The Finkel Review and scientific consistency with the Paris Agreement

Bill Hare, Director, Climate Analytics, Berlin

The Paris Agreement calls for countries to adopt measures which, collectively, will hold global warming well below 2° and limit this to 1.5°C. The Finkel Review has specifically dealt with the question of the Australian electricity sector transformation and emissions within the context of the Paris Agreement.

The Finkel Review was an opportunity to propose a science-based approach to the short and long-term development of Australia’s electricity sector consistent with the low-carbon transformation required by meet the goals and obligations of the Paris Agreement. The minimum electric sector pathway suggested for consideration by the government under the Finkel what we say about energy security Review is not consistent with a science-based approach to the necessary transformation of the electric power sector   should Australia wish to meet the obligations of the Paris Agreement.

Scientific studies universally show that the electric power sector must make faster reductions than all other sectors in order to minimise costs and maximise transformation opportunities.

The minimum electricity sector emissions reduction pathway suggested in the Finkel Report (26-28% reduction from 2030 levels from 2005) is not consistent with the scientific understanding, as its reductions only track the (already inadequate) 2030 reductions proposed for the entire Australian economy. The minimum pathway suggested is also inconsistent with recent technology assessments by the CSIRO, and the recent review by the Climate Change Authority of electricity sector developments through to 2030.

The overall minimum electricity sector pathway suggested by the Finkel review is inconsistent with either 2°C warming limit, or the stronger well below 2°C limit to 1.5°C goal in the Paris agreement.  If implemented as suggested it would lock Australia’s electric sector into a higher carbon pathway than is consistent with the Paris agreement, or the weaker 2°C limit which has been superseded by the Paris agreement itself.

This pathway would ultimately risk large stranded investments in fossil fuel intensive infrastructure, likely raise direct and indirect consumer costs for electricity above those levels that would have applied in a lower carbon pathway, and risk lock-in of carbon intensive infrastructure with associated economic and social costs.

The Finkel Review has emphasised the role of natural gas, in particular the need for expansion of exploration and development, however this inconsistent with the transition towards a zero CO2 emissions energy sector.  Whilst energy/electricity security considerations lie behind this suggestion it does not appear consistent with state-of-the-art developments in this area. A salient recent example drawn from the United States  shows that solar photovoltaics and battery storage are now outcompeting peaking-gas power on price in that market, where gas prices are considerably lower than in Australia. It is to be emphasised that a prominent Australia electricity market entity (AGL) has also reached a similar conclusion.

Australia’s present commitments under the Paris agreement (26 to 28% reduction by 2030 from 2005 levels) are inconsistent with the former 2°C limit, and even more so with the Paris agreement long-term temperature goal.  All expert assessments show that Australia’s current policies will not meet the Paris Agreement 26 to 28% reductions by 2030.  Adoption of the minimum pathway suggested in the Finkel review for the electricity sector would make achievement of this goal even more unlikely as it would require much faster action in other sectors that would be more costly, and intrinsically slower to act or to have effect.

The zero emissions timeframe for the power sector outlined in the Finkel Review – sometime in the second half of this century is much slower and later than is consistent with the Paris Agreement.  If assumed to be 2070 as a linear continuation of the minimum electricity sector emissions reduction pathway it would be some 30 years later than is required under the Paris agreement (around 2040, and about 20 years later that would be required under the weaker to 2°C degree limit (around 2050).

