Thank you for the opportunity to make a formal submission responding to the All things considered options paper.

Transcription

1 CO2CRC Limited Building 290 p: +61 (0) University of Melbourne e: Level 1, 700 Swanston Street VIC 3010, Australia PO Box 1182, Carlton VIC June 2016 Level 34, 121 Exhibition St Melbourne, VIC Dear Mr Masson, Thank you for the opportunity to make a formal submission responding to the All things considered options paper. Please find attached CO2CRC Limited s formal submission. Please feel free to publish this publically. We look forward to working with Infrastructure Victoria in developing the 30-year infrastructure strategy for Victoria. Yours sincerely, Tania Constable PSM Chief Executive Officer

2 Infrastructure Victoria All Things Considered CO2CRC Limited submission June 2016

3 CO2CRC acknowledges and appreciates the strong relationships it has with industry, community, government, research organisations, projects and agencies in Australia and around the world. Industry ANLEC R&D (on behalf of ACALET) Chevron Australia Coal 21 Global CCS Institute INPEX Browse Ltd J-Power Shell Development (Australia) Pty Ltd Community Landowners near site Moyne Shire Nirranda South Government Australian Government: Department of Education and Training Australian Government: Department of Industry, Innovation and Science CarbonNet Project NSW: Department of Industry SA: The Department for Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) Victoria: Department of Economic Development, Jobs, Transport and Resources WA: Department of Mines and Petroleum Research Australian National University Charles Darwin University CSIRO Curtin University Federation University Australia Geoscience Australia GNS Science Imperial College London Korea Institute of Geosciences & Mineral Resources Lawrence Berkeley National Laboratory (LBNL) UK CCS Research Centre University of Adelaide University of Edinburgh University of Melbourne University of NSW University of Queensland University of Western Australia

4 CO2CRC Limited Level 1, 700 Swanston Street, bldg. 290 The University of Melbourne Victoria 3010 Australia Reference: Infrastructure Victoria All Things Considered CO2CRC Limited submission. CO2CRC Limited, Melbourne, Australia. CO2CRC 2016 Unless otherwise specified, CO2CRC Ltd retains copyright over this publication. You must not reproduce, distribute, publish, copy, transfer or commercially exploit any information contained in this publication that would be an infringement of any copyright, patent, trademark, design or other intellectual property right. Requests and inquiries concerning copyright should be addressed to Chief Operating Officer, PO Box 1182, Carlton VIC 3053 Australia. p: e: info@co2crc.com

5 Contents Introduction... 1 Options already in consideration... 1 Aging coal generation asset transition (ACG)... 1 Carbon Capture and Storage... 2 CCS as an option to reduce Victoria s Greenhouse gas emissions Australian Power Generation Technology Report... 4 Continued consultation and engagement... 7 i

6 Introduction CO2CRC Limited welcomes the opportunity to make a submission to Infrastructure Victoria s process to develop a 30-year infrastructure strategy for Victoria. CO2CRC Limited is the lead research organisation for Victoria s Flagship Carbon Capture and Storage (CCS) Project, CarbonNet and has been researching CCS for over 10 years. CO2CRC is the first company in Australia to successfully and safely demonstrate capturing CO 2 from a coal fired power plant, transporting the CO 2, and storing it in a geological formation. CO2CRC considers it is important to provide Infrastructure Victoria with some further information around lower carbon energy supply to allow them to make an informed decision when developing the 30-year infrastructure strategy for Victoria. Infrastructure Victoria has identified Need 18 Transition to lower carbon energy supply and use as part of its 30-year infrastructure strategy. The primary goal of this need is to reduce Victoria s greenhouse gas emissions. CO2CRC is a strong supporter of this goal, but recognises the challenges that face Victoria, if the state is to achieve this goal while managing broader economic, social and environmental issues. Options already in consideration There are several options already considered under Need 18 Transition to lower carbon energy supply and use that address Victoria s need for low emission energy. Of interest is aging coal generation asset transition (ACG) and CO2CRC considers more in-depth analysis can be done around this option: Aging coal generation asset transition (ACG) Victoria s base load power is largely sourced from brown coal and provides 53% of Victoria s electricity 1. Brown coal provides high volume, high reliability, dispatchable electricity running 24 hours a day, 7 days a week (24/7). Removing coal assets will leave a gap in electricity generation in the medium term and as energy demand rises this gap will need to be met. A thorough analysis on replacement generation assets including impacts on energy costs, reliability for consumers should be conducted and published as part of this infrastructure plan. As identified in the options hand book there is a risk of reduced reliability during peak demand periods in the transition between energy supply sources. If newer low emission based systems are unable to scale up quickly, customers could be forced to ration their electricity during major peak demand periods, including extreme weather conditions. 2 More modelling should be done on what options are available to provide Victoria with high volume, high reliability, dispatchable electricity running 24/7 if coal assets were to be phased out. According to the Australian Energy Council (AEC) the Victorian target of 5400 megawatts of new large scale 1 Source: AER, Registered capacity in regions by fuel source available online: (accessed 16 June 2016) 2 Source: Infrastructure Victoria Draft options book available online: %2027%20May% pdf (accessed 16 June 2016) 1

