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SELECT COMMITTEE ON FUEL AND ENERGY
30/06/2009
Issues relating to the Fuel and Energy Industry

CHAIR —Welcome. I invite you to make a brief opening statement and then the committee will ask you some questions.

Mr Thorn —Thank you. As you would be aware, Curtin appeared under terms of reference (a) and (d). Due to the semester break and a number of academics not being available today, I would like to address in more detail terms of reference (g) and (h) and probably not too much about terms of reference (e) and (f). I think that in one of those we did not address any of the terms. In principle, I would like to be able to talk about some of the alternative energy activities, if that is okay with the chair.

CHAIR —Yes.

Mr Thorn —Among the key principles around alternative energies and fuels, we believe that the transport fuel mix will shift in the next 10 to 15 years, with gas being a key transitional fuel as part of that and with a move to more renewable transport fuels. We believe that the role of electricity, and electric vehicles in particular, over the longer term will start to play a role in acting as a buffer storage in the grid system. We believe that that will assume some importance in the next number of years as well. That is an issue that is emerging as we speak and, as you know, a number of electric vehicles are only just starting to come onto the market.

We believe that, in the mid to longer term, biofuels and biomass will increase in the mix of transport fuels and that the carbon footprint of any of the newer technologies must obviously be less than the emittance from petroleum products. We would base that on full life-cycle assessment processes, and biofuel sources should not be competitive with food, which has been one of the key issues that has been debated in the industry for some time. Also at Curtin University we have done significant work in the policy arena in relation to city development. Peter Newman, of the Curtin University Sustainability Policy Institute, is working on transit oriented developments and, in particular, in some recent work which he has just won from the Australian Research Council, is looking at carbon-neutral cities and starting to examine some of the broad aspects around that. This is some really new work that is starting to emerge.

Today I would like to expand on Curtin’s research in the coal to liquid and biomass areas as sustainable transport fuels for the future. You will note that we did not address these in the submission, so I thought I would take the opportunity today to expand on some of that research activity. Curtin University is a collaborator with Murdoch University in a collaborative research centre in sustainable transport fuels funded by the state government of Western Australia. The state government has helped kick off some early work in this. The key areas that Curtin is looking at are coal to liquid technology, biomass to liquid and gas to liquid technology. Some of the other projects that we are working on are looking at full life-cycle assessments of all alternative fuels, looking at fuel efficiency testing—and that is mainly through Murdoch University’s involvement—and modelling biodiesel production technologies. We are also looking at hydrogen production fuel electrolysis and obviously producing the hydrogen through potentially renewable sources. We have been doing some scoping studies on the rollout of electric vehicles and what they might mean into the future.

The participation by Curtin University in that joint centre is by about 30 staff, of which 20 are academics, and there are 10 students supporting the research work. I will just touch on some of that work for the committee. As you are aware, some of the negative impacts of first-generation biofuels on our food supply demonstrate the need to balance the approach to deal with issues of fuel, energy supply and the environment. Research over the last 15 years in Western Australia and around parts of the nation have indicated the value of oil mallees in combating salinity, and that is where a lot of the early work with mallees began. Some of the benefits of that oil mallee work have been in diversifying farm income, control of salinity and sequestering carbon. Biomass is carbon neutral and the pyrolysis of that biomass and the new processes that we are developing through various liquefaction processes will result in the net draw of CO2 from the atmosphere.

The key issue in the technology that we are developing, compared with current technology, is that some of the pyrolysis conversion of the feedstock bio-oil does not go through a gasification process and therefore avoids some of the higher carbon emissions. That is research work that is underway as we speak. So it is very early stage R&D development. Furthermore, the return of biochar from mallee pyrolysis processes back to the field represents a valuable opportunity for carbon sequestration while improving the fertility of land, and this could mean the production of biofuel via pyrolysis and biorefinery while CO2 in the atmosphere is sequestered as biochar. So this program is actually looking at all the elements, not just the chemical engineering processes but looking at some of the back-end processes of biochar.

We believe there is around 13,000 hectares of mallee in WA , and obviously for an industry to get going it would probably need to be significantly larger. One of the key developments in this project is that we are not talking about large-scale pyrolysis technology; we are talking about a smaller scale, which means that it can be movable. As you would be aware, the main issue with biomass is that, if you do not have a plant close by, you have to transport it quite large distances, which adds to the carbon cost of the activity, so they look at the scaling effects as important. The other part of the work is actually looking at bio-oil refining, because the product that comes out of that particular process will not be direct vehicle ready, so that is another element of the work as well.

