Carbon Trading: How does it work?

[Buddy]

WA, NSW and Qld - here comes trouble. The gas industry will benefit in WA and Qld but just about everything else loses. The NSW government's financial house of cards seems to have caught fire - not exactly an unforeseen event.

Smurf,
I dont understand why you say the gas industry willl benefit. How is that? Do you know the answer to the question I posed - will gas exporters, such as Woodside, get taxed on the total CO2 level of their export or just the bit that they generate in the production? Likewise for coal exporters?
In my last post I quoted an article from The Australian, where Don Voelte talks about the impact on the LNG industry. That hardly seems like a "benefit" to me.

 

[korrupt_1]

No, I think you are a bit confused. The businesses have to pay to pollute. Not us.

Hi Juw177,

Look at this website I googled up:

http://www.wikihow.com/Buy-a-Carbon-Offset

Read point #7

Buy the offset! Most offset providers sell through the Internet, so you’ll be able to buy with a credit card and get confirmation of your new clean-living, clean-driving status within minutes.

My point is... who is going to regulate what we pay someone to 'clean the environment up'?... personally I think 'paying' for a carbon offset credit is a load of rubbish... where is my hard earned money going and how can I be sure that it's going to be spent on cleaning the environment up?

 

[AlterEgo]

Hi Smurf,

It’s good to see an intelligent, considered response on the issue.

I should point out that it's a 50% rise in the wholesale power price and that is essentially what heavy industry is paying.

That’s interesting. So how are the energy companies supplying green electricity for such a small additional fee for normal households? Is the government subsidising most of the cost? Surely they wouldn’t be selling it at a loss.

Well there seem to be quite a few issues that the government will need to address. Hopefully they’ll come up with some workable solution in the end.

 

[Smurf1976]

Well you never stated how much you use. That's about what it cost's for the average home consumer to switch to green electricity. But you could be running an aluminium smelter in your back yard for all I know - I can't be expected to know that.

Household consumption varies hugely with lifestyle, climate and what energy sources are used.

Following are figures are typical for a 3 bedroom house in Hobart, a relatively cool climate. Assume 2 adults, one working full time, one part time, and 2 children. No special measures taken to conserve energy other than insulation. No timers in the shower etc.

Space heating - 12,000 kWh per annum
Hot water - 5,000 kWh per annum
All other household energy - 5,000 kWh per annum.

So if all-electric they'll use about 22,000 kWh per annum. A fairly high rate of consumption by national standards but not unusual in a cool climate.

A heat pump for heating would bring this down to 14,000 kWh.

Or using a wood heater for heating would bring the electricity use down to 10,000 kWh at the expense of typically 6 tonnes of wood.

On the other hand, if they have a wood heater, LPG cook top and heat pump water heater then they'd use only 6,000 kWh of electricity.

So there's a big difference in the same house depending on what energy source they use to heat the house, heat water and cook with.

In places with piped natural gas, you could use that for all heat sources and get the total electricity consumption down to about 4,000 kWh per annum. Such figures are quite common in Victoria and other places with either cheap gas or a warm climate.

 

[Smurf1976]

Smurf,
I dont understand why you say the gas industry willl benefit. How is that?

A boom in gas-fired power generation which will, in practice, be taxed at aout 40% the rate applying to coal-fired generation. That's due to higher efficiency and the lower carbon content of the gas.

This may not bring a net benefit to the gas industry considering the LNG issue, but it puts WA in a better position than a coal dependent state like NSW where it's all loss and no real offset.

To my understanding, emissions from the LNG plant will count but emissions from actually burning the gas overseas don't.

 

[Smurf1976]

Hi Smurf,

It’s good to see an intelligent, considered response on the issue.



That’s interesting. So how are the energy companies supplying green electricity for such a small additional fee for normal households? Is the government subsidising most of the cost? Surely they wouldn’t be selling it at a loss.

Well there seem to be quite a few issues that the government will need to address. Hopefully they’ll come up with some workable solution in the end.

Electricity prices vary but typically it's around $150 per MWh for household use at continuous supply (not off-peak) rates. That does vary a lot around the country though.

But of that $150, only about a third of that is for the wholesale electricity. The rest is transmission, distribution (about 40% of the total cost), retail margin etc.

So if the wholesale price goes from $40 (coal) to $65 (bottom end for wind) then the $25 change doesn't make a huge difference at the household level - it becomes $150 versus $175.

It's like most things. The wholesale commodity is worth a lot less than the retail price once all the extras like (in the case of electricity) distribution, metering, retail, transmission etc are added in.

Trouble is, for industry they don't need distribution or much retail either. And baseload transmission and generation works out a lot cheaper than supplying the varying loads of households. So an extra $20 or $25 per MWh is a massive difference for industry.