7 generation to be built in Victoria in the next ten years will be difficult to achieve without significant impacts on energy costs and reliability for consumers. The AEC point out that there is currently only 4300 megawatts of renewable energy capacity on the entire East Coast of Australia. 3 Further, detailed analysis is required on the impacts to jobs and growth if brown coal plants are closed and replaced in the Latrobe Valley where brown coal electricity generation forms major power generation. Is there another option for these coal generation assets? CO2CRC supports more research into retrofitting CCS or replacing and adding CCS to some of these assets to provide high volume, high reliability, dispatchable base load electricity whilst providing deep cuts to CO 2 emissions. While the current capital costs of implementing CCS is currently higher than solar and wind it has the advantage of being reliable and available 24/7. Any planning around the infrastructure to have the option to deploy CCS is required now. Further information on CCS and in respect to the Latrobe Valley is provided below. Carbon Capture and Storage Carbon Capture and Storage (CCS) is a suite of clean energy technologies that can help mitigate CO 2 emissions. CO 2 is captured at large point sources, typically fossil fuel-fired power plants, transported to suitable storage locations and then injected into the deep geological subsurface, with the end goal of permanently storing the CO 2 in safe geological formations. The International Energy Agency (IEA) predicts that CCS has a great potential to reduce carbon emissions and that the mitigation contribution from CCS will be 12% in See Figure 1. Further CCS is essential in meeting global targets of achieving a below 2 degree rise in temperature. Figure 1: Contribution of CCS to reduce global CO 2 emissions to reach the 2 degrees scenario. Taken from IEA Energy Technology Perspectives Australian Energy Council media release available online: (accessed 16 June 2016) 4 International Energy Agency (IEA). Energy Technology Perspectives Paris: France

8 CCS as an option to reduce Victoria s Greenhouse gas emissions. Although CCS is a suite of technologies, it has to be thought of as an infrastructure project. To achieve deep cuts in CO 2 emissions while providing reliable, high volume, 24/7 power; CCS deployment will need to be ramped up over the next 30 years to reach the IEA 2050 targets. CCS projects, like other large infrastructure projects, will take years in the planning and construction phase before becoming fully operational. If the option of CCS is not considered as part of Infrastructure Victoria s 30-year strategy at this point in 2016, Victoria could very easily lose the option to deploy it in the future, or have to deploy it at a much higher cost. Looking at examples internationally, the Energy Technology Institute has recently shown that including CCS in the UK's energy system will reduce the costs associated with achieving the UK s 80% reduction in GHG emissions by approximately 30bn per year. They also state that if a complete failure to deploy CCS would imply close to a doubling of the annual cost of carbon abatement to the UK economy from circa 1% to 2% of GDP by 2050 (or roughly an extra 1000 on annual average household bills for energy and transport services) 5 CCS is not just applicable to fossil-fuel power plants, it can be utilised on high CO 2 emitting heavy industry, such as steel and cement and urea. A hub and spoke infrastructure can be developed to connect multiple sources of captured CO 2 linked to a main pipeline to then be transported to a geological storage formation. Indeed, the Latrobe Valley is well suited for this type of infrastructure, and this model has already been well examined and supported through Victorian State and Commonwealth financial commitments for the CarbonNet project. 6 See Figure 2 that shows the location of Latrobe Valley power station hub. Victoria has four coal based assets, Hazelwood, Yallourn, Loy Yang A and B, which have a total capacity to generate 5,390 MW 7. Each plant is situated in close proximity to easily accessible, cheap brown coal deposits. These power generation assets and coal deposits retrofitted or replaced and accompanied with CCS technologies can be used to revitalise the Latrobe Valley by maintaining jobs, increasing economic growth, providing reliable 24/7 electricity, and remove most of Victoria s CO 2 electricity emissions. 5 Energy Technology Institute. Carbon Capture and Storage Building the UK carbon capture and storage sector by 2030 Scenarios and actions. available online: (accessed 16 June 2016) 6 CarbonNet Project corporate brochure. available online: (accessed 16 June 2016) 7 Infrastructure Capability Assessment Deloitte Touche Toshmatsu available online: (accessed 16 June 2016) 3

