Government

Let Australia Follow the Leaders

Jamison Group urges the government to take the lead of the US and China in the Energy Industrial Revolution

The Jamison Group, formed as a group of experts in sustainable transport and energy policies to make recommendations to the NRMA, delivered two new reports in February of this year. These reports informed the NRMA’s Alternative Fuels Summit, staged in Sydney in March, which attracted much media and public attention.

As a member of the Jamison Group, I would like to highlight the points we made in these latest reports, and the opportunities we see as being opened up for business in Australia by moving towards alternative fuels and renewable energies.

Let us be clear on the stakes in this game. In the US, under the Obama Administration, there is a massive swing towards renewable energy and alternative fuel targets, led by huge increases in R&D expenditure as well as market mandates enacted by Congress, all designed to restore the US to a position of international leadership in the industries that promise to be the leaders of the 21^st century. The US sees China as its biggest competitor, and for its part, China is embarked on a program that is even more massive, designed to get it off fossil fuel dependence and bring on renewable energies and low-carbon technologies at an unprecedented rate. China has official targets to ramp up renewables (such as wind and solar photovoltaic) as well as nuclear to the point that 20% of coal can be substituted by 2020, 30% of coal substituted by 2030, and 50% by 2050. This would amount to an Energy Industrial Revolution the like of which the world has never seen.

China has every intention of being the world leader in almost all renewable energy industries, as well as in nuclear. No wonder the US sees it as its main rival for leadership in this dramatic new competitive space.

China has every intention of being the world leader in almost all renewable energy industries, as well as in nuclear. No wonder the US sees it as its main rival for leadership in this dramatic new competitive space.

Where is Australia in all this? According to our research in the Jamison Group, Australia is nowhere in sight. We lag behind the renewable energy leaders on almost every score. We remain dependent on oil (now mostly imported) for almost all our transport needs, while we maintain coal exports as our number one export industry. We have huge reserves of gas, but almost all of this is for export, and only a trickle is available as an alternative fuel.

In our first Jamison Group report, issued in July 2008, we focused on what we saw as the principal obstacle to Australia’s developing any kind of alternative or renewable energy and transport system – our near-total dependence on oil. The statements from the federal Department of Resources and Energy emphasize Australia’s role as an oil producer, with a focus on stepping up oil and gas exploration. But Australia has already peaked as an oil producer, and will never be self-sufficient. Instead the oil imports bill rises inexorably, reaching an anticipated $25 billion by 2015 (in the Minister Martin Ferguson’s own words) – a ruinous whack on our Balance of Payments.

AUSTRALIA’S OIL IMPORT BILL – INCREASE OVER PAST 20 YEARS

Now in our Second and Third reports, on alternative fuels and on the Electric Vehicles Revolution, we emphasize these points once again. Our main recommendations are that the government grasp the totality of the alternative fuels and renewable energy issues, to see them not through the lenses of yesterday’s fossil fuel industries, but through the lenses of the possibility of building new industries around renewable energies and low-carbon technologies – as China and the US see them.

Under the Howard years we watched while one renewable energy sector after another was downgraded or even eliminated, while fossil fuel business interests were always promoted. The Rudd government, on the other hand, has committed itself to the promotion of greater renewable energy uptake and industry promotion – although its plans fall far short of what is required for an Energy Industrial Revolution. We now have the opportunity to utilize the abundant resources in Australia – sunshine, wind, geothermal as well as land and water for biofuel crops – to build the new industries that could make us energy independent.

The Rudd government has committed itself to the promotion of greater renewable energy uptake and industry promotion – although its plans fall far short of what is required for an Energy Industrial Revolution.

As such, our first recommendation is that the federal government grasp this issue in its totality, and attach the same strategic emphasis to it that we see in the US and in China. We then discuss the various liquid fuel options, paying attention in particular to the role that demand stimulus will have to play – for example in setting market targets that are needed for alternatives if the playing field tilted towards fossil fuels is ever to be levelled, and in proposing new fuel consumption and efficiency targets, where Australia lags badly behind China and Europe. We then look at new developments in Electric Vehicles and biofuels.

Electric Vehicles

The Jamison Group recognizes that since our last report, two years ago, there have been very significant developments in Electric Vehicles (EVs) – making electric power a new and promising ‘alternative fuel’ for vehicles. We recognize that this is a ‘revolution in the making’ and that no plug-in EVs can yet be bought in Australia. But there are proposals for a drastic upgrade of infrastructure in Australian cities that would be compatible with widespread adoption of EVs. New companies such as Better Place envisage mass development of EVs with recharging facilities to be located all around cities, and automated battery replacement sites at strategic locations. Better Place has an agreement with the Victorian government as well as energy provider AGL to provide renewable energy sources for the extra electric power needed. The proposals build on prior roll-outs in Israel this year and Denmark next year.

