Australian Energy Scenarios Predicting Uncertainty Professor Emeritus Frank Larkins Chief Scientist Energy Department of Primary Industries Victoria Presentation: Griffith Hack 17th June 2009

Australian Energy Scenarios Outline Current Situation Uncertainties Electricity Resource Projections to 2050 Australian Energy Resources Regulatory Environment Energy Technological Advances Technology Replacement Costs Infrastructure Financing Cost of Electricity Generation Technologies Global Warming – Climate Change Managing Community Perceptions International Developments

World Energy Use by Fuel Type 85% of world energy is sourced from fossil fuels 37% 25% 23% 9% 6% World energy demand has increase 2.6 times in 40 years

Energy Use per capita vs GDP per capita In GDP per capita terms Australia is an energy intensive economy

Australian Energy Fuel Mix 2005 Energy Consumption By Fuel Type Coal 41% Oil 35% 95% Fossil Fuels Gas 19% Biomass 3.7% Renewables 1.3% Source: ABARE 2005

Australia’s Energy Consumption Coal, oil & gas supply 95% of Australia’s Energy needs Energy End Use Percentage Electricity Use Total Electricity 30.8% Transport 24.3% 77.7% 0.3% 24.6% Manufacturing 22.6% 3.9% 26.5% 67.5% Mining & Metals 6.2% 10.3% 16.5% Residential 7.8% 8.2% 16.0% Commercial 4.5% 7.9% 12.4% Agriculture 1.8% 0.2% 2.0% low use Construction 0.5% Other 1.5% Source: ABARE 2006

Australia’s Net Anthropogenic Greenhouse Gas Emissions 2006 Source: CSIRO 2006 Emissions Mt CO2-e Percentage ENERGY 400.9 69.6% stationary energy 287.4 49.9% transport 79.1 13.7% 69.6% fugitive emissions 34.5 6.0% INDUSTRIAL PROCESSES 28.4 4.9% AGRICULTURE 90.1 15.6% second largest WASTE 16.6 2.9% LAND USE CHANGE 62.9 6.9% FORESTRY -23.0 TOTAL NET EMISSIONS 576.0 100%

Electricity Resource Projections to 2050 (%) Coal Gas Oil Nuclear Renewables Geothermal World 2005 Treasury 41 22 7 14 16 2050 53 17 8 11 Australia 84 2 6 2050 Treasury ATSE(1) ATSE(2) 33 30 21 23 15 43 4 Victoria 2005 90+ 3 World electricity demand is expected to increase at least 3 fold by 2050 Australian electricity demand is expected to at least double by 2050

Australian Energy Resources Black Coal 100+ years Brown Coal 500+ years Gas 65 years Crude Oil 7-10 years? Uranium 75 years Geothermal 800 years ? Solar/Wind/Wave/Tidal – renewable Biomass – renewable Source: The Heat is On: The future of Energy in Australia CSIRO 2006

Regulatory Environment Australia and Victoria have ambitious sustainable energy targets Australia 20 per cent of Australia’s electricity will come from renewable sources by 2020 To reduce carbon dioxide emissions by 60% by 2050 – HOW? A national emissions trading scheme (CPRS) to begin in 2011? CPRS insufficient stand alone driver for industrial change Carbon Capture and Storage Legislation – Site Selection and Sovereign Risk Victoria Greenhouse gas emissions reduced by 60% by 2050 – HOW? 10 per cent electricity from renewables by 2016 Energy efficiency measures CCS storage legislation Carbon reduction targets have led to: Funding opportunities for pre-commercial clean energy technologies Government support through advice and facilitation National Low Emissions Coal Council & R&D Body Global CCS Institute Access to storage sites for CO2 Renewables funding – Renewables Australia

Energy Technological Advances That Are Required Brown Coal Drying and Efficient Combustion Carbon Capture and Storage Geothermal Solar – Thermal Solar – Photovoltaic Energy Storage Electric transportation Nuclear ? Wind, Wave, Tidal

Capital Cost to Replace10% of Australia’s Total Current CO2-e Emissions in 2020 & 2050 by Specific Technologies (i.e. 60 million tonne pa) Technology 2020 A$ billions 2050 A$ billions Coal - CCS 49 35 Gas 30 26 Biomass 25 20 Solar PV 174 70 Solar Thermal 104 Wind 46 Wave 42 36 Geothermal 60 40 Nuclear Source: ATSE 2008

Infrastructure Financing At least $6 billion on RD&D for new power generation technologies by 2020 (ATSE) CCS at least $1-2 billion for demonstration per plant At least $200 billion for new electricity generating plant by 2040 – 2050 to meet Treasury generation mix $7billion pa for 30 years From where will the capital be sourced? 2009-2010 Federal Budget - $4.5 b – Clean Energy Initiative $2.4 billion - Low emissions coal technologies, CCS, 1 Mt CO2 $1.6 billion – Solar Technologies 1,000 MW, 4 plants $465 million – Establish Renewables Australia Expectation is for at least $2:$1 funding from industry and states resulting in $10 billion by 2020

MWh Cost of Electricity Generation Technologies Source: CSIRO 2006 Technology Cost $/MWh Brown Coal 29 Brown Coal+IGCC+CCS 57 Black Coal 30-48 Black Coal+IGCC+CCS 60 Gas + CCS 53 Nuclear 70 Biomass 88 Geothermal 89 Solar Thermal 196 Coal and Gas predicted to be the most economical sources

Managing Community Perceptions/Expectations Energy GHG Climate Change Drought/Water Will the community: Accept CO2 Storage? Accept the CPRS cost impost? Change significantly their energy use practices? Adopt sufficient energy efficiency measures? Accept nuclear power v continued GHG pollution?

International Developments Kyoto Protocol – A valuable framework ..but Copenhagen Talks – late 2009 How likely an outcome with specific targets? Positions adopted by USA, China, India will be critical. Australia only 1-2% of world emissions, but coal exports of vital economic importance

Victorian Government New Energy RD&D Initiatives Energy Technology Innovation Strategy Stage 1 - 2005. A$ 180m R&D & Large Scale low emission technologies A$ 1,600m total investment Stage 2 - 2009. A$ 72m pre-commercial demonstration of sustainable energy technologies A$ 110m Carbon Capture and Storage Seeking industry and Commonwealth funding for projects

Commercial (Deployment) Research & Development Victorian Government Energy Technology Innovation Strategy 2 What stage in the RDD&D cycle will it support? Demonstration Commercial (Deployment) Pilot Supported Commercial Research & Development Sustainable Large-scale Applied Strategic ETIS 2 funds projects at the post-pilot stage in the RDD&D cycle which still show technical risk

Concluding Remarks There are many policy and planning uncertainties relating to future energy use. However: What is certain is that demand for energy in Australia will continue to increase; there are sufficient energy resources available to meet demand for many decades. What is uncertain is how much of the global warming/climate change is due to anthropogenic factors, especially carbon dioxide emissions, and whether sustainable energy technologies will be available in Australia at internationally competitive economic cost that are both environmentally friendly and acceptable to the community.