I have a couple of new points. A couple of other areas in the coal-to-liquid work involves us working on lignite, which is a large resource in Western Australia and obviously has a low extraction cost and quite large availability, but at the moment it is relatively unutilised. The existing coal-to-liquid processes that exist, using coal gasification Fisher Tropsch synthesis, normally have high CO2 emissions. The technology the Curtin researchers are working on is looking at reducing the carbon footprint in that process through the chemical engineering techniques that are starting to be used. So, again, it is right at the front end of some of the research activities.

Some of the issues with WA lignite are around its high water content, its high salt content, and obviously the efficiency is not as high as black coal conversion. However, we believe that there could be an opportunity here, both for regional economies and also possibly even marrying up with some of the biomass activity, in that some of the areas where biomass can go are close to where some of these deposits are.

The other two issues that I would like to touch on that were not in the submission is that Curtin has just appointed a key research fellow in the area, examining some of the policy frameworks around electric vehicles, the undersupply of electric vehicles, some of the impediments to electric vehicle uptake and obviously their production and getting them into the country. It is about life-cycle assessments around the full electric vehicles. It is about linkage into a carbon neutrality city project that we are working on, about the plug-in standards and regulations required for the future and about the grid infrastructure and the smart grids that will be required if this were to go ahead, as well as integration into our urban planning. These are some of the issues that need some exploration into the future.

Professor Peter Newman, who runs the Curtin Sustainable Policy Institute, has also just recently completed some work—it is very early preliminary work—looking at the impact of inner-city versus outer-city developments. We have a particular interest in transit oriented developments. The full cost of inner city development is around $309 million per thousand dwellings compared to $653 million per thousand dwellings for fringe developments. So you can see there are some economic issues around that. We believe the increased transport costs are around $250 million over 50 years, so it is a fair time frame that the guys have estimated, and there are obviously around 4,000-odd tonnes of greenhouse gas per thousand dwellings impacting on how those developments occur. So this integration back into the planning issues and how the city developments occur is a critical part of transport fuels into the future.

Lastly, I want to touch on some of the issues under item H, around energy security. We believe that the current national definition around energy security could be expanded by including some of the sustainability elements around economic, social and environmental dimensions by including an infrastructure security element, and it must take into account both short- and long-term impacts of exporting energy on future energy security needs.

I will not go too much further, except to say that some of the additional policy items in relation to the areas in which we discussed in the submission were the consideration of targets for the non-petroleum based fuels into the future. The issue of relief, rebates or some other incentive for lower-emission vehicles, such as electrical vehicles, into the future could be an issue for consideration. We looked at the current import barriers to electric vehicles, given that there are about 600,000 expected to be produced by 2012. Not many of those will probably see their way to Australia. We believe that R&D support for second-generation biofuels and biomass, in particular, is important. The option for tax credits in relation to growing biofuel stock and non-food is an essential element of that. Obviously support programs around demonstration plants for alternative energy is a critical element to actually demonstrate the way for the future.

CHAIR —Thank you very much. If you had to sum up in a couple of paragraphs what you see as the major issues for Australia in terms of energy security, how would you summarise that for us?

Mr Thorn —That is a broader question than what I have just presented. This would have been covered by my colleagues in the previous hearing—

CHAIR —In the previous hearing we spoke about the CPRS, essentially.

Mr Thorn —The issues really evolve around the importance of coal and carbon capture and storage into the future. That is a critical element. If capture and storage is to become a critical element by 2050, we need to make sure that (a) the technology is there, (b) the demonstration is there and (c) the economics is there. Its applicability nationally is going to vary enormously from state to state. There are opportunities in Western Australia where there are fields for carbon capture and storage to be conducted. Obviously we will wait and see how some of the larger-scale demonstrations play out over the next 12 to 18 months. That will be an important part of understanding some of these technologies. That is one key element. Curtin University has some interest in examining where the uranium debate will do, but at this stage we are not moving too much further on that issue. But that could become an issue for the nation.

CHAIR —In relation to uranium, I note in your submission you talk about the importance of the role of Geoscience Australia. Geoscience Australia appeared before the committee in Canberra last Friday, and they are doing a lot of work around four energy sources: thorium, uranium, geothermal and petroleum, of course. Are you aware of the work that they are doing?

