Cleaner Future Power Stations ITG Secretariat
Energy and Environment Division
Department of Resources, Energy and Tourism
E-mail: cleanerfuturepowerstations@ret.gov.au
Industry House
9/10 Binara St
Canberra City, ACT 2601
GPO Box 1564,
Canberra City, ACT 2601
24 December 2010
Re: INTERDEPARTMENTAL TASK GROUP DISCUSSION PAPER: A
CLEANER FUTURE FOR POWER STATIONS
Australia is currently at a crucial stage in its energy policy. Legal and policy
frameworks need to be developed to initiate the long term structural shifts
required to move Australia to a low carbon economy. In this regard, the urgent
threat of climate change offers a strong incentive to ‘wean’ Australia from its
historical dependency on fossil-based fuels for power generation. In particular,
the Australian economy and society needs to move away from using coal as
the primary means of stationary electricity provision which is widely accepted
as the major source of greenhouse gas emissions in Australia. It is the
overarching imperative to move away from fossil fuel use towards more
sustainable energy sources that needs to inform proposals for a cleaner future
for power stations. The specific proposals in the above Discussion Paper
should be read against this need for transformation of the energy mix. Thus a
focus on multiple regulatory levels is necessary to respond to, and to
precipitate change in, the day-to-day activities of individuals, families,
businesses and governments that operate at multiple levels and are the
primary source of GHG emissions.
More generally it should be noted that the adoption of standards-based
regulatory measures for emissions and the discrete ‘performance ready’
standards for CCS is in keeping with similar trends to enhance direct
regulation of the energy sector in many countries. Declining enthusiasm for a
market-based approach for dealing with climate change [at least as sole
measure] is evident in some other jurisdictions, with a return to more direct
regulatory approaches e.g. mandated energy efficiency standards and other
measures e.g. promoting renewable energy uptake. The recent climate
change legislation in Victoria which gives particular powers to the EPA to
regulate GHG emissions as a form of pollution is a recent example. This
submission generally endorses the move to direct regulation via standard
setting for power generation emissions intensity, but notes that such
regulation of power generation facilities needs to be seen as part of a
spectrum of legal and regulatory approaches for responding to structural
change and innovation in energy source technologies. Discussions of
emissions standards and CCS readiness should be extended to existing
power stations that continue to make stationary energy the biggest single
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source of greenhouse gas emissions in Australia. Further, the range of
initiatives in energy efficiency regulation at a national domestic level has
grown, although the level of attention directed to demand-side measures for
power generation still seems to lag well behind the more discrete proposals
advanced for supply-side measures.
The following address the specific matters for comment raised in the paper.
BEST PRACTICE EMISSION STANDARDS FOR NEW COAL-FIRED
POWER STATIONS
This submission would favour the extension of regulatory standards based
upon Best Available Technology (BAT) for all power stations. The adoption of
regulatory emission standards is particularly suitable for stationary power
generation sources where existing reporting requirements (e.g. NGER Act
2007) that will facilitate monitoring and compliance. However the submission
notes the need to ensure that innovation in emission intensity reductions
technologies, and indeed renewable technologies, are not unduly constrained
by standards for new power generation that are comparatively weak and thus
do not drive changes to the technologies. [The submission notes the ‘phase
out’ policy in the discussion paper but would suggest that measures once
introduced should be evaluated for their effectiveness vis a vis market
measures although the different regulatory forms required to address existing
facilities and any potential ‘retrofit’, as opposed to new facilities are noted.
However the bifurcation in economic positions that may be introduced by two
different emissions standards as a result is noted below].
Accordingly there is a need to ensure a progressive refinement of the
standard over time in order to drive and maintain levels of innovation and
uptake of new BAT. Overseas experience has demonstrated that BAT or best
practice standards usually provide more flexibility and adaptability than
standards setting fixed emissions limit. Further, such a standard might be
coupled with regimes to promote performance beyond the standard: for
example accredited licence type schemes that operate in pollution control
legislation in some Australian states.
Thus the submission would favour the following option for the proposed
standard threshold- 5. A Standard set with review and possibility of a declining
threshold to account for improvements in technology.
