CarbonSignal

These days most companies are cutting costs and pulling back on major capital projects.  Banks are reluctant to lend and investment dollars are shifting to low-risk safe havens.

Australian companies have bucked this trend.  The government’s Renewable Energy Demonstration Program (REDP) has elicited a staggering number of large-scale renewable energy applications.  The REDP set out to provide $435 million in funding, at a ratio of $2 private investment for every $1 provided by the REDP.

The REDP guidelines required renewable technologies that are one step away from full commercialisation. The ideal  applicant would have financing secured, network access agreements in place, and front-end engineering design (FEED) activities underway.  Applicants were instructed to seek funding grants of $50 - 100 million (resulting in a $150 to $300 million project), because the government clearly stated that it wanted to fund a few large projects rather than many small projects.

How many Australian companies could possibly meet these specific requirements?  How many companies could possibly have renewable energy projects on the drawing board, and hundreds of millions ready to invest?

Only a handful of eligible projects were expected.

Today the energy minister Martin Ferguson announced that 61 REDP applications were received, seeking $3.9 billion for projects totalling $15.4 billion.

These are all real projects with real private dollars behind them, hoping for government approval so they can go ahead. The application process was no easy task.  Competitive grant-writing is an iterative process, requiring substantial in-depth analysis and careful wordsmithing.

The services of HAC were secured by one applicant for a baseload concentrating solar power project.  Our analysis shows that this particular project measures up very strongly against the merit criteria.

The $435 million that is earmarked for the REDP program is a significant sum, but it is relatively small in comparison to the investment needed to meet Australia’s 20% Renewable Energy Target.  To put it in perspective, that amount wouldn’t even buy you a single conventional coal-fired power plant.

Consider that the government has already spent $21 billion on cash handouts over the last six months.

One can only imagine the transformative power this vast portfolio of 61 projects could have on Australia’s energy industry and job market.

It’s impossible to overstate the significance of the signal that private industry has communicated to the Australian Government through this REDP turnout:  We’re ready when you are.  It’s time to up the ante.

Obama’s stimulus act allocates $4.5 billion USD to develop a smart grid in the US.  This is a hefty chunk of change, but is it enough to kickstart a widespread transformation of the electricity infrastructure?

There are many possible smart grid configurations and technologies, but the fundamental concept is that information exchange between power generators and consumers will enable better control of generators and loads, thus improving the efficiency of the network and possibly increasing the penetration of distributed renewable generators on the grid.  See this Forbes article for a good explanation.

In Australia, a Smart Grid Alliance was formed last September.  Silver Springs Networks is currently attempting to network “approximately 1 million homes and businesses in Victoria” with advanced metering infrastructure, and IBM has signed data management contracts handling information from thousands of sensors scattered throughout the networks.

This seems like a good start, but how big is the challenge?  Obama’s initial investment is intended as a “down payment” that will fund several pilot projects which will demonstrate the viability of a smart grid.  The LA Times reports that,

“The Electric Power Research Institute, a utility industry think tank, has estimated the cost of building a smart grid at a staggering $165 billion — about $8 billion a year for two decades.”

General Electric has joined the Australian Government in founding a Global Clean Coal Institute.

Back in September we noted Kevin Rudd’s announcement of Australia’s new $100M Clean Coal Institute, and questioned whether yet another “Global Institute” was needed.

Maybe it is time to start actually building these things?  In Clean Coal terms, $100M is a drop in the ocean.

To put things in perspective, consider that last year BP and Rio Tinto announced plans to build a clean coal gasification plant in Kwinana, Western Australia.  The plant was to cost $2 Billion, and that only covered the capital cost to build the coal-to-gas plant.  Operating costs, like the cost of the coal feedstock, were in addition to this.  On top of that, someone would have to pay for a power plant to convert the synthetic gas from the clean coal plant into electricity.

That particular project was scrapped because the geological formation off Perth, which was the intended eternal destination of carbon dioxide from the plant, was found to be too porous.  It was impossible to guarantee that greenhouse gas stored in the reservoir would remain trapped forever.

GE operates many gasification plants around the world, and has been demonstrating IGCC in the US since the 1980’s.  GE is obviously in the clean coal business to make money, and they can’t make money without building things, so perhaps their influence on the Clean Coal Institute will ultimately push beyond reports and presentations and lead to some sod being turned in Australia?

The Senate inquiry into the Carbon Pollution Reduction Scheme has unleashed a new wave of criticism, but the government is continuing to hold the line. 

Professor Garnaut, the government’s climate change advisor, told the inquiry “it was a “lineball” call whether it would be better to push ahead with the proposed scheme with its flaws, or start from scratch.”

The government proposes to cut greenhouse gas emissions by 5 to 15 percent from 2000 levels by 2020.  The Greens and the Opposition have both said that they would support deeper emissions cuts, amongst other changes to the Scheme.

But Minister Wong is adamant that the Scheme should progress as planned.

“Going back to the drawing board on emissions trading would significantly increase business uncertainty.”

However, ABC reports that “the Government will consider a suggestion from fellow Labor senators to amend the proposed legislation to make sure voluntary action by the community to reduce emissions is taken into account when setting targets.”

Preliminary results from the Cleantech Group show that venture capital investment in Q1 2009 has dropped to $1 billion, down by 41% from the previous quarter, and 48% from Q1 2008.

“Cleantech financing is moving into a new phase, characterized by diversified funding sources, as the global recession and liquidity issues impact venture investors. Venture funds continue to invest significant sums, albeit at a slower pace and smaller scale than in the past two years.”

The economic downturn has had a negative impact on private investment in CleanTech companies, but governments around the world are looking to pick up the slack, and then some.  A report to be presented at the G20 summit this week says that of the $2.6 trillion USD already announced in stimulus packages, approximately $400 billion is earmarked for CleanTech investment.

Increasing numbers of individuals, businesses and government bodies around the world are claiming the label of ‘carbon neutrality’.

To say an entity is ‘carbon neutral’ is effectively saying the entity makes zero contribution to the total amount of greenhouse gas in the atmosphere.  The entity calculates that they emitted X tonnes of greenhouse gas, and then purchases X offsets from a provider which reduces the amount of greenhouse gas in the atmosphere or the amount that would otherwise be emitted from other sources.  Typical offsets include tree planting, burning landfill gas, energy efficiency improvements, or a number of other means (the quality of the available offsets is an issue for another article).

The concept is simple, but the introduction of an emissions trading scheme muddies the waters.  Under an ETS, the total aggregate emissions of the economy are fixed by the scheme cap.  Therefore, the link between individual emissions and aggregate emissions is severed.  An economy under an ETS is a zero-sum game.

• If an entity chooses to voluntarily offset its emissions by purchasing offsets that are outside the scheme, that will have no impact on the total aggregate emissions from the covered sectors.
• If the entity chooses to reduce their emissions through efficiency improvements, or perhaps by installing solar panels on their roof, then they will have reduced their own permit expenditure.  They have therefore reduced the demand for permits, which should correspond to a reduction in permit price.  The aggregate emissions from the covered sectors still remains fixed at the scheme cap.
• If the entity chooses to voluntarily buy permits under the scheme and then tear them up, they will have reduced the supply of permits.  This would effectively lower the scheme cap and raise the permit price.  A permit is not an offset, but if the entity reduces aggregate emissions in this way can they then claim carbon neutrality?

What role does the concept of carbon neturality play under an emissions trading scheme?  Has the term ‘carbon neutral’ become obsolete?  Should another term replace it?