(EnergyAsia, December 29 2011, Thursday) — The Australian Coal Association (ACA) has called on the Clean Energy Finance Corporation (CEFC) to take a “technology-neutral approach” to investment, adopt a stage-gated approach to financing high risk projects and be subject to reviews by the Productivity Commission.
In a submission to the Federal government, the association also criticised the decision to exclude carbon capture and storage (CCS) technology from eligibility for CEFC funding.
ACA CEO Nikki Williams said the government’s commitment to public funding of low emission energy technologies should remain a fundamental part of its climate change policy.
She said: “Australia’s carbon tax will not deliver the future energy technology required to meet growing energy demand and meet emissions reductions targets on its own. Government funding is essential to encourage private investment in an area of research, development and demonstration (RD&D) which is inherently high risk, complex and long-term.
“It is vital that there are appropriate mechanisms in place to make ongoing assessments of the development of projects and technologies to maximise the effectiveness of the CEFC funding allocation. For this reason we have recommended the introduction of a stage-gated approach and a role for the Productivity Commission to review the programme.
“CCS is not a coal technology. It is a carbon technology. It is the only technology available to significantly reduce emissions not just from the use of coal and gas, which account for almost 92% of Australia’s electricity generation, but also from industrial processes such as cement and steel manufacturing and natural gas processing associated with liquefied natural gas (LNG) production,” said Dr Williams.
“The CEFC, its funding allocation and the exclusion of CCS was an outcome of the negotiations with the Multi-Party Climate Change Committee. The exclusion of CCS however exacerbates the current funding imbalance between renewables and other low emission technologies. It also handicaps the development of a key low emission solution important to Australia’s energy future.
“Australia has a clear strategic and economic interest in CCS as the world’s largest exporter of coal and is a major exporter of LNG. This is why the decision to exclude CCS from CEFC funding is flawed.”
The ACA submission highlights the view of the International Energy Agency (IEA) that “a ten-year delay in the availability of CCS would increase the cost of achieving a 450 [parts per million] scenario by US$1.14 trillion between now and 2035. The IEA concludes that “intensive investment and effort to demonstrate the commercial viability of CCS is the rational course of action for governments seriously intent on restricting the average global temperature rise to no more than 2ºC”.
Dr Williams said that Treasury modelling underscored the importance of CCS.
“Treasury found that CCS applied to coal and gas could account for around 30% of Australia’s electricity mix by 2050. It also found that without CCS, domestic emissions would be higher by 25 million tonnes per annum (Mtpa) in 2050 – and that does not take account of broader applications of CCS outside of the electricity sector.
“Australia is facing a significant energy challenge and we must investigate the broadest range of low emission energy options”.
The submission highlights the apparent mismatch between the Federal government’s welcome ongoing commitment to CCS funding and the funding allocation for renewable energy technologies.
“Given the enormous potential of CCS in Australia, it is surprising that it has received considerably less funding support than other low emission technologies. Renewable technologies have access to the A$3.2 billion managed by the Australian Renewable Energy Agency as well as the estimated A$20 billion in indirect support provided by the 20% renewable energy target. According to Treasury modelling, this will provide the foundation for renewable energy to deliver an estimated 40% of Australia’s electricity mix in 2050. In contrast, CCS is receiving less than A$2 billion to deliver a potential 30% of the electricity mix.”
The ACA represents Australia’s black coal producers which play a fundamental role in the country’s economy. Black coal is Australia’s second largest export industry (worth A$43.1 billion in 2010-11), directly employs over 40,000 people and provides the fuel for around 55% of its electricity.