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Issues relating to the Fuel and Energy Industry

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

Dr Smyth —Thank you. I note that you have background information on Toro in your pack but, for the record, we are a small to medium sized, publicly listed, emerging uranium explorer, and we seek to become a producer by 2013. We are going through those processes now. I note the primary terms of reference for this committee and I will try to restrict my comments to those. We have a strong interest in your deliberations for two reasons. One is the fuel costs associated with our proposed construction and operation of the Wiluna uranium project, and the second is the planning of new electricity supply in Australia.

I will start by addressing the first of those through your reference point f, ‘taxation arrangements on fuel and energy products’. Like much of the mining industry, uranium mining is significantly exposed to the price of fuel in both electricity supply and transportation. Our industry requires world-competitive electricity to support the people working in our mine site in a remote and hot location and to process our ore. We are sensitive to the price of diesel for the transport of our goods and reagents to site and for running the mobile equipment associated with mining. Like most mining operations these days, we are strongly supported by the aviation industry and, as such, are exposed to the cost of aviation gas. With this focus on energy needed to mine and process, we are exposed to changes in government charges on our gas for our on-site power generation, for our diesel and for our gas fuel excise.

My second area of interest is that of planning for Australia’s future electricity supply and, hence, your reference point g, ‘the role of alternative sources of energy to coal and alternative fuels to petroleum and diesel’. Toro agrees that Australia needs alternatives to coal fired electricity but acknowledges that the capital already invested in this reliable baseload supply should be worked to its maximum practical life. As such, methods to re-use the carbon emitted should be researched further.

Toro Energy, however, recognises that other countries have already taken significant steps towards sourcing their increasing demand for clean energy through a diversified portfolio which often includes nuclear. As such, we are focused on meeting the needs of growing world demand for nuclear power. Many developed and developing world economies are now choosing nuclear power over coal and hydro for their baseload electricity growth needs. We put that, with an increase in the desire for electric cars and growing use of home based computers and air-conditioning, the domestic tolerance for interruption to supply will be less, rather than more, with time.

We submit that there is no all-embracing, perfect method for generating and balancing electricity supply to meet these changing demands. Each supply method has its advantages and disadvantages, and I commend the Senate for looking at alternatives for the Australian situation. With this in mind, I submit 10 copies of a report prepared by the University of Sydney’s Manfred Lenzen entitled Current state of development of electricity generating technologies: a literature review. This was released last Thursday and was prepared for the Australian Uranium Association. As far as I know, this is the most up-to-date, credible literature study available.

I have marked two sections which will be of particular interest to this committee. Page 17—the pink tab—features the technologies available and compares many of their aspects, including generating costs, energy requirements, CO2 emissions and mitigation potential and barriers. Pages 141 to 169, marked by the yellow tab, examine the subsidies applied to various forms of generation around the world. This information may help you in assessing future policies in Australia compared with the world stage. I hope this publication offers you a strong reference base during your considerations. I now hope that you will briefly indulge me by allowing me to make the following points.

Australia will continue to need new electricity generation, both to replace ageing coal infrastructure and to meet new demand. Our real challenge is that this growth may occur in a piecemeal way as various state governments meet their own communities’ concerns about reliability of supply. This ‘energy management on the run’ does not encourage strategic decision making for the long term. Australia needs bipartisan electricity supply policy which is embraced by all federal and state governments and which will deliver clear and bankable guidelines for supply investors and operators in the future.

We submit that a viable and clean baseload supply is critical to enabling increased renewable sources in the total mix. Community expectations are that this sector must be encouraged to grow, but it will require a backup base supply that enables stability in the distribution and supply grids. Since this new capital investment in baseload electricity supply will be part of our energy mix for the next 40 to 50 years, we need to manage it outside the normal political election cycle. The table on page 17 in the Manfred Lenzen report highlights the complexities of decision making with respect to technical alternatives available for electricity supply, and I recognise that the development of such a bipartisan policy will not be easy.