In terms of industry, I'm refering to heavy industry like steel works, aluminium smelters, paper mills, zinc smelters etc and not the sorts of things you find in "industrial" areas of cities with lots of warehouses and the like.

For "green power", there's a hidden subsidy from fossil fuel generation in that it provides the back-up when the wind is not blowing etc. It's fine if 10% of the energy is green, but costs increase dramatically if you want (say) 50% of the total grid to be green power. And it would cost an outright fortune to go to 100%.

Even oil tends to still be cheaper at those very high renewable % usage levels despite wind being a quarter the cost of oil at lower concentrations of use in the grid. In other words, the big problem is that the costs of green energy go UP as use increases, not down as applies to most industries.

 

[AlterEgo]

Dreaming am I Alter, and you certainly have one?

Well you just seemed to have such a great arrogance, that I thought I’d reply in a tone of voice that you may be able to understand.

And CO2 is not a pollutant. "Open a CO2 gas cylinder in your room and see just how long you live for!" is a ridiculous comparison and absurd. No one ever in this debate has ever said that CO2 would get to those levels. You are just fear mongering and talking rubbish!

I never said it’d get to those levels - don’t be ridiculous! I was just making a point that it’s not totally harmless as you seem to be making out. You’re arguments about the ‘dangers’ of lowering CO2 are just as absurd!

We do know though that the levels we currently have are affecting the environment, and we need to reduce those levels. The world’s best scientists say it is so, and they would know much more about the issue that you or I, so we should believe what they say.

The cost of acting NOW will be much less than the cost of acting LATER, so the sooner we act the better. Short term pain for long term gain.

 

[Smurf1976]

What I can't understand is why George Bush is spending billions of $ on this Iraq war when he chould be using that money to reduce the Americans oil dependence instead. He has already spent in excess of $550 Billion on this war, and estimates suggest it could end up costing in excess of $1 Trillion!!! Just imagine how much good he could have done by spending it on fixing climate change instead.

Just think how much Australia could have achieved if we'd spent the past 16 years developing a proper energy policy rather than the ideologically driven step of making the industry "competitive" and less technically efficient in the process.

The "reforms" of the 1990's and this decade have delivered market prices no lower than those expected under a monopoly situation (except in Victoria) whilst lowering generator technical efficiency and increasing greenhouse gas emissions as a result.

With all the cost and effort of this system, we could have actually built some decent renewable generation instead. And we could be running the coal and gas plants for maximum efficiency and minimum emissions rather than maximum profit and to hell with emissions.

 

[AlterEgo]

Just for everyone's info, these are the prices to switch to green household electricity:

You pay the same price you are paying now, plus:
$1.10 per week for 25% GreenPower
$2.20 per week for 50% GreenPower
$4.40 per week for 100% GreenPower

Source: Jackgreen Energy http://www.jackgreen.com.au


So $4.40 per week seems a pretty small price to pay for green electricity - not much more that the price of a cup of coffee.

 

[Buddy]

OK Ego, I'll leave the deabate about CO2 levels to another thread. Although I still maintain, even though it's hypothetical and quite improbable, that if CO2levels were to go down significantly, the impact would far worse that increasing CO2 levels. It's a throw away line though, OK? And I still maintain that it is annoying and quite improper use of the word to calll CO2 a pollutant.

I started off by calling the carbon tax, a tax. It is. Its a duck, and its a tax. And will have severe impact on Australia's economic wellbeing. You are entitled to your opinion but there are many people who have the same opinion as I do, and see it as just another scheme by polies to get into your pocket. Sorry, I've been around too long to believe polies dont seize upon any opportunity to get into your pockets.

Here's another reason why it's a tax:
http://blogs.theaustralian.news.com.au/meganomics/index.php/theaustralian/comments/push_to_favour_low_income_households
So, I guess this means that poor people dont "pollute" (if you want to insist on using that word). Likewise, only poor people should get a rebate for solar installations. Does that mean poor people "pollute" more than rich people. So, which one is it? I mean, the whole thing is just absurd, and reeks of the old labour ideological claptrap.

It's the wrong way to tackle the problem (yes, I agree there is a problem) and will do nothing to lower overall CO2 levels. Meanwhile, the big "polluters" China, India and USA will take advantage of all the industries we have exported, and the levels will continue rising. You might all feel really good, shivering in the middle of winter, eating contaminated food from china, waiting for the dole cheque that will have no value because the government will be bankrupt. There are better ways to solve this problem.

 

[AlterEgo]

Ok Buddy,

Sorry about before. I was just beginning to get pretty annoyed with your apparent attitude towards me. Whether that was intentional or not, I don’t know. I may have misread the situation. Anyway, let’s move past that.

