Some people claim that 50 per cent renewables by 2030 is ambitious, but it is entirely feasible and would not break the bank. It is also the minimum needed on the path to keeping emissions below the levels that would exceed the 2 degrees warming limit agreed to by the United Nations. The Business Council of Australia with others recently acknowledged that it means Australia, alongside most countries, must reduce emissions to net zero. By 2030 we need to be well on the way. Thanks to technology advancements, it can be done.
CSIRO modelling for our Deep Decarbonisation Pathways study show renewable energy shares of between 50 per cent and 70 per cent at 2030, on the way to a zero-carbon electricity system by mid-century. This would come mostly from a dramatic expansion of solar cells, both on rooftops and in large solar power stations, alongside an increase in wind power, especially in the short term. Solar thermal power stations, including with storage, would also come into the system. Alternative trajectories include significant shares for nuclear power or carbon capture and storage, but renewables are the mainstay in all scenarios.
This modelling takes into account the intermittent nature of renewable energy supply, and even assumes rising power demand on account of switching from direct use of oil and gas to electricity, to allow for very deep cuts in Australia’s carbon emissions. Energy storage, new ways of managing energy demand and smarter power grids can make it happen.
Many businesses are already nearly there. IKEA has announced it will use 100 per cent renewable energy for all its global operations by 2020. Apple already uses 100 per cent renewable energy for all its US operations, and all its retail stores in Australia, Britain, Germany, Spain and Italy. In Australia, King Island has had an imperative to move faster than the mainland and is now on average 65 per cent renewable energy powered. At the country level, Germany is the best comparison, with a renewables target of at least 50 per cent by 2030, and much more difficult preconditions for achieving it than Australia.
Renewable power is expected to be the cheapest source of power in coming decades, if emissions are limited in line with a 2-dregree warming goal. Of course, it is impossible to know the exact future costs of renewable technologies. But we do know three things, all of them good news.
The first is that the costs of new energy technologies continue to come down. The cost reductions have been much faster than anticipated, in particular for solar cells. The costs of large-scale solar power plants today are already only about half what modelling for the Australian Treasury from four years ago suggested the costs would be in 2030. For example, the ACT is having solar power stations built at fixed-price contracts that are much cheaper than thought possible just a few years ago. Costs for energy storage are likewise coming down.
Even without further drastic cost reductions, the overall capital costs for 50 per cent renewables will be small compared to past major infrastructure investments. And Australia’s fleet of coal power stations is aging. Most of the plants that would be replaced by solar, wind and other renewables will be past or near the end of their design lives by 2030. It’s industrial renewal.
The third point is the tremendous potential for greater energy efficiency in Australia’s housing stock and appliances. Household energy savings counterbalance power cost increases. Even under ambitious decarbonisation scenarios, the share of household incomes spent on electricity would fall.
And yet, by itself a 50 per cent renewables target would fail the cost-effectiveness test to reduce Australia’s carbon emissions, because it misses the opportunities in energy efficiency at all levels, and also in fuel switching: there are emissions savings to be had from switching from highly polluting brown coal to black coal and to gas as well as to renewables.
A portfolio of actions is needed. Our recent analysis shows that doing cost-effective energy efficiency in buildings, industry and transport would keep Australia’s emissions from growing. Switching to renewable energy in the electricity sector and using this low-emissions electricity to replace fossil fuels in cars, buildings and some industries would help reduce emissions to 25 per cent below 2005 levels. Carbon forestry and agricultural improvements can bring emissions down to about45 per cent below 2005 levels. Switching to biofuels and gas, and reducing industrial non-energy emissions can bring Australia’s emissions down to 50 per cent below 2005 levels by 2030.
The economically sensible policy instrument to achieve all of these goals is to put a price on carbon. This could be in the form of an emissions trading scheme, or probably less effectively by turning the government’s Direct Action policy into a baseline-and-credit scheme. Putting a price on carbon will also help with a renewables goal. Governments can also use direct regulation, which can work well for energy efficiency.
Policies that are “long, loud and legal” – stable, clear, firm signals for investors – will keep costs down and they are what business is calling for. We are a long way from that in the highly politicised climate change debate.
Getting to a low-carbon economy will be about investment but also about innovation and managing the social transition that is inherent in any significant economic shift – and Australia has successfully managed a few. It means being clear that building a resilient future means investing now, and building a societal consensus around this. Will Australia’s politics be up to the challenge?
This article was originally published at The Age.