We in the Jamison Group point out that with a bit of foresight, the government can use the forthcoming EVs revolution to drive the uptake of renewable energy sources for electric power, ensuring that EV uptake will actually reduce carbon emissions rather than raise them. Yet the federal government remains silent on this matter. Our report is designed to focus and energise the Rudd government and trigger a national plan for the accelerated adoption of EVs based on electric power generated from renewable sources.

Australia’s existing sugar cane industry could produce 1 billion litres of ethanol per year

Biofuels

As part of the strategy recommended to the NRMA for moving Australia towards alternative fuels, in our first and second reports we emphasized the huge possibilities for Australia to produce biofuels, of both first and second generation type. The Howard government enacted some modest market mandates for biofuels, but then killed off the nascent industry by fiddling with the tax issues involved. So far the Rudd government has remained silent on the issue, letting the running be taken by state governments – particularly Queensland, NSW and Victoria.

In the Jamison group, we do not want to see biofuels in Australia caught up in the noxious ‘food vs. fuel’ debates that have hampered developments overseas. We have therefore recommended that for first generation biofuels (made from sugar or starch), Australia concentrate on sustainable tropical crops such as sugar cane rather than temperate food crops such as grains (wheat, maize, sorghum). In both reports we have emphasized that sugar cane farmers could switch to growing cane for ethanol as well as sugar, by cooperatively building the latest technology bioreactors near the sugar cane fields. With just the existing sugar cane industry Australia could produce up to 1 billion litres of ethanol per year, and by doubling the industry (and thus reviving rural communities in Queensland and northern NSW) we could produce 2 billion litres a year by the year 2030 – enough for 10% of our own private vehicle transport fuel requirements, as well as some exports.

Contrast these figures with those from Brazil, where currently more than 20 billion litres are produced, almost all from sugar cane, and all grown in the country’s Southeast, thousands of kilometres away from the Amazon. Australia could actually compete with Brazil if there were a concerted national policy, designed to move rural industry towards the tropical north where rainfall will remain plentiful, and where new crops and products such as ethanol from sugar cane could lead the way. But so far there is no progress or leadership on this front.

GM-Holden has announced an ethanol partnership with the Victorian government and other companies

Surprisingly, there is leadership on next-generation biofuel production, where it is not just sugar or starch that is fermented but whole plants, woody waste, agricultural residues, or urban waste that contains organic (or carbon-containing) matter. I say surprisingly, because while second-generation biofuels are thought to be a few years away from major commercial exploitation, GM-Holden has just made a dramatic announcement that the company intends to take a leadership role in second-generation biofuels in Australia, in partnership with the Victorian government (which is showing up by its focused activity the relative inactivity of the federal government).

 Make no mistake, the GM-Holden Commodore commitment is a revolutionary announcement that promises – at a stroke – to take Australia to the forefront in the biofuel transport revolution.

GM-Holden has committed to producing a range of Commodore cars within a year that will be both flex-fuel (able to run on petrol or ethanol) and where the ethanol can be of 85% purity (E85) thus giving the cars burning this fuel an added power advantage (because ethanol is an oxygenating additive).

The GM-Holden agreement announced in March also brings into the picture the US firm Coskata as provider of new technology for producing 2^nd generation ethanol from urban waste, as well as Veolia as the company that will provide the waste, and Caltex that will undertake to build E85 outlets at 30 petrol forecourts by July this year, and over 100 outlets within a year. Mitsui is also part of the arrangement. So this proposal would produce alternative fuel that reduces greenhouse emissions, as well as reducing urban landfill, and giving Australian motorists a taste of E85 power.

Make no mistake, this is a revolutionary announcement that promises – at a stroke – to take Australia to the forefront in the biofuel transport revolution. And it is exactly in line with the Jamison Group recommendations calling for support for an Australian second-generation ethanol and biofuel industry, to reduce oil imports, promote domestic consumption as well as exports, and help revive rural industries.

So the ball is in the federal government’s court. We in the Jamison Group have clarified the issues as best we can. Now it is up to the federal government to respond. We invite you, Ministers Ferguson, Tanner and Wong, to come and talk with us and get some dramatic new federal policies rolling to put Australia on the same track being pursued in the US and China.

The Jamison Group report can be found by clicking here.

John Mathews is the Eni Chair of Competitive Dynamics and Global Strategy at LUISS Guido Carli university, in Rome, on leave from the Macquarie Graduate School of Management