In respect of coverage the submission notes the following:
Definition – “A generation complex, generation complex project or generation
unit that uses coal to generate electricity and may be grid connected or nongrid connected generation”
The definition does not seem to cover a situation where a power generation
facility may conceivably incorporate more than coal-based generation. Further
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is there a need to define different types of coal given the GHG emissions
produced varies with type.
The submission would favour applying uniform emissions intensity standards
to all power generation facilities as the exclusion of existing facilities provides
an indirect ‘subsidy’ to those ‘players already in the market’. This situation will
further entrench the economic advantage of those existing facilities and limit
the potential for innovation. However of the three options developed in the
discussion paper the submission would see the thirds suggestion i.e. “3.
exclude existing generation units; however apply the standard to new
expansion units.” This situation is in keeping with areas, such as planning law,
where all new and extensions to existing ‘developments’ typically are
regulated under the prospective standards.
In respect of the definition of ‘committed or advanced project’ the submission
would suggest that the high level of discretion implicit to the measures i.e. a
project meets 3 of five criteria or shows ‘progress toward’ criteria is vague and
may prove unworkable. There is a wide divergence between the stages of the
project under the criteria. The submission would favour the choice of 1-2
definitive criteria at a relatively final stage in the project development process
such as whether financing (including execution of all necessary contracts) is
complete and whether there is a firm (i.e. contractually determined) date for
construction to begin. The submission is mindful of the issues around breach
of contract and it is these constructs that should primarily drive considerations
around appropriate criteria and their implementation point.
The submission would favour a firm commencement date for the legislation to
allow for certainty of commercial planning and thus would favour 31
December 2011.
Legal form
“There are two likely ways in which the Standard could be enacted:
• a stand alone Act of Parliament incorporating the Standard, and CCS-Ready
requirements; or
• insertion of a trigger in existing legislation, for example relevant State or
relevant electricity market legislation.”
The submission suggests that both a stand alone piece of legislation clearly
articulating the Standard and CCS Ready requirements (see below) and a
series of insertions into other cognate legislation should be implemented.
The stand alone legislation is advocated to ensure that the standards are not
‘lost in the detail’ of other Acts and that the importance of the measure and
the coherence of the standard are maintained. There is also likely to be
considerable delegated legislation associated with the primary statute in terms
of technical guidance etc and thus it may be more efficient to have the primary
point of reference for such guidelines contained in one statute. Further the
electricity market rules may not be a suitable vehicle for the standards as their
regulatory objectives operate within a more deregulated market context;
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although significant interaction with these rules is necessary to ensure
complimentarily outcomes.
Further, it is vital that the standards be implemented in association with other
legal frameworks. In particular, the regulatory system for emissions standards
and licencing should be instigated with a view to interaction with the planning
and environmental impact assessment (EIA) laws and development controls.
Effective integration with the EIA process will require a consideration of both
federal and state legislative regimes although consideration in relation to the
federal EPBC Act 1999 is worth consideration. However this is to be achieved,
it is critical for planning and approval decisions to be integrated with power
generation facility licensing decisions. These considerations could be
implemented by way of ‘referral authorities’. As noted also, there is a need for
integration across jurisdictions of any measures i.e. If States have own (higher)
standards then it is vital that the federal legislation allows scope for their
application should be preserved. A useful model here operates within the
European Union.
Phase Out Issues
“Should the standard be enforced though ongoing compliance or should
approval for new coal-fired power stations be granted at commencement
only?”
The submission would favour on going monitoring and compliance as all too
often these aspects are the ‘poor cousins’ in a regulatory regime even though
they are vital for the successful outcomes. There are significant monitoring
and reporting regimes already in place that could be adapted.
“Should the standard be phased out with the introduction of a carbon price,
and what would be the implications of this for planning, investment, and
construction activities?’
The submission would favour a long transition between the use of the
standards and the phase out due to the introduction of a carbon price. The
effects of the carbon price in driving innovation may not be apparent for some
time as the ‘price signal’ needs to permeate at the level of widespread
behavioural change. The standard will provide certainty to planning and
investment particularly given the long term and strategic orientation of such
activities.
“Should the Standard be reviewed in the future?”
The standard should be open to review and to third party review mechanisms
that are available through typical planning law/ EIA regimes.
