Energy policy of Australia

The Energy policy of Australia is subject to regulation and fiscal influence by all three levels of Government, but particularly the State and Federal Governments. The fossil fuels industry is the main driver in the formulation of energy policy at the Federal government levels as shown by the massive subsidies for the fossil fuel industry in spite of those industries being primarily responsible for anthropogenic climate change.

Australia is the highest emitter of greenhouse gases per capita in the developed world. It is one of the major exporters of coal, the burning of which creates CO₂. It is also one of the countries most at risk from climate change according to the Stern report, partially because of the size of its agriculture sector and long coastline.

Renewable energy commercialisation in Australia is an area of relatively minor activity compared to the fossil fuels industry. Many projects are funded through the Australian Greenhouse Office. Australia's renewable energy industries are diverse, covering numerous energy sources and scales of operation, and they currently contribute only about 5.9% of Australia's total energy supply.

The major area where renewable energy is set to grow is in electricity generation following the introduction of the Australian Government's Mandatory Renewable Energy Target.[1].

Wind power, particularly in South Australia, is the most significant area of renewable power generation.

Federal Government

Federal Policies Overview

In the 2004 White Paper Securing Australia's Energy Future, a number of initiatives were announced to achieve the Australian Government’s energy objectives. These include:

• a complete overhaul of the fuel excise system to remove $1.5 billion in excise liability from businesses and households in the period to 2012–13
• the establishment of a $500 million fund to leverage more than $1 billion in private investment to develop and demonstrate low-emission technologies
• a strong emphasis on the urgency and importance of continued energy market reform
• the provision of $75 million for Solar Cities trials in urban areas to demonstrate a new energy scenario, bringing together the benefits of solar energy, energy efficiency and vibrant energy markets
• the provision of $134 million to remove impediments to the commercial development of renewable technologies
• incentives for petroleum exploration in frontier offshore areas as announced in the 2004-05 budget
• new requirements for business to manage their emissions wisely
• a requirement that larger energy users undertake, and report publicly on, regular assessments to identify energy efficiency opportunities.

Energy and Transport Subsidies

Overview

Currently, the Australian Government provides extensive financial support for the production and use of fossil fuels. These include direct payment, Tax reductions and other means. As a result, fossil fuel energy costs are unnaturally low and thus leaves the cleaner but more expensive renewable energy sources out of scope. Whilst encouraging greater use of fossil fuels and higher levels of damaging greenhouse gas emissions, the colossal amounts of subsidies for fossil fuels still make it consumer's choice for energy.

Between 2005 and 2006, Australia's subsidies for the Energy Market ranged from $9.3 to $10.1 billion. However, the subsidies for fossil fuels are at an unbelievable 96% leaving the funds for renewable and transport technologies at less than 4%. This insignificant amount of funding is slowing down Australia's path towards a renewable future.

The table below outlines all the subsidies for Fossil Fuel and Renewable Energy Sources.

File:SubsidiesFossilRenewable.jpg

Subsidies by Sector

• Transport 74% at $7.2 billion
• Electricity 18% at $1.7 billion
• Other Stationary 8% at $806 million

Total subsidies that support production and consumption of different fuels

• Oil 76% at $7.4 billion
• Coal 17% at $1.7 billion
• Gas 4% at $377 million
• Renewables 3% at $326 million

Energy Subsidy

Public Agencies Subsidies

Geoscience Australia, Department of Industry, Tourism and Resources & State Government energy departments are involved in the direct support of mining and fossil fuel exploitation. These agencies only provide subsidies if there is a benefit to a particular group. As forecasted, the main groups concerned are the coal industry. Thus, by providing subsidies to the coal-fired power industry, there will be an increase in fossil fuel production, lower coal costs and inevitably increase in GHG.

Geoscience Australia (GA) provided a $107 million subsidy for energy on 2005-06. The 2006-07 budget involves 66 projects of which 11 are allocated to petroleum research and others related to mineral and mining industry. Sadly, the only subsidy allocated to aiding climate change was 'storage of GHG' with a subsidy of a mere $0.6 million.

The Department of Industry, Tourism and Resources (DITR) similarly to GA, provided a $30 million energy technology fund in 1994-95. This increased to a government funded $1,314 million subsidy which divides into 52 branches.

95% of Australia's electricity originates from fossil fuels which makes the power industry quite profitable. The DITR supports fossil fuel research with 95% of its total budget, leaving less than 5% for renewable energy technology.