These choices will be impacted by Australian considerations including renewable options available around the country; the baseload versus peak load ratios; transmission distances and associated losses; CO2 emissions and future carbon costs; management of associated pollutants and waste; the social impact of noise, visual amenity and fear; community desires for increased use of renewables; the expectation that the lights will always go on; accommodating emerging technologies; and reducing demand through efficiencies. Significant shifts in electricity infrastructure cannot be achieved overnight, so I put to you that within this policy the total environmental advantages of nuclear power should not be ignored and investigations into the technologies available, the development of the skill base needed to operate them and the reservation of optimal construction sites should be considered now.

With a 15-year lead time, we are by default making decisions now about a non-nuclear Australia in 2025-2030 by not allowing any preplanning or skills development in this area. I therefore put to you that it is time for Australia to manage for the long term with respect to its electricity supply and to create a bipartisan policy framework that does not exclude nuclear. Thank you.

CHAIR —When you say ‘does not exclude nuclear’, are you talking domestically in Australia?

Dr Smyth —I am talking about the exclusion of nuclear domestically now by not at least having some base preparation for the future. That is a skill base and it is about getting us aware of the technology options. Every year we go forward that we do not develop that base means that we lock off that possibility for another year in 15 or 20 years time.

CHAIR —Is there any work on the potential use of nuclear energy going on across governments—state or federal—as far as you are aware?

Dr Smyth —Other than people’s private interests—

CHAIR —Geoscience Australia is scoping the resource as one of its—

Dr Smyth —That is right.

CHAIR —So you are aware of that.

Dr Smyth —Yes. And that is a resource for export as much as anything.

CHAIR —We spoke to them last week. It is because it is part of the energy security program that they are looking at it. That is what they have told us. They were assessing thorium—

Dr Smyth —Good.

CHAIR —uranium, geothermal and petroleum. They were focusing on four resources as part of an energy security program. That is Geoscience Australia.

Dr Smyth —That is the base level. That is not technology; that is the first step.

CHAIR —So what you are saying is that within government, in anticipation that public opinion down the track might shift as the energy demands become more pressing, we should be doing some preparatory work so at least we have the capability of going down that path should we make the decision to do it.

Dr Smyth —Yes. I am in a difficult position in that I am also director of ANSTO. I am not here to speak on ANSTO’s behalf, but there is plenty of public information about the ageing population of our workforce. That includes ANSTO. The only expertise on any form of nuclear that sits in Australia at the moment is ANSTO. I ask the question of you: is there a strong enough focus on keeping a younger skilled workforce in ANSTO? I have to be careful there; I am not here as a spokesman of ANSTO.

CHAIR —I think the workforce issue is something that the Department of Resources, Energy and Tourism raised with us as well. That is one of the barriers as to why we would not be able to do it quickly if we made the decision. There is quite a bit of workforce capability overseas in Europe. If Australia made the decision it could be done, couldn’t it?

Dr Smyth —In theory you could do that, but a lot of that expertise is being sucked up by China. They are buying in that expertise now, so we do not want Australia to end up with the C team or the D team of the future. You need a workforce that then makes sure that the contractors you might bring in are capable and are skilled, and the best way to do that is to make sure you have the regulators and expertise available here.

CHAIR —Yes. When I look at your table—it is a very interesting table—on page 17 of your publication, you have gas oil, which are really the main energy sources for the stationary energy sector, certainly in Western Australia. It is sort of like a two-legged stool; when something happens like what happened with Apache, it can fall over. What is the most realistic energy source out of the ones in here that could be the third leg of a three-legged stool?

Dr Smyth —This is the point I am making. To me, the only realistic nuclear sites for baseload are the eastern states because at the moment with current technology they need to be large units of a gigawatt or more. The technology is coming for smaller units, but it is not here yet.

CHAIR —Five hundred megawatts.

