It’s the politics (stupid)!

Yallourn Coal-Fired Power Plant

If his­to­ry has rules, one must be that inter­est smoth­ers con­cept (and eats its lunch). The polit­i­cal chal­lenges of imple­ment­ing any big, dis­rup­tive tech­nol­o­gy on a large scale inevitably deflate the hopes of tech­no­log­i­cal opti­mists. The com­mer­cial chal­lenges track close­ly behind.

This is why, if for no tech­ni­cal rea­son, the pro­jec­tions in Treasury’s 2008 ETS mod­el that assumes one-third of our elec­tric­i­ty from car­bon-capu­ure-and-stor­age (CCS) pow­er plants by 2050 are so implau­si­ble; indeed, naïve.

This Finan­cial Times report on the Ger­man Chancellor’s Energiewende plan to replace Ger­man nuclear pow­er sup­ply with renew­able ener­gy by 2022 points to some of the the hur­dles that will face the high cost “reform” of Aus­tralian ener­gy sup­plies that Julia Gillard and Bob Brown want to launch with their coal tax.

Angela Merkel’s plans to more than dou­ble the con­tri­bu­tion that renew­able ener­gy makes to Ger­man pow­er demand by the time the nuclear plants shut down requires at least 10mw of off­shore wind-pow­er: 25-times the capac­i­ty of plants now in ser­vice, under con­struc­tion or in the late plan­ning stages. The wind-gen­er­a­tor indus­try and the cabling indus­try are both skep­ti­cal of the timetable, to say the least. They believe they will have trou­ble find enough banks (each ready to take only a small share of the sov­er­eign risk) to fund the projects.

The nation­al pow­er grid man­agers are already stum­bling over Ger­man State gov­ern­ment hur­dles that have delayed cur­rent net­work expan­sion (Schleswig-Hol­stein requires the replace­ment of trees affect­ed by the cabling at a rate of 3-for-1). They don’t wel­come the recon­fig­u­ra­tion of the grid that will be required by the decom­mis­sion­ing of cur­rent base-load plant and the relo­ca­tion of gen­er­a­tors.

The hyr­do-pow­er indus­try has already run out of ‘short-run’ stor­age options in the face of strong oppo­si­tion from local com­mu­ni­ties but will need to build new mas­sive dams—no doubt in the face of mas­sive pub­lic opposition—to sup­ply the gaps in the high­ly vari­able sup­ply from renew­able ener­gy sources (wind, solar, geot­her­mal). The indus­try lead­ers, con­tem­plat­ing the decades it takes to locate, design and build such dams, are clear­ly skep­ti­cal that the polit­i­cal com­mit­ment will be sus­tained for so long or that the funds will be forth­com­ing.

Of course, the nat­ur­al-gas gen­er­a­tors will be part of the post-nuclear mix, too. At least half of the base-load—and prob­a­bly much more as the renew­ables project tar­gets slip—but they, too, are wor­ried about finan­cial for plants that will be, offi­cial­ly, sec­ond-class options as the renew­able sources come on-line. Unsur­pris­ing­ly, investors in gas gen­er­a­tion are reluc­tant to take on the addi­tion­al unknown polit­i­cal risk. No doubt there’s a price.

So even if CCS were com­mer­cial­ly fea­si­ble (it may not be), the imple­men­ta­tion of a plan that looks to investors like a very expen­sive, reg­u­la­tion-depen­dent, band-aid will be sur­round­ed by doubt.

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