(Top of Page)

Transport Subsidy

Road User Deficit

• Road users were not being charged enough between 2005-06 to give an appropriate rate of return
• In 2005-06, the road construction costs was $4.7 billion more than the revenue received by road users. This makes the Road User Deficit the largest subsidy in the transport sectors.
• Largest government revenue in transport is $0.38/L fuel

• Old Scheme - Energy Grants Credit Scheme - reduced fuel revenue by $3.5 billion, with the addition of different fuels like LPG and natural gas which reduced fuel revenue by $710 million
• New Scheme - Fuel Tax Credit Scheme - allows a wide range of fuels and activities to be elligible for rebates and therefore the 'Road User Deficit' will increase.

Statuary Formula Method for Fringe Benefit Taxes (FBTs) for company cars

Company Car owners are encouraged to drive more because first of all there is no formal record of personal and business use. Secondly, the special formula used for calculating FBTs is that the more you drive, the more it automatically means you are driving for a business purpose than a personal one and thus the output is less TAX paid. Whilst this is a great thing for travelling on holidays and soforth, it is encourging the greater consumption of fossil fuels which increases Greenhouse Gas Emission.

State policies

State Energy Concessions

There are formal subsidies in forms of rebates/discount on energy bills for people with the following statii:

• aged-pensions
• unemployment benefits
• people in country areas
• financially disadvantaged groups
• people using home life-support equipment

By reducing the energy costs of these household, they encourage people to use more electricity and in effect increasing the production and consumption of fossil fuels.

NSW

Recent announcements include

1. legislated cuts in greenhouse pollution of 60% by 2050
2. stabilisation target by 2025.
3. legislated renewable energy target of 10% by 2010 and 15% by 2020.

Concession Rebates/Discounts

• Life support rebate - $2.7 million
• Pensioner Energy rebate - $79 million
• Energy Account Payments Assistance - $9 million
• Administration payments - $0.9 million

Victoria

1. Victoria also announced a solar feed-in tariff.

Concession Rebates/Discounts

• Mains Electricity Concession - $58.7 million
• Mains Gas Concessions - $39.4 million
• Non-Mains Concessions - $1.9 million
• Utility Grief Grants - $3.2 million

Queensland

Queensland's energy policy is based on the year 2000 document called Energy Policy: A Cleaner Energy Strategy. The Queensland Government assists energy development through the Queensland Department of Energy and is most noted for its contribution to coal mining in Australia. Initial development in the middle of the 20th century facilitated the extraction of fossil fuels and distribution of natural gas and oil in pipelines from the south west of the state, under the leadership of Joh Bjelke-Petersen.

About 80% of Queensland's electricity is produced from the burning of coal in major fossil fuel power stations including, Tarong Power Station and Stanwell Power Station. The policy of Queensland stipulates that the government will not issue further generating licences for new coal fired power stations unless there is a clear and demonstrated need. It is expected that Queensland will need a major new power station by 2012.

The Gladstone Power Station is the state's largest power station.

The current energy policy of Queensland will not set targets above the national mandates for renewable energy because of its significant economic impact. Despite having a clear statutory definition of renewable energy, renewable energy development in Queensland lags behind other Australian states at an insignificant 5% of total consumption, despite having an ample source of sunlight. Widespread access to numerous coal mines, including 10 mines in the the major coal producing region of the Bowen Basin, has provided an abundant fuel source which is much cheaper to produce when compared to renewable sources.

The current policy has provided initiatives like the 13% Gas Scheme. These efforts and the 2006 halt to land clearing in Queensland, forms part of the state's strategy to reduce greenhouse gas emissions.

The Western Corridor Recycled Water Scheme in the states south east, has been built to ensure water supply to power stations is maintained during drought in Australia.

The Queensland Government has made its own energy efficiency improvements under the Government Energy Management Strategy.

Concession Rebates/Discounts

• Electricity Rebate Scheme - $59.4 million
• Electricity Life Support Scheme - $0.5 million

(Top of Page)

South Australia

The South Australian Government has developed a Energy policy based on sustainability objective as well as on South Australia's Strategic Plan.

A major priority of South Australia’s Strategic Plan is to reduce greenhouse gas emissions in South Australia to achieve the Kyoto target as a first step towards reducing emissions by 60% (to 40% of 1990 levels) by 2050.

