Human Settlements Theme Report

Australia State of the Environment Report 2001 (Theme Report)
Lead Author: Professor Peter W. Newton, CSIRO Building, Construction and Engineering, Authors
Published by CSIRO on behalf of the Department of the Environment and Heritage, 2001
ISBN 0 643 06747 7

Emerging issues (continued)


  • New drivers of energy policy
  • Restructuring of the energy supply sector
  • Development of sustainable energy solutions
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    New drivers of energy policy

    The energy sector is in a state of rapid change. Powerful forces are at work, and some of them are in conflict, so that the direction of change is unclear.

    Technological change is revolutionising the energy sector. The trends of the past 100 years are being challenged by a variety of changes, including:

    • Increasing potential for more efficient energy use. Cars that use less than 3 L of fuel per 100 km, compared with the average of 11 L/100 km today, are under development. The best modern refrigerator uses 80% less energy than typical refrigerators of the early 1980s. Buildings that require 80% less energy for heating and cooling are now being built. New office lighting systems that use up to 90% less energy than those of the 1970s are also available. So it is now possible to do much more with much less energy.
    • Electricity generation technologies are being transformed. For most of the past century, the trend has been towards ever-larger centralised power stations using coal. Now the trend is towards distributed energy systems - large numbers of smaller power generation plants using a diverse range of energy sources, including natural gas, organic wastes and a range of renewable energy sources, including wind, solar radiation, biomass, waves and tides (Figure 89). This is likely to extend over time to include residential suburbs as a new source of energy, via the utilisation of photovoltaic solar energy panels on the roofs and gables of houses and other buildings, and the sale of excess electricity back to the grid (see Bouwmeester and Van Ijken 2000). This is not to say that centralised generation will disappear. On the contrary, it will continue to be a major contributor to an overall integrated power system and may also become the focus of 'industry parks' which can utilise some of the waste heat produced.

    Figure 89: The shift from centralised to distributed energy systems.

     The shift from centralised to distributed energy systems.

    Source: CSIRO Energy Technology.

    The electrical efficiencies of distributed systems, however, are already demonstrated to be up to 70-90% or more when coproduced heat is used. By comparison, coal-based centralised systems with transmission and distribution losses have efficiencies of only about 30%; that is, they use three times more fuel than is theoretically necessary. As a result the greenhouse savings associated with distributed systems are substantial.

    New methods of producing transport fuels are now practical and, as oil prices rise, are becoming economically viable. These range from the conversion of fossil fuels such as coal and oil shale into liquid fuels (a process with higher greenhouse impacts than conventional petroleum fuels), to renewable fuels such as alcohol and vegetable oils from biomass. The production of hydrogen from renewable electricity is also foreshadowed.

    The production of heat, which provides up to half of the energy requirements of modern societies, is also switching from traditional boilers fired by fossil fuels to cogeneration, small modular heating systems, and renewable energy sources such as solar thermal collectors (e.g. solar water heaters) and biomass conversion. Improving technologies such as catalysts and low-temperature detergents mean that many processes that used to require large amounts of heat now need less or even no heat. Heat recovery technology allows much more efficient use of heat, further reducing the amount needed. Other possibilities include geothermal and nuclear power; Australia is potentially well positioned in both. For geothermal production, Australia has large areas of heat-producing granites, buried at 3-4 km, naturally heated to 300C. From a nuclear perspective, Australia has approximately one-quarter of the global reserves of uranium ore.

    A key social driver is the recognition of the importance of providing high-standard energy services to rural communities, both in Australia and in developing countries. Energy-efficient technologies and small-scale renewable energy systems have an important role to play in satisfying the energy needs of rural communities, especially in developing countries, where the cost of conventional energy grids is simply unaffordable. The need for affordable energy for low-income households also shapes energy policy. In Australia, this is particularly important for transport, which is a major cost for low-income households.

    Political and economic forces are also transforming the energy sector. The 1990s saw the break-up, and in some cases the sale, of publicly owned energy supply utilities and the establishment of a national electricity market. Gas supply is following a similar path. The implications of these changes are far-reaching, and are discussed below. Internationally, oil supply is again becoming an issue. As non-OPEC oil resources are depleted, the potential for disruption of oil supply and increasing costs seems to be increasing. Some experts suggest that world oil production is reaching its geological limits, and that world oil production is likely to peak around 2010 (Konkes 2000). From this point there would be a post-peak decline in availability of around 3% each year. If this is correct, it means the ongoing growth in consumption of oil cannot be maintained, even if the political issues can be managed.

    Environmental drivers have always influenced energy use. For example, the shift to coal from wood in Europe in the industrial revolution resulted from massive deforestation. Over the past 15 years, global warming has emerged as a potentially major driver of energy policy. Fossil fuel use is the major contributor to global warming, although land clearing and a range of other activities are also significant. Essentially, humans have burnt so much fossil fuel that the carbon dioxide released has raised the concentration of CO2 in the atmosphere by 30% over the pre-industrial level, to a point where it is higher than at any time in the past 400 000 years. This CO2, along with other greenhouse gases, is raising the Earth's temperature as it traps heat that would otherwise escape to space. Unprecedented international negotiations have seen the introduction of the Kyoto Protocol which, if ratified, will require developed countries to reduce their overall greenhouse gas emissions by 5% by the compliance period of 2008-2012. While Australia's target has been set at 108% of its 1990 level of emissions, ongoing energy growth is making it increasingly difficult for Australia to meet its obligations. This puts Australia in a difficult long-term position, as it is expected that much more stringent emission reductions will be required if concentrations of greenhouse gases in the atmosphere are to be limited to levels that do not create dangerous warming effects.

    Australia's response to global warming has included an increased emphasis on development of renewable energy and stronger policies on energy efficiency. Reform of the energy sector was originally seen as a greenhouse response strategy, but it has actually increased emissions so far (see below). (Information on Australia's greenhouse response is available at ) The problem to date seems to be that policies and strategies that promote increased greenhouse gas emissions are outweighing the effects of those intended to reduce emissions. A more integrated approach must be developed over the next few years to resolve this anomalous situation.

    One strategy that is likely to become central to our greenhouse response is emissions trading. In broad terms, emitters of greenhouse gases would have to purchase permits for each unit of emissions, while those who reduce emissions or remove carbon from the atmosphere (e.g. through growing trees under certain circumstances) would be able to sell credits. By trading permits and credits, it would be possible for those who can most cheaply reduce emissions or absorb carbon to receive payment from those for whom this was difficult. Overall, economists believe that such a trading scheme would minimise the costs of emission reduction. There are many issues to be resolved, and the Federal Government has announced that it will not introduce a mandatory trading scheme until an international scheme is in place, which is unlikely before 2005.

    The implications of emissions trading for fossil fuel suppliers and energy-intensive industries are very significant. While the value of emission permits is not yet known, a wide range of possible prices has been proposed. At the low end, permits may be valued at $10/tonne of CO2, while prices may exceed $50/tonne according to some authorities. At $10/tonne, the price of coal-fired electricity would increase by around one cent per kilowatt hour-about 10% for households, but up to 30% for energy-intensive industry, which buys energy at much lower prices than small consumers. Petrol prices would increase by around 2.5 cents per litre at this price. A trading scheme would therefore make energy efficiency and renewable energy sources more financially attractive.

    Another important driver of developments in the energy sector is the trend towards triple bottom line reporting and management. This approach involves addressing economic, social and environmental performance. When this is done, it is often found that the adoption of sustainable energy solutions rates highly because it reduces a major environmental impact while often saving on business costs and improving social outcomes.