Energy and productivity

Craig Milne's picture

Australia's carbon tax has been controversial for many reasons and its impact on productivity has been one of them. Craig Milne says the most productive technologies should be chosen in the move to low CO2 emissions, but most renewables fail that test.

The tax on carbon dioxide emissions is a bad idea and a national government acting in the best economic interests of Australia nation would have considered it.

The theory that catastrophic global warming will result from unchanged human economic activity remains controversial, but even if the science is eventually settled in its favour, Australian policy to reduce carbon dioxide emissions should follow others rather than lead. There are two compelling reasons for this. Firstly, Australia’s contribution to global emissions is small, about 1.3%, and is substantially offset by natural sequestration over its large geographic area. Without action by major emitters, a lead taken by Australia will be trivial in climate effect and harmful to its economic interests.

Secondly, the claim that early action will deliver first mover economic advantages through “green innovation” is nonsense. Australian manufacturing is uncompetitive; labour costs are ten or twenty times higher than Asia, scale economies a chronic problem, the skill base thin and taxes and regulations too burdensome. Whatever technologies eventually replace current energy sources, they will be produced elsewhere. Innovative Australian businesses might sprout a green shoot here or there, but better placed industrial nations will grow the whole cabbage, as they have always done.

Any sensible policy for moving to a low carbon dioxide emissions economy would choose the most productive technologies. In all but a few special cases, renewables fail on productivity. Current Australian policy, which sets a mandatory target for a contribution from renewables, should therefore be abandoned. If Australians wanted to replace carbon dioxide emitting energy sources, the last technologies to choose would be expensive, unreliable, disruptive, low intensity sources like solar and wind. These are “gesture” technologies, inadequate for the task being set for them. Unfortunately, the disappointing facts of their low productivity do nothing to deter the dreamers and rent-seekers in government, business and the academies that promote them and the technically illiterate inner city dolts that vote for them. Innovation won’t help either; these technologies don’t need government grants to make them work, they need new laws of physics instead.

If Australians wanted to reduce carbon dioxide emissions without destroying their standard of living, the only practical alternative to chemical energy derived from burning hydrocarbons is nuclear energy.

The application of chemical energy to mechanical work via the invention of the heat engine has served humanity well. It has powered the development of the modern world and is the principal source of the great prosperity we now enjoy. Energy at hand is the fundamental metric of wealth, the base upon which modern technical civilisation rests. Rich nations have a large quantum of energy at hand, poor nations do not. In the face of such global inequity, the idea of closing down perfectly good power stations, like those in the Latrobe Valley, on the basis of a contested theory, is to treat our good fortune with contempt.

The technologies that exploit chemical energy have been developed over three centuries and are all thoroughly understood. Few productivity gains are left to be extracted from heat engines fuelled by compounds of hydrogen and carbon. On the other hand, current nuclear plants, mostly light water reactors (LWRs), are relatively crude designs conceived in a hurry during the 1950s as spin-offs from nuclear weapons and naval reactor programs. They were deployed in the expectation that something better, the fast breeder reactor (FBR), would become available. But for reasons that made sense at the time, the nuclear industry picked the wrong technology and the FBRs were never widely adopted.

Then the left and the environmental movement got organised. From positions in politics, the bureaucracy, the media and the streets, and for various motives, they worked against nuclear power. The effectiveness of green left activism has marooned the nuclear industry in a technological stasis, with old reactor designs that demand stringent management regimes, waste most of the fuel that goes into them, are prohibitively expensive to build and are thermally inefficient. Yet despite these shortcomings, existing nuclear plants, unlike any of the renewables, except for hydro, are almost competitive with coal-fired generators. The explanation is in the physics; fissioning an atom of uranium 235 releases about 200 MeV, the oxidation of a carbon atom just 4 eV. Allowing for the mass differences between uranium and carbon, a nuclear reaction still yields 2.5 million times the energy of the chemical reaction, which is why inefficient reactors can still make cheap electricity.

That inovation aimed at raising energy productivity favours nuclear over renewables is a fact so obvious it is an irritation to have to write it down. Engineers can already approach the theoretical performance limits of airfoils, generators and solar cells. Unlike renewables, however, the potential productivity gains from nuclear technology are truly stupendous. As an example, and there are many, a fourth generation liquid fluoride thorium reactor (LFTR) could improve fuel utilisation over the LWR from 0.5% to close to 100%. The design of the LFTR enables better Carnot efficiency on the generating cycle, up from 35% to 45%, it is much safer to operate, cheaper to build, produces a fraction of the waste and is unsuited to the production of weaponable materials. Reactors like the LFTR would enable a giant leap in nuclear productivity; a step improvement over the LWR much larger than that achieved by the chemical heat engine over its entire history, from the first Newcomen engine of 1712 to the modern turbo-diesel.

If those fretting about carbon dioxide emissions want to be taken seriously, they should be demanding the construction of nuclear power stations and calling for research projects to develop better reactor designs. That mostly they are not, suggests either an inability to follow a train of thought to its logical conclusion or that some other agenda is in play. In due course, anti-nuclear sandbagging will be overcome, innovation will resume and the superior energy productivity inherent in nuclear technology will be realised. When that happens, coal-fired power will enter a period of decline, eventually to go the way of the water wheel and the horse gin. We don’t need to rush this; just enable the replacement of coal plants with nuclear as they are worn out. We don’t need more bureaucrats or carbon taxes or contrived “market” schemes either. We just need to get the green left out of the way and let the natural progress of technological innovation and entrepreneurship take its course.