Measures announced in South Australia include:

1. stabilisation of greenhouse pollution by 2020
2. legislated cuts of 60% in greenhouse pollution by 2050
3. legislated renewable energy target of 15% by 2014
4. solar feed-in tariff
5. ban on electric hot water systems.

Concession Rebate/Discount

• SA Energy Concession - $28.1 million

(Top of Page)

Western Australia

Concession Rebate/Discount

• State Government Energy Rebate Seniors Air Conditioner Rebate - $3.1 million
• Life Support Equipment Electricity Subsidy - $1 million

(Top of Page)

Tasmania

Concession Rebate/Discount

• Healthcare and electricity concession Pensioner electricity concession heating allowance rebate - $1.3 million
• Life support discount

(Top of Page)

Northern Territory

The Northern Territory is energy rich but has no economic coal reserves like New South Wales, Victoria, Western Australia. It has natural gas, some oil and significant potential for renewable energy resources.

Concession Rebate/Discount

• Pensioner concession - <$1 million

Australian Capital Territory

Concession Rebate/Discount

• Energy concession - $0.9 million

(Top of Page)

Renewable Energy Technology Research

In 1994, Australia funded $180 million for energy research and development (R&D) yet only $27 million (15%) is directed toward renewable energy and efficiency applications. Whilst, the word 'climate change' has only just reached the Australian government, funding and subsidies for fossil fuel research is still at large.

Corporative Research Center (CRC)

CSIRO funding

Total subsidies

(Top of Page)

Mandatory Renewable Energy Targets

The Mandatory Renewable Energy Targets (MRET) is considered as subsidy which creates a legal liability for wholesale electricity purchasers to contribute for the 2010 national 9.5 TWh or pay the $40/MWh penalty/tariff.

MRET allows wholesale purchasers of electricity to either pay a $40/MWh tariff or adapt to the cheaper renewable energy sources. In other words, MRET doesnt make energy any cheaper, but it encourages the adoption of renewable energy sources which would be cheaper than electricity from coal fired power stations that have the $40/MWh penalty. In 2005-06, the total MRET subsidy set was $32.3 million which included the renewable energy certificates for $30/MWh and administration costs of $2.8 million.

Note: MRET is not funded by the tax payer, but by the customer and retailer

1. In South Australia, a legislated renewable energy target of 15% by 2014 was announced.
2. Victoria announced a legislated renewable energy target of 10% by 2016.
3. NSW also announced a legislation renewable energy target of 10% by 2010 and 15% by 2020.

(Top of Page)

Greenhouse Gas Emissions Reduction Targets

Coal is the most carbon-intensive energy source producing the highest levels of carbon dioxide pollution into the atmosphere. Reducing the Greenhouse Gas Emissions is vital to Australian Climate Change.

1. South Australia, legislated cuts of 60% in greenhouse pollution by 2050 and stabilisation by 2020 were announced.
2. Victoria announced legislated cuts in greenhouse pollution of 60% by 2050 based on 2000 levels.
3. NSW announced legislated cuts in greenhouse pollution of 60% by 2050 and a stabilisation target by 2025.

(Top of Page)

Low Emissions Technology Demonstration Fund (LETDF)



1. $500 million - competitive grants
2. $1 billion - private sector funds

Currently has funded 6 projects to help reduce GHG emissions,which are summarised below

Project	Details	'$' million Funding
Cheveron - Co2 injection program	natural gas extraction, carbon capture and underground storage	60
CS Energy - Callide A Oxy-fuel Demonstration Project	black coal power with carbon capture and underground storage	50
Fairview Power - Project Zero Carbon from Coal Seams	gas power station with seam injection of CO2	75
Solar Systems Australia - Large Scale Solar Concentrator	concentrated sunlight solar power	75
International Power -Hazelwood 2030 A Clean Coal Future	drying of brown coal, carbon capture and underground storage	50
HRL Limited -Loy Yang IDGCC project	combined drying coal systems	100
Total		410

As attractive as it looks, 82% of subsidies is concentrated on something the Australian Government refers to as 'Clean Coal Technology'. There is only a mere 18% of funds allocated to renewable energy - project Solar Systems Australia - $75 million

The LETDF is a new subsidy scheme aimed at fossil fuel energy production started in 2007.