Dr Smyth —Five hundred megawatts. Western Australia could easily cope with one of those as a base demand alternative. I see the vision of geothermal, but efficient geothermal requires the geology to go with it and, at the moment, it is not located, as far as I can see, close to the population centres, and then you start to incur large transmission losses and other aspects. Geothermal technology is still some way away, as well, as we have seen with some of the issues that have been faced recently in getting geothermal power happening here. So none of these are super simple. For me, we need a mix. We are 80 per cent coal in Australia. Most other countries have got significantly different distribution—

CHAIR —They have got a more diversified setup.

Dr Smyth —The extreme, on the other side, is France, which has 80 per cent nuclear, but the USA, the OECD and Japan have got a much more balanced mix of power generation.

CHAIR —I guess that would be something desirable for us to move towards, though not simple, as you say.

Dr Smyth —No, none of it is simple.

CHAIR —What are some of the things that governments should be doing now to get us to a more diversified energy mix?

Dr Smyth —To me it should be encouraging other alternatives, and that may be by some subsidies. It depends on what you want. To me, we want clean energy and that means not just greenhouse. We seem to be fixated on greenhouse. To me it is also about particulates and SOx and NOx and those sorts of things as well. The world seems to be focused on greenhouse with no appreciation of the other issues that are emitted by particularly the coal and fossil fuel cycle. I think that until we have an efficient battery system, or energy storage system, we cannot rely totally on wind and solar. You very quickly come to the conclusion that nuclear should be in the mix.

CHAIR —The government is sort of going down the path of the 20 per cent renewable energy target, and renewable energy is defined as to what that is. How do you think that is going to impact on our energy security moving forward—in particular looking at the competitiveness and affordable supply of energy moving forward?

Dr Smyth —Our problem is that we cannot easily increase hydro, which is the most flexible of the renewable energy supplies. You can turn it up and down if you have plenty of water, and it is clear that Australia does not have much more room for hydro. So we have to lead in new technologies like ocean power and wind—if you can get the public to accept them, and wind has still got some issues. There are places we can put wind in, but it is not reliable. Getting capacity greater than 30 per cent is very difficult, which means that you have got to fall back to a baseload that you can turn up and down in a predictable way. That is why coal works so well, and maybe gas, because you can balance wind with gas, but gas is not cheap either. With gas you are very susceptible with the petroleum prices around the world. They are being tied more and more now to the price of oil. So a greater dependency on gas has to translate into a greater exposure to the world price of petroleum.

Senator HUTCHINS —On page 17—public acceptance, waste disposal proliferation. That is the issue we constantly hear about—the reason to oppose nuclear energy. You are putting to us today that despite that sort of public acceptance whoever is in power should be planning for the potential that we may need to address this within the next 15 or 25 years. You do not see any evidence of that at all either from my government or the previous government?

Dr Smyth —I am out there doing a lot of public speaking on this topic and the curiosity from the general public is enormous. People want more information. They want to understand the issues better. I think many of them are seeing that countries like France, Germany, Sweden and Finland have taken on nuclear in a big way. Those are countries they respect and the public is now starting to say, ‘If they can do it, why can’t we,’ or ‘should we?’ Those are the options. Public opinion is shifting; how fast it is shifting, I do not know. But I think it is clearly shifting. I do not have to apologise any more for being part of the uranium mining industry; in the past you would have kept that very quiet—you would not have been all that willing to put your hand up above the parapet. But that is not the case any more. There is a lot more willingness on the part of people to at least have a debate. There is not universal approval for it but at least there is a realisation that if we do not go down that path we are perhaps going to be at a disadvantage in the future.

Senator HUTCHINS —I wonder if you could give us some information. In Europe, just to give an example of where they do use nuclear power, what is the attitude of the Green parties towards nuclear power and nuclear energy?

Dr Smyth —It is hard to gauge because a lot of the parties are saying you have to reduce your greenhouse emissions but there are no practical solutions to do it. There are previous leaders of the anti-nuclear movement who are now, in their independent roles, saying that nuclear is part of the solution. But the shift in the official places has not occurred. In strongly green countries like Germany, governments are making the shift and are able to make that shift. Even Italy is coming into being pro-nuclear. We are finding that the practicalities are overtaking some of those policies.

