecting money into renewable energy, and introduces some of the projects that are benefiting from the Government's shift in focus.
The Death of the CPRS
The Copenhagen Climate Conference in 2009 aimed to reach a new world accord and agreement to replace the Kyoto Protocol commitments, which are set to expire in 2012.
However, the Australian Government decided to delay the introduction of the twice-introduced CPRS until the end of the Kyoto Protocol commitment period. The Government's reasoning was that it required some "clarity" on the actions that major economies such as India, China and the United States planned to take to reduce carbon emissions before Australia would make similar commitments. Given that the introduction of a CPRS would require time to allow businesses to adjust, the start date could be as late as 2014/2015.
Focus on renewable energy
The Government's focus has now shifted to renewable and more efficient energy – that is, encouraging cleaner and greener energy in Australia.
The Howard Government introduced Australia's renewable energy target in 2001. At that time, the purpose of the legislation was to require two percent of all of Australia's electricity to be sourced from renewable energy sources by the year 2010. The Rudd Government then expanded that target to require 20 percent of all of Australia's energy to be sourced from renewable energy producers by 2020. For a brief overview of the renewable energy target and renewable energy certificate schemes, see our article on dual markets for renewable energy certificates .
The scheme essentially enables wholesale purchasers of electricity to show that they are purchasing electricity from renewable energy sources and accredited power stations. Wholesale purchasers are required to produce compliance statements or pay a shortfall charge, therefore encouraging start-up renewable energy producers to sell renewable energy certificates on the open market.
The Government's fresh focus on renewable and efficient energy provides a much-needed boost to our renewable energy market. Some have argued that energy efficiency should have been first on the Government's agenda, rather than getting bogged down pushing the otherwise complicated (and politically sensitive) CPRS through Parliament. Many believe that energy efficiency is a "low hanging fruit" that has been ripe for the picking, but that the Government, under its former leadership at least, was too distracted by the lure of the CPRS. Now the CPRS has been shelved (at least for the moment), the focus can return to energy efficiency. This focus will hopefully mean that the past problems with rushed energy efficiency schemes won't be repeated - the home insulation program being a case in point.
Both the 2009 and 2010 Budgets have earmarked large amounts of money for energy efficiency measures.
The Budget
The 2010 Budget saw $652 million allocated over a four-year period to a renewable energy future fund. Only $42 million of that was allocated in the first 12 months, primarily aimed at private companies working in partnership with Government to research and develop new renewable energy projects.
However, the 2009 Budget saw much larger amounts allocated:
- $2 billion to the Carbon Capture and Storage Flagship Program; and
- $1.5 billion allocated to a Solar Flagship Program.
Solar Flagship Program
The $1.5 billion Solar Flagship Program is designed to support the research, development and demonstration of low emission energy technologies. The overall goal is to accelerate "the commercialisation of solar power in Australia" by providing financial support for the construction and demonstration of solar power plants in Australia using either solar thermal or photo voltaic technologies.
Applicants will need to demonstrate a project that is capable of delivering 30 mega watts for 12 months more. The "winners" will be announced in 2011. Of the 52 proposals received, eight projects have been invited to participate so far. These eight projects will share in up to $15 million in feasibility funding in going forward to the second stage of assessment:
Solar photo voltaic projects
- AGL Energy proposes a multi site project across the ACT, New South Wales, Victoria, Queensland and South Australia, generating up to 150 mega watts using thin film cadmium telluride solar photo voltaic technology.
- TRUenergy proposes to generate up to 180 mega watts using thin film cadmium telluride solar photo voltaic technology in a single site near Mildura in Victoria.
- Infigen - Suntech proposes to use three sites in New South Wales and Victoria to generate 195 mega watts using crystalline silicon solar voltaic technology.
- BP Solar proposes to use several sites in New South Wales to generate 150 mega watts from a single axis tracking photo voltaic system.
Solar thermal projects
- Acciona Energy Oceania proposes to generate 200 mega watts of electricity using solar thermal parabolic trough technology in either Queensland or South Australia.
- Parsons Brinckehoff proposes a 150 mega watt solar thermal parabolic trough at Kogan Creek in Queensland.
- Wind Prospects CWP proposes a 250 mega watt power plant using linear fresnel technology in Kogan Creek in Queensland.
- Transfield proposes to convert the Collinsville Coal Fire Power Station in Queensland into a 150 mega watt solar thermal linear fresnel power plant.
This shortlist has received some criticism, particularly from people in Western Australia (which is not represented in the shortlist), who argue that solar radiation levels in Western Australia are 10 percent higher than Queensland.
There has also been some controversy surrounding the shortlisting of the Transfield project at Collinsville. Transfield purchased the Collinsville Power Station for $1 in the 1990s and has spent $200 million upgrading the station to transform it into a solar thermal facility using German technology. By using the equipment and infrastructure already in place, including the turbines and generators, Transfield has the edge on its rivals in terms of start-up costs.
These projects, and the money allocated to renewable energy, represents a sizeable investment from a Government that is no longer distracted by the CPRS. The overall effect is that these one-off projects are used for demonstration purposes, and are really a preliminary to establishing a full-blown selfsupported renewable energy sector in Australia.
With sizeable investment in the sector, it seems there will be real incentives for private businesses to invest in and build permanent infrastructure for renewable energy in the future. The current funding for what are in essence research, development and pilot programs is a step towards reaching the renewable energy target of 20 percent by the year 2020.
However, what the sector really needs is incentives to build and produce large scale projects. Now that the CPRS has been shelved, albeit temporarily, the Government should be able to focus more on renewable energy.
For more information on renewable energy, please contact HopgoodGanim's Climate Change practice.
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