Mr Thorn —I will touch on two issues. In Western Australia we are also working closely on a geothermal research program with the University of Western Australia Curtin University and the CSIRO are part of that. Geoscience Australia is not a direct part of that, but obviously is linked through geosciences within the state departments. That is a key issue. We see geothermal as an important aspect into the future. I think the context in which we raised Geoscience Australia in the submission was really around coal seam methane. That was the way I read the submission. I apologise, but I was not involved in the preparation of that particular element. That was my understanding of how the context was raised. I think the key issue was that Australia needs to make sure that resource developments are still able to continue and that we are in front of the game into the future. I think that was the main point that Curtin was making.

CHAIR —But do you think uranium as an energy source is something that we should keep on the table for domestic use in Australia?

Mr Thorn —I think it will be an issue that the community will debate over the next little while.

CHAIR —But if you are debating it, it means that you are keeping it on the table.

Mr Thorn —I think it will be on the table. For me, the difference between east and west is very difficult in terms of future energy needs.

CHAIR —You must be reading my mind, because that was my next question. Do you see the issues for Western Australia as being different to the ones in the rest of Australia?

Mr Thorn —I do.

CHAIR —How?

Mr Thorn —I think gas is really important as a key transition fuel. I think that is really important.

One of points I did not make in my introductory remarks is that one of the things that we are seeing that would be valuable in Western Australia, and obviously would have value nationally, is a centre for energy markets starting to do some research and development on some of the core questions that are being asked. There are agencies that do some of this work, but we believe in Western Australia that there is an opportunity for both of the two main universities, Curtin university and the University of Western Australia. As we speak, we are discussing looking at establishing a capability in that area. We basically need to grow, in the academic sense, some of our capability in this area.

CHAIR —What sorts of changes do you think will be required to the regulatory framework in order to set ourselves up for a secure, affordable, reliable and environmentally sustainable energy future? We have the debate on CPRS and renewable energy targets—let us leave that to one side. Are there things that we are not doing that we should be doing?

Mr Thorn —No, I think I will have to decline that one at the moment, if I can.

CHAIR —Fair enough.

Senator HUTCHINS —Has the university had an opportunity to consider what sorts of barriers or restraints there might be for the introduction of alternative fuel and energy in the country? I know you have mentioned what you would like to see the government do—with the tax relief and rebates et cetera. Are there practical things? Have we not got industry looking at it enough? Could you respond, if that is within the submission?

Mr Thorn —If we take the biomass one as an example, one of the critical elements is, obviously, getting feedstock. Let us say that the research programs deliver on the outcomes in terms of the efficiency of the process and new technologies around that and that it is scalable and can be moved to areas where the feedstocks are. The key question will be around making sure that the feedstocks are available; otherwise, there is not much point in doing that. That will be driven both by the economics of the day in the agricultural sector and also by the opportunities that farmers see in diversification. We believe that will be an important part. Is there enough encouragement for that to occur at this stage? I suppose at the moment it is being driven by an environmental issue rather than an economic driver. Things that will push it in that direction from an economic point of view will help develop the scale that will be required in the longer term.

I think there are some issues there. This is not all easy, but there are certainly things that we ought to be doing. At the same time, we have to be mindful that you do not want to take good agricultural land out of crop production. Being mindful of those issues is important. This is almost about the balance between my introductory argument around the economics, the energy and the environment issues, and getting that balance is still going to be one of the critical issues for the future.

We are still a fair way behind in terms of whether we are really positioned in a regulatory sense to fully exploit geothermal. Also, to some degree that dovetails with carbon capture and storage. One of the fears that sits there is that, if you have almost sterilisation of areas of land under which there is capture and storage, there may be elements of exploration that are required at levels that are not so deep. What are the impediments or otherwise that will be imposed once you start to have capture and storage at whatever depth? Those sorts of frameworks need to be thought through quite clearly and understood; otherwise, you do run the risk of having reasonable tracts of land in a quarantine type process. What the value of that is I cannot give you a handle on at this stage. So I think there are some regulatory issues around both the CCS and geothermal—without being a regulator in making my comments.

CHAIR —Again on regulations, what are the import barriers to electric cars at the moment? Do you know them off the top of your head?

Mr Thorn —That is what we are actually going to start to study now. We have only just taken on the fellow in the last three months. Basically, his job is to look at all of the issues around electric vehicles, from what are the barriers. So I cannot give you the answer today but we certainly want to start to explore all of those barriers, such as just the flow of vehicles and whether Australia will not be a preferred market in the early flow. What will the critical mass requirements be to actually have any impact if you want to move into a smart grid technology? What is the size of the electric vehicle fleet you need to actually have any net impact if you are going to use them as de facto storage? Some of those sorts of things are questions we are prepared to now start to get on and have a look at. I cannot give you the definitive answer today, because these are research questions that we are posing.