9 Figure 2: Map showing the location of Latrobe Valley power station hub. Figure taken from CO2CRC report: CO 2 storage potential in the onshore Gippsland Basin - Phase 1: site screening and capacity estimation. (2009) note Energy Brix power station is no longer active Australian Power Generation Technology Report The Australian Power Generation Technology Report 2015, a technology neutral report reviewed a number of large scale energy technologies, their costs and capabilities in 2015 and This report provides the most up to date quality data set of a broad range of large scale electricity generation technologies, their capabilities and their capital costs for 2015 looking out to The report provides a foundation data set to help governments in Australia and the power generation sector make informed decisions about energy policy in Australia. The datasets form all the building blocks needed to accurately and quantitatively explore and evaluate a range of possible technological futures. These datasets will also underpin most power industry modelling studies in Australia over the next few years, help investors make important decisions and assist policymakers to guide Australia towards reliable and sustainable electricity supply. This report led by CO2CRC resulted from the combined efforts of a broad cross-section of 45 industry, government and research participants, including project developers, technology experts and international consultants. The datasets were backed up by a broad range of supporting information, including information on: how Australia s electricity grids operate the status of carbon dioxide (CO2) capture, transport and storage the role and development of energy storage systems an in-depth assessment of the Callide oxyfuel technology demonstration project in Queensland. Key findings of the Report: Importantly, the Australian Power Generation Technology Report reaffirms what is well known in the energy industry that a diverse range of energy technologies and their associated infrastructure is 4

10 required to meet current and future energy needs. Each of the energy technologies has their strengths and weaknesses which relate to costs, environment and reliability of supply. Figure 3 below demonstrates the strengths and weaknesses of each of the technologies. Note no Hydro electricity costs have been included as it is unlikely that new large scale hydro will be built in Australia. Figure 3: Generation options - strengths & weaknesses Figure taken from APGT 8 Key observations about the report Electricity generation sources contributing to Australia s electricity grids and how they are managed are continuing to change and develop. The cost of some of those technologies particularly wind and solar has dropped significantly over recent years, and further technological options and developments will mean costs will continue to come down. Australia has a range of large scale potential technologies available including renewable energy resources, low-cost fuel, infrastructure for a range of carbon capture and storage (CCS) technologies, and the option of pursuing nuclear power. The key findings of the report for 2015 and 2030 are summarised as follows: 2015 No single technology can supply all of Australia s energy needs Of renewables wind has the lowest levelised cost of electricity in 2015 Super critical coal and natural gas combined cycle have the lowest levelised cost in All new low and zero emission technologies are projected to decrease in cost by 2030 The scope in reduction of cost is dependent on the uptake of technology 8 Australian Power Generation Technology Report (APGT) available online: (accessed 16 June 2016) 5

11 Overall ranking of levelised cost of electricity for technologies remains the same, but there is likely to be a convergence across most technologies. Figure 4 below shows the levelised cost of electricity (LCOE) for a range of technologies if they were to be built in Australia today, under today s conditions. The LCOE captures the average cost of producing electricity from a technology over its entire life, given assumptions about how the generator will operate. It allows the comparison of technologies with very different cost profiles, such as solar photovoltaic (PV) (high upfront cost, but very low running costs) and gas-fired generators (moderate upfront cost, but ongoing fuel and operation costs). Figure 4: Levelised cost of electricity in 2015 Note: LCOEs for all technologies in this study are calculated at the generator s boundary, with no allowance for the cost of connection to the grid Figure 5 shows CSIRO s projected capital costs for the same range of technologies if they were to be built in Australia in Figure 5: Levelised cost of electricity in 2030 Note: LCOEs for all technologies in this study are calculated at the generator s boundary, with no allowance for the cost of connection to the grid 6

12 Continued consultation and engagement CO2CRC s knowledge and research into CCS and the Australian Power Generation Technology Report will be a valued input in providing information and options to Infrastructure Victoria. CO2CRC looks forward to working with Infrastructure Victoria in the development of its draft strategy 7

13 CO2CRC Limited Level 1, 700 Swanston Street, bldg. 290 The University of Melbourne Victoria 3010 Australia p: e: info@co2crc.com.au Follow us on Twitter@CCS_research

14 BUILDING A LOW-EMISSIONS FUTURE