Carbon conundrum

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Getting good media coverage of its statement on carbon emissions this week will no doubt please The Climate Group – 170 reports, according to Google News – but the statement itself won’t have shocked Rudd government ministers and advisors.

“Tell us something we don’t know,” will be the reaction, at least in private, of the government as it prepares to lob its emissions trading and renewable energy bills into federal parliament.

The lobby group will be happy it at least got acting Victorian Premier Rob Hulls on the defensive, blaming population growth for his state’s increase, when he should have been pointing to the fact that the Gippsland coal burners have been called on to come to the rescue of drought-stricken Tasmania to stand in for a lack of hydro capacity and to service an economy that has been doing quite well in the past two years.

Unlike New South Wales, where there was a smaller rise in emissions due to the fact that the basket case state was already in something of a slump before the global credit tsunami surged in.

The federal ministers will shrug and soldier on with their proposals because they know a number of things:

– Emissions from electricity generation passed the 200 million tonnes per annum mark in the previous financial year. What The Climate Group has “revealed” (actually they are guesstimates – it will take 12-18 months to come up with the official data) may be some slight slowing in the rate of growth of emissions.

– To even hit the 2020 target Rudd proposes is a huge ask for electricity suppliers, calling on them to make average cuts of more than 25 million tonnes a year over the next decade.

– The bulk of new generation capacity to meet sharply-rising peak power loads in the three states ‘named and shamed’ will be gas-fired, with projects close to completion or about to get under way.

– NSW, Queensland and Victoria, the three big coal burning states, have no viable substitute for existing power stations in the next decade to meet existing baseload needs. The new renewable capacity and extra gas brought on by Rudd’s measures will be meeting new demand only.

– Economically, absolutely the worst thing that could happen would be for radical policies to cause two or more Victorian brown coal burners to shut down in the next two to four years. It would cause a huge supply problem for the entire eastern seaboard.

– The core issue is not population growth or even householders’ desire for plasma TVs and air-conditioners (the purchase of which has been promoted by Rudd and Swan’s stimulus package) but business consumption. Reining it in through energy efficiency measures will take years.

Somehow The Climate Group and other boosters for more radical carbon measures never seem to get round to saying upfront to journalists and the public that the real demand (and hence emissions) driver in the electricity sector is business consumption, which of course has a nexus with jobs.

As Rudd & Co are only too well aware, just 27.8 percent of power demand is residential. Some of the strongest rates of growth are in Queensland, which is driving the use of coal seam methane, and Western Australia, where gas not coal is the dominant generation fuel.

The large number of businesses – embracing corner stores as well as high rise buildings, hotels, hospitals and education facilities – in the commercial sector have an even smaller share of consumption: 22.4 percent.

The balance, nearly half of all electricity demand, is industrial, dominated by metals processing (18.1 percent), aluminium smelting (11.6 percent), mining (9.1 percent) and the rest of the manufacturing sector (9.2 percent). These are the energy-intensive, trade-exposed industries that alone employ more than 1.1 million Australians. Neither Kevin Rudd nor Malcolm Turnbull will have their senators voting for measures that drive these businesses in to the ground.

The only resource that realistically can meet the bulk of electricity demand in NSW, Victoria and Queensland – the three states which account for about 85 percent of Australian power consumption – throughout most of the next decade is coal. In the largest area of consumption, NSW, coal burning (both by domestic stations and those over the border in Queensland) provides 90 percent of its electricity supply and a third of total national demand.

Whether the environmental movement likes it or not, the mantra that Rudd and his ministers will be chanting around the Cabinet table in 2009 is “jobs, jobs, jobs” and employers, at least those in mining and industry, will be chanting back “cost, cost, cost.”

Nothing in The Climate Group’s commentary is going to change that.

And if they really want a statistic, NSW and Queensland black coal burning rose from 49 million tonnes in 2002-03 to 51 million tonnes in 2006-07. By now it is probably around 53 million tonnes. It’s not a secret – the firm figures are in the annual power industry publications and so are the projected forward demand levels.

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.