Ok, you agree there’s a problem and something need to be done about it. Is this the best way to go about it though? Maybe not, I don’t know. At least the government has shown that they are serious about this issue. Howard would’ve done nothing about it.

Yes, it is a tax. Hopefully the tax is used to offset the carbon that we are paying for though – renewable energy research, planting tress, etc.

This scheme isn’t ‘set in stone’ yet though, is it? I’m sure the government will consult all industries to come to some workable compromise.

Should it be a tax? Business always goes for the cheapest option, so they won’t move to being any ‘greener’ unless there is a monetary incentive to do so. A tax does address that issue.

Everyone talks of the costs of going to a carbon future, but what about the benefits it will bring? There will be heaps of money to be made from green energy technologies in the future. Australia could become a world leader in these technologies, which would obviously be great for our economy in the world carbon future, which is obviously coming. We don’t want to be left behind. We should be trying to get a head start on the rest of the world.

 

[Julia]

Well you never stated how much you use. That's about what it cost's for the average home consumer to switch to green electricity. But you could be running an aluminium smelter in your back yard for all I know - I can't be expected to know that.

No you can't. So probably best to stop making generalisations.

 

[Julia]

For anyone who can be bothered reading it, here is an article from FNARENA/ShareCafe offering their summary of how things will work.
NB The content is not offered with any endorsement or otherwise from me.

http://www.sharecafe.com.au/fnarena_news.asp?a=AV&ai=9457

 

[chops_a_must]

A boom in gas-fired power generation which will, in practice, be taxed at aout 40% the rate applying to coal-fired generation. That's due to higher efficiency and the lower carbon content of the gas.

This may not bring a net benefit to the gas industry considering the LNG issue, but it puts WA in a better position than a coal dependent state like NSW where it's all loss and no real offset.

I think the first thing to realise about what WPL are saying, is that they whine the house down. Wouldn't be out of place in Geelong.

The government here has forced gas producers in the north to sell gas at less than market cost, as a part of getting infrastructure etc. up there. WPL wouldn't exist if it weren't for the WA government over the years, and it's probably posturing to make sure it doesn't have to provide more gas to keep costs down here. They have a pretty big moral debt built up with the govt. and the know it.

If we are forced to pay true market price for the gas, it will be a different story however.

It's interesting, because the privatised Western Power here can't make a buck because of the costs, and because they are effectively subsidising true power costs. Massive price rises coming here regardless of carbon trading. It's really the least of the problems.

For "green power", there's a hidden subsidy from fossil fuel generation in that it provides the back-up when the wind is not blowing etc. It's fine if 10% of the energy is green, but costs increase dramatically if you want (say) 50% of the total grid to be green power. And it would cost an outright fortune to go to 100%.

I disagree Smurf. Never been to Freo after 3pm where it isn't blowing consistently. For mine, in WA at least, wind offers the perfect peak power producing capacity. Hell, our coastal trees grow sideways because of it.

 

[marklar]

No, I think you are a bit confused. The businesses have to pay to pollute. Not us.

Rest assured that the consumer will pay. The consumer ALWAYS pays!

The cynical side of me thinks status-quo is about the best we can expect (no nett change in emissions or costs) the realist in me thinks that someone will find a nice way to profit. I've seen the results of SOX & PCI compliance and the entire industry that has formed around audits, consulting, advice, etc.

m.

 

[Smurf1976]

It's interesting, because the privatised Western Power here can't make a buck because of the costs, and because they are effectively subsidising true power costs. Massive price rises coming here regardless of carbon trading. It's really the least of the problems.


I disagree Smurf. Never been to Freo after 3pm where it isn't blowing consistently. For mine, in WA at least, wind offers the perfect peak power producing capacity. Hell, our coastal trees grow sideways because of it.

The situation Western Power has been placed into guarantees financial failure. In short, let others take most of the baseload with plants running flat out and leave Western Power to make the system work and cope with peak load and the failure of others' plant. You could make that pay with a hydro system for sure (not that I'm saying you could build a hydro system in WA) but it doesn't work with the thermal plant they have.

As for wind, it might do that in Freo but it's basically the only place in the world if you're right. Being totally serious here, I'd expect Freo to become a totally heavy industrial zone absolutely dominated by wind farms within 15 years if it's true. Whatever else is there now (never been there so not sure) will go to make way for towers of both the wind and transmission line variety. Yes I'm being totally serious there - probably average 1 turbine a week until there's 500+.

For everyone else, wind runs typically 35% of the time and that's the problem. It's down to 15% in some overseas locations. There are parts of Tas where over 40% is possible but for most of Australia take 35% as about right.

