Although I give the US political environment grief from their lack of action at a federal level its not all doom and gloom in America. Since Arnold Schwarzenegger has become governor of California his mantra has been “We are not waiting for politics, we are not waiting for problems to get worse; we are not waiting for the federal government; we are not waiting period; because the future does not wait”.

His state government has set aggressive guidelines and targets for renewable energy mix in the power generation portfolio required to power that state. In 3 years time 20% of energy must come from renewables and this doesn’t include the current level of 28% already provided by generation from hydro and nuclear power. California has set a 30% target by 2020, which is significant given the growth in demand that overlays the amount capacity that must come on line in the next 12 years.

Within that US state, Southern California Edison has responded. From its Grid control center this company controls over 30,000MW in power representing more than half of the total Australia generation capacity. They are in the process today of bringing on another 4,000MW of wind energy from one project alone (as much as 6 large coal fired power stations) to complement their current renewables contracts of wind (1500MW in place), solar (500MW from Nevada - see pictures), biomass, geothermal and others (together with a healthy mix of co-generation). This is the mix that offers diversity of generation needed to sustain a base load dispatch capability with the % of renewable power to meet the aggressive targets. No one technology can currently provide sustainable green generation.

One thing is clear, most industrial advantage comes through innovation and if we stay with coal power in Australia we won’t have that industrial advantage moving forward. The Howard government in their economic heyday set us back in the long term. And we congratulated them.

In the 1960’s, when the Snowy Mountains scheme was finished, Australia was running at 20% renewable power. Now we are down to 8%. Coal has been the mainstay of Australia’s increased capacity. In 1993 an Australian senate recommendation to increase renewables was refused by the then Howard government. They set a mediocre 9000MW total renewable generation by 2010. Taken together with Australia’s growth in energy needs the country looks to slip back another 2% to a 6% total renewable mix by 2010. It may be necessary to tighten the belts to enable the investments necessary to transform Australian power generation base into a clean, green form of provision.

As I alluded to in the previous blog, most Australians are looking for our new federal government to show leadership in this area. California has shown how aggressive target setting can lead the distribution environment to engage in renewable contracts and also generator companies to invest in renewables and a viable energy source for the future. The future is looking brighter, given the political impetus, interest from the investment community, and guidance under the energy regulator NEMMCO. Given these factors Australia could leap forward to become one of the global renewable energy transformation leaders.

One step forward in Australia

2008 marks a dramatic step forward for Australian action on Climate. With an election win old news Prime Minister Rudd ratified the Kyoto Protocol for Australia; a significant about turn on the ignorance displayed under the Howard government.

The move towards reducing Australia GHG emission is significant already. The government are moving on:

• The introduction of a national emissions trading scheme no later than 2010,
• The introduction a target for 20% renewable electricity by 2020,
• and the creation a series of funds including:

1. $500M for a clean coal fund,
2. $500M for a renewable energy fund,
3. $240M for a clean business fund; and,
4. $150M for an energy innovation fund

Now I am more a fan of the renewable energy push that a “clean coal” approach, but given our reliance on coal in Australia, and the proportion it contributes to essential energy services it seems like an indispensable part of a CO2 reduction formulae. My support for renewables comes from an inherent feeling that we need to start looking at sustainability of the population on earth; and sustainability starts with renewable energy sources, not expendable fossil fuel sources at any rate; so why not start now.

I am just returning from a two week session on energy production and distribution in New York. It was interesting to get the view of those in the US vs Canada vs Europe and of course we have the Aussie contingent. It is hard to generalize, but I still see a number of the Americans arguing that Climate Change is not an issue; and therefore the status quo on electrical generation mix is fine, whilst the Europeans take a very dynamic approach to changing the way we produce and distribute energy. Distributed generation, in the form of Wind Energy, Solar Energy and Co-generation; Micro generation (ie Solar Voltaic’s on houses) are all going through increasing cycles of investment and government sponsorship. In Canada and Australia I feel that we are lagging the European community, but sensitive to the degree of change necessary to stem the headlong rush to climate avalanche predicted by some. Whilst there remains a fraction of a chance that climate change might cumulate in an “avalanche” how can we continue to be satisfied with the status quo of atmospheric CO2 increases and accelerated increases in the CO2 atmospheric mix.

What is fascinating (and becoming obvious) is the way the US will take a back seat in renewable energy innovation. Whilst the US has led the charge in IT innovation (even thought the original micro processor and micro computers were designed in England) they are missing the boat in renewable energy. I point you to the attitude of conservation of fossil fuel resources and vehicle consumptions. In this regard the US mentality needs a reset. The Europeans however are thought leaders. What will be the governing factor is the liberal capital investment attitude taken in the American community vs the conservative approach in Europe.

However, government drive is also a key element. The European community have proposed a set of ambitious and comprehensive international agreements for the period after 2012, when the Kyoto Protocol’s first compliance period ends. The 27-member EU bloc has proposed that developed countries collectively reduce emissions 30% by 2020 and 60-80% by 2050 compared with 1990 levels.

Despite some global lag in government initiatives, a recent report published by the law firm Clifford Chance saw four out of every five companies globally believing more regulation is needed to curb climate change. Businesses around the world want governments to take a more coordinated approach to climate change and introduce more regulations to help them adapt. Businesses setting their strategies on climate change want to see clarity in governmental policy and thinking so that they avoid uncertainty. They are sending clear signals about the need for fair and consistent regulation on this issue, ideally based on a coherent global approach. The majority of companies surveyed said they are taking steps to mitigate risk that go beyond current requirements. The report also reveals that firms expect new business opportunities from climate change, including development of renewable energy technologies. Pity about America missing the Bali climate change meeting.

So, if the impetus is already there; Australia has changed their political agenda and the private sector and popular opinion is headed in the right direction. Europe is on board. A change of government in America is what is needed, but we have to wait a whole year to see that evolve.