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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