Senator HUTCHINS —This is not the same fellow that is doing the one on the inner urban areas?

Mr Thorn —It is the same group. They work very closely together for obvious reasons. We are very interested in exploring further the mix of smart grid technologies, urban and city planning, and electric vehicles. Most people travel less than 100 kilometres a day, and that was well within the range of electric vehicles. In Australia and even Europe and the US, they are the sorts of numbers you come up with. It is all about the psyche. When I need to go to Albany, and I have to travel 400 kilometres down there and 400 back, that is where the issue is. But, if you are a domestic traveller around Perth, electric vehicles make it into that mix or preferably using the train or other transport mechanisms which are less carbon dioxide intensive.

Senator HUTCHINS —We have had a number of people appear before us today. One of them used the expression—and he actually urged the opposition to take this up; not the government but the opposition—’fuel tax escalators’. Does the university have a view about using fuel tax as a mechanism to try to deal with people’s behaviour?

Mr Thorn —I think in the submission that was probably addressed under the first part of CPRS. I thought we had made the position that there may be opportunities in there. But I am not able to expand. If I had Tony Owen sitting here, I am sure he could.

Senator HUTCHINS —Actually, when Tony Owen appeared before us he was very negative about the value of nuclear power, as I recall. Do you remember that?

CHAIR —What I remember is that he thought we should introduce a carbon tax rather than a Carbon Pollution Reduction Scheme.

Mr Thorn —I was not at the hearing.

Senator HUTCHINS —Tony’s report did a lot for New South Wales politics.

CHAIR —It did, too.

Senator HUTCHINS —It sealed some careers and made some.

Mr Thorn —It created a Premier, didn’t it?

Senator HUTCHINS —Yes, as I said, it made some.

CHAIR —In your submission you talk about the long- and short-term benefits of a policy of retaining gas supplies for the domestic market. We had the DomGas Alliance here earlier today heavily criticising the selling arrangements in terms of the Western Australian gas resource. Have you got a view in terms of science policy issues?

Mr Thorn —I think the key issue is making sure that gas developments that are smaller in scale are able to be utilised. I think that is the important part for Western Australia in the long haul, which gives you that diversification of supply. I think there are only two major suppliers at the moment. So that is an issue: being able to get those smaller developments into the system and then obviously utilised as key players. I am aware that there is a separate study undergoing in Western Australia on the back of gas supply, energy security and emergency management, to which we have a submission.

CHAIR —There is a separate process in there.

Mr Thorn —There is a separate process due to start.

CHAIR —Is that a government process or is that an industry process?

Mr Thorn —It is a separate committee set up by government to examine these issues. If you would like, I can direct you to our public submission in light of that.

CHAIR —Sure. We would be very interested in that.

Mr Thorn —We did not make ours confidential; we put it in the public domain.

CHAIR —If you want it to be kept confidential please let us know. We can take submissions on a confidential basis, which means they would not appear on the website et cetera.

Mr Thorn —I imagine it is in our purview to do that.

CHAIR —Check it, and if there is an issue—

Mr Thorn —No, that is fine. In that, we make the case for the need to do some of this economic analysis both in the shorter and longer term and the impacts of the domestic reservation policy—what it means in the long haul. All those sorts of questions are some of the research questions that we have in mind.

CHAIR —And the issue of retention leases?

Mr Thorn —Yes, we raised that issue in our submission—that there should be an examination as to whether people should be able to keep pushing out the holding of those leases without development. That might be a good long-term strategy for future energy security or it may not. That is the sort of economic analysis that needs to be done. I do not think these are simple questions with yes or no answers.

CHAIR —Sure, and there are going to be people on each side of the argument with very strongly-held views. I was interested in our discussion with the DomGas Alliance. The chairman is running the Dampier to Bunbury gas pipeline, so the discussion was very much focused on diversifying gas supplies, whereas really an issue in Western Australia is that we are more dependent on gas and coal than any of the other states. Is there a case for having a third leg to the stool, so to speak, in the energy mix?

Mr Thorn —In our submission we said to maybe keep some of those coal fired power stations on a semi-redundant basis—keep them in a state in which, if you ever have a major disaster, you can reutilise them. That is what happened.