Feed-in Prices

1. South Australia also announced a solar feed-in tariff
2. Victoria also announced a solar feed-in tariff

(Top of Page)

Electricity Pricing

Network regulation

(Top of Page)

End User Pricing

(Top of Page)

Fuels

Coal

Main article: Coal Mining in Australia

Coal is mined in every state of Australia. It is used to generate electricity and is Australia's largest export commodity. 75% of the coal mined in Australia is exported, mostly to eastern Asia. In 2000/01, 258.5 million tonnes of coal was mined, and 193.6 million tonnes exported. Coal also provides about 85% of Australia's electricity production.

Fuel Costs

Coal-fired power stations is the second largest subsidy associated with fuel subsidies. Coal-fired power stations are known to pay much less for their fuel than the international market price. Australian major power plants such as Macquarie Generation, CS Energy, Stanwell and Delta Electricity pay 1.36 cents/kWh. By comparison, coal-dominated utilities in the United States paid 1.37-2.44 cents/kWh.

The Coal power stations have subsidies which are calculated to be between $450 million and $1.1 billion in 2005-06. Currently, the subsidies received by several electricity generation companies prioritising in coal-fired generation appear to match or exceed the profits made by those companies in 2005-06. In other words, government subsidies appear to be directly creating profits for coal-fired generators.

The impact of removing certain electricity sector subsidies will increase cost of of electricity by about $0.05/kW or 3.9%. This will make demand for electricity 1.4% less and also reduce Greenhouse Ga s Emission by about 2.7 Mt CO2-e.

The Greenhouse Gas Abatement Program (GGAP) has given $5 million to coal-fired power stations for improving thermal efficiency and $15.5 million for pre-drying brown coal. The total of $20.5 million allocated has reduced Greenhouse Gas (GHG) emissions. The subsidy is considered a fossil fuel subsidy instead of a GHG reduction subsidy for the fact that reductions occur at coal power stations. Similarly, a $58.8 million fossil fuel subsidy is set to capture coalmine waste gases - 'methane', use it and reduce GHG at the same time.

(Top of Page)

Depreciation

The major Australian Coal-fired power stations (Delta Electricity, CS Energy, Stanwell)have a 0.23 cents per kWh depreciation charge for their plants. On averge, the cost of buying a plan it about $220/kW compared to the international market of $1300/kW. As these power plants age over time, their asset values decline and thus form a subsidy of $189/kW. This in turn equates to a power generation subsidy of 0.2 cents/kWh.

From 2005-06, 141TWh of electricity was harvested, with a total of $284 million for concession subsidies. All of these subsidies:

1. lower the cost of coal firing
2. encourage increase in coal firing and depletion of fossil fuel sources
3. naturally produce higher levels of GHG emissions

These subsidies that encourage coal firing are distorting the energy market. The removal of this subsidy would cause coal power stations to lose profitability and thus they require to raise their electricity prices to regain profits in order to compete with other energy methods.

(Top of Page)

(Top of Page)

Biomass

Biomass power plants burn crops remains to produce power similar to the way coal-fired power plants work. Another product of Biomass is extracting ethanol from sugarmill byproducts. The GGAP subsidies for Biomass include ethanol extraction with funds of $7.4 million and petrol/ethanol fuel with funds of $8.8 million. The total $16.2 million subsidy is considered as a renewable energy source subsidy.

(Top of Page)

Oil - Petrol

In the transport sector, fuel subsidies reduce petrol prices by $0.38/L. This is very significant, given current petrol prices in Australia of around $1.20 per litre. Removal of this subsidy will make petrol prices rise to around $1.60/L and thus could make certain alternative fuels competitive with petroleum on cost. The 32% price increase associated with subsidy removal would be expected to correspond to an 18% reduction in petrol demand and a Greenhouse Gases emission reduction of 12.5 Mt CO2-e.

(Top of Page)

Oil - Diesel

Energy Grants Credit Scheme (EGCS) : off-road component is a rebate program for diesel and diesel like fuels.

Petroleum subsidies

Companies involved in the extraction of the fossil fuel petroleum are given special deductions as follows:

1. deduction of expenditures
2. deduction of expenditures on capital and current environmental protection on pollution control and waste management
3. deduction of mine rehabilitation costs

The Petroleum Resource Rent Tax (PRRT)

1. keeps oil prices low
2. encourages investment in the 'finite' supplies of oil, at the same time considering alternatives
3. removal will effect low income households

(Top of Page)

Natural Gas

GGAP provides $26 million subsidy for constructions of natural gas fired power plants.