CHAIR —When you say practicalities you mean the growing demand for energy and keeping it affordable.

Dr Smyth —That is right. We need to keep it affordable and keep it clean from a total emissions point of view.

Senator HUTCHINS —Again on that issue of the political parties: the Greens have been in coalition in some of these countries—

Dr Smyth —That is right; for a long time. The decisions are still being made. Plants are not being shut down. They are reversing decisions to shut plants down. They are renewing them and putting replacement plants into their planning. The shift is happening in the OECD; that is for sure.

CHAIR —You mentioned the need for bipartisan energy policy. You are aware of the energy white paper process the government is going through?

Dr Smyth —Yes.

CHAIR —What do you think should come out at the end of it? How do you think bipartisan energy policy should look?

Dr Smyth —I am pleased that there is a bipartisan approach on this committee.

CHAIR —It is a very bipartisan committee.

Dr Smyth —Yes. That has encouraged me.

Senator HUTCHINS —There are only two of us on it at the moment!

Dr Smyth —According to my research I expected to see a lot more people here.

Senator HUTCHINS —We agree with each other.

Dr Smyth —My concern is that the planning horizon is so long. At the moment I have concerns, for instance, that the policy on uranium mining itself has just changed in this state. My worry is that if we cannot quite get into this term of the state government and if anything happens all of the investment we have made—

CHAIR —Nothing will happen at the next election.

Dr Smyth —It is a risk management process that companies go through—

Senator HUTCHINS —Sovereign risk—

Dr Smyth —Sovereign risk now that we have to justify to our shareholders that we have got enough incentive to try to get through all of the approval processes that we need to do now and not find that everything we do falls over because of a change of government. It is not bankable, it is a risky process to do it. So why would you step into the frame of even thinking about developing a nuclear power option in a commercial way when you had no bipartisan support? These are risky things that you do. They cost a lot of money and take a long time—and that usually is a lot of people’s lives—to achieve, so why would you do that and why would you step into that frame if you could not be sure that you were going to get bipartisan support?

CHAIR —Going back to the practicalities of it, oil is a rapidly depleting resource—

Dr Smyth —That is right.

CHAIR —Coal and gas are proven resources but certainly with coal there is the environmental aspect to it. In that long list of possible energy sources, technologies, what other reliable, affordable baseload sort of power source is there other than coal and gas?

Dr Smyth —Nuclear.

CHAIR —That is essentially it, isn’t it?

Dr Smyth —That is it. In current proven technology now, that is it. At the moment Australia is locking out one of the legs of that. Really, if you want to be efficient with baseload, at the moment it is coal, hydro and nuclear. The rest are really good peaking load or energy dependent—like when the sun is shining, when the wind is blowing, when the waves are coming and when the tides are coming. But to harness those we need a really efficient storage and retrieval system—and we have no indication that there is any technology to do that efficiently now. If you do it with hydro and you pump the water back up, you would use more energy to get the water back up than what you create on the way down, so that does not work.

CHAIR —If you look over the next decade, it is unlikely that carbon capture and storage would become available. That is right, isn’t it?

Dr Smyth —Even if it does, if you look at the carbon capture and storage in there, the generating cost is double. You have to double what it is costing you now. There is a very high price for that, and we do not even know whether that is going to work. I think there are other ways that you can capture the carbon emitted from coal, and that becomes putting it in to perhaps some form of algal mass and capturing that biomass and recycling that. But we are still at the very tip of that technology. There are a lot of issues associated with doing that. But we have to start to get clever about that. That is why I submit that it is recycling rather than capture and storage. I am not a great fan of carbon capture and storage, but I do see that there is potential for the capture of carbon from these stations and reusing it through various forms of algal capture and biomass burning.

CHAIR —Wilson Tuckey appeared before us a little while ago, and he was very passionately telling us about the virtues of tidal power. He has got a view that to the north of Derby there is a spot where we should get a big tidal power generating capacity going. Is that something that you have looked at?