CHAIR —Some of those coal fired power stations were brought back on line.

Mr Thorn —They were, and they sucked up a lot of the gap in supply of electricity. One of the questions is: is that the ‘least cost’ solution in an energy security perspective for Western Australia?

CHAIR —We also had Wilson Tuckey before us. He was telling us very passionately about the potential for tidal energy. Have you ever looked at tidal power?

Mr Thorn —No, Curtin university does not have any direct research activity on tidal at this stage but we do work with Carnegie—

CHAIR —In terms of wave?

Mr Thorn —on various other elements. To be quite fair about it, our research program in the alternate fuel space is around biomass and the use of lignite through to liquid. That is our core focus, and hence why I spent a bit of time on it today. We have quite significant engineering capability in intelligent grids, and that will be a really important part for renewables into the future—and also how electric vehicles fit into the system in a 50-or 70-year time frame. We have quite strong capability at Curtin in that area. We are not trying to be all things to all people; we will concentrate on a few areas.

CHAIR —We had somebody from Pacific Energy here as a witness. They are developing a biomass facility 30 kilometres north of Perth. He essentially described it very much as a niche energy source. How important do you think these sorts of energy sources can be as part of the overall energy mix?

Mr Thorn —I think they will develop over time. I do not think it is going to happen tomorrow, but certainly, if you take it up to 2050 or 2070, all of these areas are going to develop because they will have to. The question is: in most new industry developments that I am aware of there is generally a 20-year lag between getting the ideas, getting the research developed, getting some early industry development, getting some early adopters, having a couple of runs of at it and then eventually starting to get an industry development. If you want quick solutions that is much harder.

CHAIR —It is not so much quick solutions as, I guess, sustainable solutions, which is what you are looking for. At the moment in Western Australia we have two main legs to our energy stool, with gas and coal; what would be the most promising energy source in terms of a third leg, or maybe even a third and a fourth leg?

Mr Thorn —That is a good broad question. Obviously, we believe that geothermal has some opportunities. There are two elements to geothermal in Western Australia. We see ourselves as sedimentary aquifer geothermal, so we are setting ourselves apart from a lot of other geothermal research in Australia—hot rock technology, which is a deeper technology. We believe that there is a resource under the Perth Basin, right here, as we speak, probably at about 1.4 to 1.8 kilometres, which is nowhere near the three and four kilometres required for hot rock technology. In terms of the engineering required, it is lower temperature water and basically, I suppose, you would be setting it up for big units. Where we see the market for that is in high-performance computing facilities which have high energy demands for cooling and heating et cetera, so we see a good market in that. We see a good market in things like hospitals and large facilities such as that. We see a good market in things such as universities, where we start to demonstrate some of the sustainable energy futures. So we certainly see geothermal as an emerging technology. For Western Australia, our research focus—I am not saying our total focus as an industry, because the industry has got both elements—will be based on the sedimentary aquifer research. We see that as an opportunity. There is a fair bit of technology already known. The key issue is about making sure that the economics are right around that activity.

The next major one obviously is solar, and probably solar thermal as we see opportunities developing in that space. I am talking only about the university here at the moment. Our strength is not in that particular area—most of that strength in Australia is at the University of New South Wales and the Australian National University, and a little bit at Newcastle—but obviously we would like to form links nationally by working into the Australian Solar Institute activities over the next few years. We believe that there is a large future for solar, but at the moment we do not have that research capability. So we certainly see solar in the mix.

We are not doing any research on wind generation. Some of our researchers are doing research on small-scale diesel utilisation in some of the offshore island areas where they require a mix of energy generation to deliver for their needs. So we do have a little bit of research work in a couple of those areas, but they are very niche—well, they are niche orientated but there are probably large markets on a global scale. They are more like community or village energy supplies. So that is another area.

There are mixes of, for instance, wind with solar, and possibly with geothermal if we get the right spots. So you might end up with a number of co-generation technologies rather than one technology at a site. That is an issue that has not been explored too far, as far as I know. There are mixes around—for instance, a little bit of gas mixed with solar; those sorts of mixes—but there are not a lot of the newer technologies in demonstration.

CHAIR —Fair enough. Thank you very much for your contribution today. Is there something that we have not touched on that you think we should have asked you questions about?

Mr Thorn —No.

CHAIR —We are very grateful for your contribution.

Mr Thorn —Thank you very much.

Proceedings suspended from 3.19 pm to 3.37 pm