CCS-Ready Standards
The following makes some general points about the idea of CCS readiness.
While it may be commendable that new power stations should emit as little
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GHG emissions as technically possible, at the same time the legislation might
be regarded as further locking Australia into a coal dependent future. In an
ideal situation, new coal stations should not be built at all if Australia is to
move expeditiously to a low carbon future. CCS readiness will not provide for
a true low carbon alternative; if too much reliance is placed on this form of
‘technological fix’ and thus on the finite resource of coal, it will continue a
pattern of very energy intensive power generation. Additionally, it should be
pointed out that CCS technology is currently not applied on a commercial
scale and long term storage management is uncertain. It is this uncertainty of
when and how CCS may become commercially available, that is reflected in
the term ‘CCS-ready’ (to be applied in the uncertain future).
On the other hand, the Melbourne Energy Institute’s Stationary Energy Plan
has recently shown that even 100 per cent renewable energy is economically
achievable in a short timeframe with the help of proven technical solutions
such as wind and solar. Further reliance on coal as energy source will make it
more difficult for renewable generators to succeed in the electricity market.
While the proposals in the discussion paper may curb the exponential growth
of emissions in Australia a little, they will not significantly alter the trajectory of
emissions without strong additional measures being implemented. As noted
above, the discussions of emissions standards and CCS readiness should be
extended to existing power stations.
The following addresses specific matters in the discussion paper.
“Are there exceptions where it is not appropriate for the CCS-Ready standard
to apply to the same activities and entities as the best practice emissions
standards?” Generally it would seem appropriate to apply both regimes in the
approvals process for all new facilities and extensions of existing facilities.
CCS readiness should also be applied to existing power-generation facilities
as a condition of licences to ensure that such power generators do internalise
the costs of externalities (i.e. pollution) previously borne by the community at
large.
“Are there reasons to enact the CCS-Ready standard through a different
legislative process than the emissions standards? If so, what alternative
would be suggested?”
A stand alone statute incorporating both standards and CCS readiness would
be appropriate for clarity and as the interactions with other statutes are
complex. However there is a strong need to ensure that CCS requirements
are effectively reflected in other regimes – the EPBC Act 1999 may be a
vehicle here as well as state pollution/ licensing works approvals.
“Are there reasons to administer the CCS-Ready standard through a different
Authority or process than the emissions standards? If so what alternative
would be suggested?”
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It may be possible to apply the CCS readiness standard through planning and
development control laws at a state level in combination with the federal
authorities under a bilateral agreement model.
“What criteria need to be covered in regulation or guidance material on what
CCS-Ready facilities may require to demonstrate their CCS readiness?”
This matter should be decided by an independent technical reference group of
experts appointed under the legislation working in cooperation with statebased authorities that are a part of existing works approvals and EIA
processes.
“What level of detail, if any, is required or practical when assessing whether a
plant is CCS-Ready?”
An independent panel of experts should be set up under the legislation for
these purposes. There should be rights of third party review for the decision.
“Should proponents be required to secure rights to potential storage areas to
meet the CCS-Ready criteria?”
Yes. If proponents do not secure rights then the technology requirement may
prove redundant.
“Could the definitions create any unintended incentives, inconsistent with
minimising long term emissions?”
As noted this submission holds some major reservations about CCS
technologies and would advocate ongoing review of CCS readiness capability
to allow for adaptive management.
“Is annual reporting appropriate to ensure that new power plants continue to
comply with CCS-Ready standards?”
Yes with a view to updating requirement after a review period of say 5 years.
Is it appropriate to phase out the CCS-Ready standard once a carbon price is
introduced?
Note the comments made about transition above in relation to standards.
However there is a more pressing need though to phase out CCS
technologies to drive innovation in BAT for power generation itself and to
assist in the uptake of renewable energy technologies.
What level of detail should be required in the economic feasibility study?
Again an independent panel of experts should assess economic feasibility in
relation to each proposal as it will vary temporally and with the nature of the
project.
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Thank you for the opportunity to make this submission to the Discussion
Paper.
Professor Lee Godden, Associate Professor Jacqueline Peel, and Ms Anne
Kallies.
December 24 2010
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