The effect on other power stations is simply to reduce their load factor (ie utilisation). That cuts revenue far more than it cuts costs (or emissions) so it doesn't really scale up. The exception there is with a large scale storage hydro system in which case wind integrates very well at no real economic penalty up to (if the grid load factor is high enough) 25 - 30% of total generation.

 

[AlterEgo]

No you can't. So probably best to stop making generalisations.

Why are you being so rude to me, Julia? I'm just trying to help by showing you an inexpensive alternative.

So what unusual case do you have that would require you to spend a vast amount more than I stated? Are you running a business? Because the fact remains that for a normal residential property the cost for green energy is only $4.40 per week above your normal bill. And source is as stated previously in this thread. You're claiming that "your suggestion that the additional cost will equate a cup of coffee is simply silly.", and I've shown you that your assumption was incorrect by showing you an energy provider that is offering it for that price. So I don't know what more you expect from me. I've backed up my claims, but rather than backing up yours, or admitting that you were wrong, you just choose to attack me instead. Very poor form, Julia.

 

[Smurf1976]

Just for everyone's info, these are the prices to switch to green household electricity:

You pay the same price you are paying now, plus:
$1.10 per week for 25% GreenPower
$2.20 per week for 50% GreenPower
$4.40 per week for 100% GreenPower

Source: Jackgreen Energy http://www.jackgreen.com.au


So $4.40 per week seems a pretty small price to pay for green electricity - not much more that the price of a cup of coffee.

I'd be careful with those figures.

Looking at their site, they seem to think that 1.5 MWh per annum for hot water is normal. Sorry, but that's only 30 - 40 litres per day once tank losses are counted. One short shower for one person is hardly what I'd consider normal usage. What's typical? About 4 MWh for a two person household, more for a larger household although it's not linear (so it's around 6 - 6.5 MWh for 4 people).

As for other power consumption, they give figures for 1.5, 5 and 8.5 MWh per annum. The 1.5 figure is for your bedsit with someone at work all day. Or a highly efficient house with gas for everything, natural light all day etc.

5 would be a typical household without air-conditioning and that uses gas / wood / oil for heating. 8.5 MWh would be more reasonable if it's a typical all-electric house.

So it's potentially quite a bit more than $4.40 per week depending on how much you're using. And of course if you're going for green power then you wouldn't want to be using gas etc to reduce your consumption as that would defeat the purpose.

 

[AlterEgo]

I'd be careful with those figures.

Looking at their site, they seem to think that 1.5 MWh per annum for hot water is normal. Sorry, but that's only 30 - 40 litres per day once tank losses are counted. One short shower for one person is hardly what I'd consider normal usage. What's typical? About 4 MWh for a two person household, more for a larger household although it's not linear (so it's around 6 - 6.5 MWh for 4 people).

As for other power consumption, they give figures for 1.5, 5 and 8.5 MWh per annum. The 1.5 figure is for your bedsit with someone at work all day. Or a highly efficient house with gas for everything, natural light all day etc.

5 would be a typical household without air-conditioning and that uses gas / wood / oil for heating. 8.5 MWh would be more reasonable if it's a typical all-electric house.

So it's potentially quite a bit more than $4.40 per week depending on how much you're using. And of course if you're going for green power then you wouldn't want to be using gas etc to reduce your consumption as that would defeat the purpose.

Well my understanding is that the extra weekly rate is a fixed rate, not dependent on your usage. They have examples on the same website for up to 8.5MWh, and the additional figure still works out to the same $4.40 per week.

 

[chops_a_must]

As for wind, it might do that in Freo but it's basically the only place in the world if you're right. Being totally serious here, I'd expect Freo to become a totally heavy industrial zone absolutely dominated by wind farms within 15 years if it's true. Whatever else is there now (never been there so not sure) will go to make way for towers of both the wind and transmission line variety. Yes I'm being totally serious there - probably average 1 turbine a week until there's 500+.

Nah, it happens for 1000's of k's up the coast as well. Type in Geraldton trees to google for instance, really interesting. Some say the trees grow like that because of the wind, others because of aeroplanes: http://www.writerspen.com.au/ArticleCorner/GeraldtonTrees.html

And nah, Freo wont become like that. The time for that has passed. There was a proposal to put wind towers up around the port a few years back (which I supported), because it was perfect for wind, but it got rejected at some level.

Land value is way too high in Freo for that, and sandgropers would never support it anyway. However, about 20k's worth of coastal development and marinas are likely between Freo and Rockingham. Billions upon billions being thrown around. Check it out if you like the drawings of developments and things. I find it quite fascinating really. A hell of a lot of dwellings and residents will call Freo home in the next decade or so.