Craig Milne is the Executive Director of the Australian Productivity Council (APC), a position that he has held since 1987. Prior to joining the APC in 1984, he worked as a Technical Manager with a major trading company engaged in East European trade. Originally qualified in Economics and Politics at Monash University, Craig has undertaken further postgraduate studies in industrial economics and economic history, with a particular interest in Australian industrial development and technology issues. The APC is a private-sector industry assistance organisation originally founded as the Commonwealth funded peak body dedicated to productivity promotion and improvement in 1969. Craig is also Chairman and a director of more than twenty years standing of the Victorian Innovation Centre Ltd (Innovic) and is the President of the Society for Australian Industry and Employment (SAIE).


One of the best articles I

One of the best articles I have seen. It makes my heat bleed to see how our ideologically blinded politicians are dismantling Australia’s wealth and economic advantages; how well trained engineers and scientist don’t speak up and rebel against this incredible green waste of tax money. For the normal citizen looking at the latest electrical power bills, it should have become plainly obvious that our politicians failed us and I sincerely hope that extreme incompetence will not be rewarded and people with a untainted future vision will utilise more common sense technologies until we can import LFTR’s from China as we are missing the chances of developing them in Australia.    http://www.youtube.com/watch?v=xJZ0XLiW8dI


Not Quite.

I agree that the left made a severe, reactionary and self-defeating blunder in shutting down nuclear, and your assessment of the new wave of fast breeder reactors is spot on. In refusing an imperfect solution, we've ended up with no solution. Nuclear was and probably still is the best current clean-energy technology if we are serious about addressing carbon emissions, which at this point means rapid deployment. Nuclear has one other minor advantage - it can be deployed onto existing energy grids, which favour concentrated power nodes a la coal fired plants. However the remainder of your article makes several mistakes or misrepresentations that I feel compelled to correct:

"If Australians wanted to reduce carbon dioxide emissions without destroying their standard of living, the only practical alternative to chemical energy derived from burning hydrocarbons is nuclear energy."

This is an exaggeration, to say the least, for several reasons:

  • The US EIA Annual Energy Outlook 2012 (AEO) report gives these figures for Levelised Energy Cost in USD per Megawatt Hour (holistic cost over lifetime of the source)
    • Advanced Nuclear: $112.7
    • Wind (onshore): $96.8
    • Solar PV: $122.2
    • Conventional Coal: $99.6
    • Advanced Coal: $112.2

So wind is actually cheaper than nuclear, and solar is not far off, and none of them are all that far from coal. Both are within 10% of the cost of Nuclear which is hardly grounds for the blunt dismissal of wind and solar that you advocate. Nor would a 20%+ increase in energy prices "destroy our standard of living" - we've already survived far greater increases in recent years. Even further to the contrary the latest REN21 report shows Germany deriving 35.6% of its total energy from Solar PV while Australia just scrapes in to the top 10 solar nations with 1.9%. So Germany - in the northern latitudes - can generate over a third of its power from solar, and despite this you suggest that in Australia - one of the most sun-drenched developed nations - solar is a "gesture" technology. The facts simply defeat this claim.

"Engineers can already approach the theoretical performance limits of airfoils, generators and solar cells."

The cost of Solar PV halved in 2011 (REN21) thanks to continuing technological improvements and scale economics. 2011 saw several technology breakthroughs in Solar PV, including a recent development involving carbon nanotube technology promises even greater drops in price (1). This is a flourishing and active area of research and we are nowhere near hitting the "theoretical perfomance limits" of solar cells.

Global investment in renewables is surging: $257 billion in 2011, with 5 million jobs globally (REN21). But instead of engaging in and profiting from this market, you propose Australia ignores it entirely? This backwards thinking is why Australia is being left in the dust by other nations instead of leading and profiting in these new technologies, for which there is a gigantic and expanding global market.

"on the basis of a contested theory"

That 97% of Climate Scientists agree on AGW and its effects hardly constitutes a contested theory. In 2012, if there was ever "a fact so obvious it is an irritation to have to write it down", that is it. Suffice to say that the intellectual hollowness of Australian industrial and political discourse on the science of climate change is an embarrassment.

"Australia’s contribution to global emissions is small, about 1.3%"

Talking in absolute terms is not the whole story though, is it? There is a tremendous moral imperative that you completely avoid. Australians are among the highest per-capita emitters in the world, even higher than the US. Wealthy, developed nations have a responsibility to lead the world in renewable technology research and development, investment and policy implementation, as we have the greatest intellectual, financial and in some cases industrial capacity to do so. Merely shrugging and waiting to ride on someone else's coattails is a contemptible moral capitulation, is frankly pathetic and, dare I say it, even un-Australian. 

Australia is hardly moving alone on this issue, in fact we're being left way behind. Over 118 countries now have renewable energy targets (many make Australia's targets look very ordinary), and several developed nations have significant installed renewable capacity, and all this in the middle of a US and European recession. The growth curve of installed Solar PV is exponential (REN21). But thanks to an absurd narrative springing from wilful ignorance of the science, moral vapidity and outdated/protectionist conceptions of economic rationality, Australia has remained at the back of the pack. But it's hardly surprising. When industry opinion makers, supposedly with "a particular interest in Australian industrial development and technology issues", trash our national capacity for technology development as "thin", ignore the data about renewables, and continue adding to this narrative, what more can we expect?

(1) http://web.mit.edu/newsoffice/2012/infrared-photovoltaic-0621.html

(REN21) 2012 Global Status Report - http://www.ren21.net/REN21Activities/Publications/GlobalStatusReport/tabid/5434/Default.aspx

(AEO) http://www.eia.gov/forecasts/aeo/