Addicted to fossil fuels

The recent oil spill catastrophe in the Gulf of Mexico could be an energy game changer. In a speech from the Oval office a few weeks ago, President Obama urged a transition away from fossil fuels and towards clean energy. This raises three very important questions. What is clean energy? Which clean energy can really replace fossil fuels? And how much will it cost?

Our new prime minister might want to ask herself these questions as she plans her own actions on climate change.

The world is not only addicted to fossil fuels; it’s addicted to a high standard of living delivered by cheap energy. Replacing fossil fuels means deciding on big changes to two large energy related sectors, electricity generation and transport. Poor decisions will seriously undermine our standard of living.

Let’s look at each of those three questions in turn.

What is clean energy? Most people think of it as renewable energy. Some, particularly in the electricity generation sector, consider gas and “clean” coal to be clean energy. It is true that both gas and clean coal will produce much lower greenhouse gas emissions than black or brown coal. But are they clean enough?

The Treasury doesn’t think so. Not if we want to stabilise greenhouse gases at 450ppm. In its Low Pollution Future Report in 2008, the Treasury indicated that electricity emissions need to be below 50kg per megawatt-hour globally by 2050. Based on current industry estimates, both gas and clean coal will fail this test.

Many forms of renewable energy will pass this test, depending on how they are used. But can they replace fossil fuels?

The simple answer is yes, they can, if they are used with plenty of expensive electricity storage. The tricky part is probably in transport where replacing oil will be a major challenge because of its high energy density. It seems likely that electricity will be the answer for transport either directly (as in light vehicles) or indirectly to artificially produce synthetic fuels for heavy vehicles. The problems to be solved are really all in the electricity sector.

What about the cost?

The most promising and mature renewable energy option for high capacity electricity generation is concentrated solar thermal power with adequate heat storage. It can technically replace both coal and gas - except perhaps over extended days of cloud. The issue is cost.

Recent estimates (PDF 1.55MB) from The Australian Bureau of Agricultural and Resource Economics (ABARE) put the cost of solar thermal at six times the cost of coal. The solar thermal industry believes these costs will fall over time and ABARE has the cost dropping 25 per cent by 2030 so it will only be 4.5 times the cost of coal - admittedly without a price on carbon. A carbon price of $75 will lower the difference to 2.5 times.

These solar thermal costs do not include any additional reserve generation or electricity storage capacity needed to cope with extended, widespread cloud cover when a number of solar thermal plants may need to be taken offline.