(Top of Page)

Geothermal

There are a number of geothermal projects trying to offer proof of concept. One is near Innaminka in North East South Australia. http://hotrock.anu.edu.au/index.html
(Top of Page)

Town Gas

(Top of Page)

Hydro Electric Power

See Snowy Mountains Scheme

Talbingo Dam

Hydroelectricity accounts for 6.5 per cent of Australian electricity generation.

The Snowy Mountains Scheme is a massive water diversion, storage and hydro-electric scheme, which takes water from the eastern slopes of the Australian Alps (part of the Great Dividing Range) in eastern Victoria and southern New South Wales through pipes, tunnels and aqueducts into a series of dams, for use in hydro-electric power generation and irrigation in the Murrumbidgee and Murray valleys. The scheme created two major artificial lakes, Lake Eucumbene and Lake Jindabyne as well as a number of smaller lakes and ponds.

Wind Power

See Wind power in Australia, Wind power in South Australia

Wind power in Australia is clean and renewable and a typical wind turbine can meet the energy needs of up to 1000 homes. The technology is proven, fast to build and economical compared with other renewable energy technologies. Wind power currently accounts for 0.6 per cent of Australian electricity generation.

Australia is the highest emitter of greenhouse gases per capita in the developed world and Wind power is well placed to grow and deliver greenhouse gas emission cuts on a cost competitive basis. A typical 50 megawatt (MW) wind farm in Australia can reduce greenhouse gas emissions by between 65,000 and 115,000 tonnes a year.

Solar Power

See Solar power in Australia, Photovoltaic and renewable energy engineering in Australia

Solar power is not yet a significant source of large scale electricity generation in Australia, despite the country having a reputation for a hot dry and sunny climate that might make it ideal for utilisation. This is mainly due to the higher cost per kW than other power sources because of the cost of solar panels. However, costs are coming down, mainly due to promising research by Professor Martin Green, the engineering breakthroughs of Professor Andrew Blakers, and production initiatives of companies such as Origin Energy and Solar Systems, and BP Solar.

A major 154MW photovoltaic (PV) Solar power station in Victoria is planned and will cost $420 million. It will be the biggest and most efficient solar photovoltaic power station in the world. The power station will have the capability to concentrate the sun by 500 times onto the solar cells for ultra high power output. The Victorian power station will generate clean electricity directly from the sun to meet the annual needs of over 45,000 homes with zero greenhouse gas emissions.

Nuclear Power

Jervis Bay Nuclear Power Plant was a proposed nuclear power reactor in the Jervis Bay Territory on the south coast of New South Wales. It would have been Australia's first nuclear power plant, and was the only proposal to have received serious consideration as of 2005. Some environmental studies and site works were completed, and two rounds of tenders were called and evaluated, but the Australian government decided not to proceed with the project.

Queensland introduced legislation to ban nuclear power development on 20 February 2007. Tasmania has also banned nuclear power development. Both laws were enacted in response to a sudden pro-nuclear position, by John Howard in 2006 , and the release of the Dr Ziggy Switkowski report into nuclear power. This report has been criticised for not dealing with total costs of nuclear power, particularly cost of storage of nuclear waste and cost of decommissioning plants at the end of their economic life.

The main problems with Nuclear power are:

1. it is not a short or medium term solution to climate change as no reactor has been built in less than 16 years over the past 3 decades
2. none of the proposed Gen IV reactors that are claimed to be safe have actually been built
3. proliferation of nuclear weapons
4. risk of intractable nuclear waste
5. cost of storage of nuclear waste for thousands of years which is generally omitted from budgetted costs and cost per Kwh comparisons with other stationery energy sources.
6. industry only viable with massive government subsidies or caps on liability for damage caused by accidents
7. cost of decommissioning generally omitted from costings, leaving taxpayers with large costs not relevant to other energy providers
8. a number of countries with real experience of nuclear power generation are actively decommissioning their plants.
9. no electorate that is a suitable location for a nuclear power station is willing to have one, which is why the federal government chose Jervis Bay, a federal territory with few voters, as a potential site.

(Top of Page)

Energy Exports

(Top of Page)

Energy Imports

(Top of Page)

Energy Security

(Top of Page)

See also

• Effects of global warming on Australia
• Energy policy
• List of active power stations in New South Wales
• List of active power stations in Queensland
• List of active power stations in South Australia
• List of active power stations in Tasmania
• List of active power stations in Victoria, Australia
• List of active power stations in Western Australia
• Wind power in Australia
• List of wind farms in Australia
• Wind power in South Australia
• Solar power in Australia
• Renewable energy commercialization in Australia