Background

  • The electricity sector accounts for the largest share (about a third) of Australian emissions. With existing policies, emissions are projected to increase from 187 MtCO2 equivalent emissions in 2015 to 186 MtCO2 in 2030.
  • The electricity sector is crucial for achieving the overall goal of net zero emissions. The IPCC (link) has shown that decarbonisation of the electricity sector can and has to happen by 2050 with existing technologies to achieve the goal of globally aggregated zero emissions in the second half of the century. This is also confirmed by the IEA in it 2017 Energy Technology Perspectives[i] report.
  • Because of the longevity of infrastructure in the electricity sector, it is important to avoid locking into technologies that do not achieve deep enough reductions.
  • Full decarbonisation of the electricity sector can be achieved using known technologies and is a key strategy to decarbonize other sectors (buildings, industry, transport). This is a robust finding – both globally (IPCC, Climate Action Tracker) as well as for Australia (CCA 2016b[ii], Climate Works 2014)[iii].
  • A least-cost pathway for the electricity sector consistent with the Paris Agreement 1.5oC limit for the Pacific OECD region (comprising Australia, New Zealand, Japan) leads to emissions reductions by 85% in 2030 and to zero emissions by 2040. A pathway consistent with limiting global warming to below 2oC shows reductions by 65% in 2030 and reaches zero emissions in 2050.
  • Many studies have shown that Australia has opportunities to achieve cost-effective reductions in the electricity sector emissions in this range, see for example the review published by CCA in 2016 (CCA,2016b).
  • The lowest cost option for decarbonizing the electricity sector are renewable energy technologies, combined with improvements in energy efficiency across all sectors.
  • The share of renewable energy in the available studies analysed by CCA (2016b) is between 46 and 74% in 2030. Emissions intensity of electricity generation would go down from from 0.81 t CO2-e/MWh in 2015 to around 0.25 t CO2-e/MWh or lower by 2030 and below 0.1 t CO2-e/MWh by 2050 or  CCA (2016a)[iv] had, in 2016, proposed a pathway for emissions intensity to reach zero “well before 2050”.
  • CSIRO, in a report for Department of Energy and Environment (DOEE)[v] released on 2 June this year, has outlined several pathways for energy related emissions. While it assumes a proportional share of the 2030 target for the whole energy sector (including buildings, industry, transport), the resulting emissions reductions in the electricity sector are much higher, ranging between 52 and 70% from 2005. These are explicitly based on separate technology pathways, such as increased productivity or higher shares of renewable energy. If these were combined (higher renewable energy share plus ambitious increase in energy productivity across all the sectors), even higher reductions could be achieved.
  • The Finkel Review electricity minimum electricity sector pathway is inconsistent with these assessments and reviews. It assumes a reduction pathway proportional to the overall objective. This implies proportional reductions in other energy and non-energy sectors. This is not consistent with an overall least-cost pathway consistent with the Paris Agreement.
  • A wide range of studies (CSIRO and ANE 2017[vi], Teske et al[vii],) show that a transformation to 100% renewable energy in the electricity sector can be achieved cost-effectively – given the disruptive transformation of the market taking place and the dramatic decrease in costs for wind and solar combined with battery storage.
  • The CSIRO and Energy Networks Australia 2017, Electricity Network Transformation Roadmap final report shows that the electricity sector can achieve zero net emissions by 2050 with less costs compared to a business-as-usual path, due to avoided investments in network infrastructure by orchestration of distributed energy resources. This results in a reduction in cumulative total expenditure of $101 billion in 2050, and $414 annual saving in average household electricity bills compared with a business-as-usual pathway.

Climate Analytics

Climate Analytics is an institute headquartered in Berlin, Germany that does research on assessing climate change impacts, adaptation and mitigation. This includes the study of emissions pathways and energy transformation pathways globally, regionally and nationally to avoid dangerous levels of climate change such as the goals agreed in the Paris Agreement, as well strategies and implementation policies consistent with these goals. Examples are the 2016 Low Carbon Monitor LCM report for the Climate Vulnerable Forum, looking at global and regional environmental, social and economic benefits and opportunities of a transformation pursuing the 1.5d limit of the Paris Agreement; and the 2016 coal report looking at the implications oft he Paris Agreement for coal use in the power sector globally and regionally (EU, OECD, USA). This was followed by a detailed analysis of a strategy for phasing out coal in the European Union and its Member States, providing a science-based shut-down schedule of coal power plants at the individual unit level, in line with the Paris Agreement long-term temperature goal.

It also is part of a consortium, the Climate Action Tracker, that provides timely assessments of climate action of countries compared to what is needed to implement the Paris Agreement, including tracking important decarbonisation pathways and providing recommendations for key decarbonisation strategies, such as the ten most important short-term steps for decarbonisation.

HoldfastThe Finkel Review and scientific consistency with the Paris Agreement