Dr Smyth —I had a look at that some years ago when I had a different role. It is a long way from where you need the energy. Once you have captured it, what do you do with it in Derby? It is not an environmentally cheap proposal. Like all hydro-based schemes you have to have a big area behind it in order to capture and then release it in a controlled manner. But what do you do with the power in Derby?

CHAIR —He envisages an HVDC supergrid continent wide. I am not an engineer and I am not across the technology side of it. The way he put it to us was that it was technologically feasible—much the same as bringing power from Tasmania to the mainland through a similar technology, and apparently there are other places around the world that do that.

Dr Smyth —Derby is a hell of a lot further from the demand than is Tasmania.

CHAIR —Sure. Apparently they are doing it in China. That is one of the things he pointed out. I have to take his word for it that it is technologically feasible but the question is of course the cost and whether it is going to be commercially viable.

Dr Smyth —You can do tidal power in Derby. That is technically possible. But it is not environmentally neutral in that you have to actually dam that back and capture an enormous amount. You have to find ways to deal with the bit between the tides.

CHAIR —When you say it is not environmentally neutral you are saying that it might be greenhouse gas emissions friendly but that there might be other environmental issues.

Dr Smyth —Yes. It is a bit like hydro dams. They are not greenhouse neutral in that you release a lot of captured methane that sits in the water behind the dams when you take it down. There is a lot of science about that. There is stuff in this report about hydro. Tidal power is not in the right place to be viable for Australia. And matching your power supply to where you need it—it is a long way to transport energy from Derby to the east coast, which is where it is really needed. Even to transport it to Perth is a long way.

CHAIR —What about to Wiluna?

Dr Smyth —Our demand is not that great! The infrastructure you would need to get it there!

CHAIR —Is there anything that should be done at the state level? We are not part of the national electricity grid. We have got four different grids in Western Australia. What do you think should be happening at the state level from an energy security point of view moving forward?

Dr Smyth —I think we have to get a lot cleverer about reducing our demand.

CHAIR —Energy efficiency.

Dr Smyth —There are a lot of things we could do energy efficiency wise to encourage more intelligent use of what we have. We waste 25 per cent, probably, of our energy use. I am involved in a cooperative research centre at the moment that is looking at how we can do that smarter. That CRC is coming to its end; it finishes next year. Being more efficient in our usage of energy requires real intelligent thought. That is one way we should be doing it. We need to get intelligent about capturing energy from the ocean. We are doing some initial stages of that. The ocean sits around us so finding some really smart way of doing that would be one of the biggest potential sources, but it is still a long way off. If we are going to do R&D then I would be putting R&D into that area for Western Australia, in particular. But you still have to have some backup power, and we have coal and gas. They are the backups that we would use, I think. It will be a long time before I will be proposing nuclear in Western Australia, just from a size of demand point of view. There are other alternatives for us.

CHAIR —What are the other alternatives for us? We have got gas, coal and then a few bits and pieces.

Dr Smyth —That is right, and none of the them are achievable in the immediate or short term, in my view. In my view, we have to rely on efficiency in the short term and perhaps ocean and algae biomass in the medium term. In the long run, I think even Western Australia will have nuclear.

CHAIR —Thank you, Dr Smyth. That was a most interesting presentation.

Dr Smyth —As long as that is my personal view and not the view of—

CHAIR —Is there anything that we should have asked you questions about that we should have asked you about? Is there something that we have missed?

Dr Smyth —I would just like to reinforce the need for us to be technically capable in nuclear in order to keep the options open. I think it is a mistake to say now that we are never going to use nuclear and therefore we allow that skill base to disappear from this country. The corporate memory we have is seventies based, and I think it would be a shame not to encourage that education and debate to continue. It is all my age group, and I am 57. So it is centred around my age group.

CHAIR —Thank you very much. That is a most appropriate closing remark. I mean that in relation to the need to keep the capability—not about your age group.

Dr Smyth —I do not care who knows my age. You can put in Hansard.

CHAIR —Thank you.

Committee adjourned at 4.11 pm