Australia’s most promising options for a clean energy future may lie in hybrid technologies which combine the best features of fossil fuels such as clean coal or gas with renewables like solar and wind.

After seven years of piloting the cutting edge of national energy research at the CRC for Coal in Sustainable Development, Frank van Schagen is convinced the answer to the nation’s clean energy challenges lies in encouraging the best mix of technologies.

“There are no silver bullets in energy,” he says. “The next generation of power technologies is going to be both expensive and difficult. There will be winners and losers. We need to ensure our regulatory environment for carbon trading is effective in its objectives to reduce emissions for Australia and can be integrated with future global initiatives. In this respect, it is important that public funds derived from carbon trading are made available to achieve emissions reduction by developing the best new technologies.”

There are a number of risks in carbon trading which need to be addressed for it to work effectively, he cautions.

“First we need to recognise that a carbon market will be designed to contract over the long term. Its dynamics in this sense will be unlike other markets that seek to expand.“

It is by no means clear that investors, who are already eyeing carbon certificates as the next big financial windfall opportunity appreciate this fact, Mr van Schagen says. Many people are already referring to carbon as the ‘gold’ of the 21st century.

Second there is a risk that trade in carbon certificates will be driven more by financial speculation than by the need to encourage the adoption of new, clean technologies.

“Clearly a good many people see carbon certificates as a way to make money, rather than as a way to clean up the environment. There is a risk people will buy up certificates and sit on them until they can extract the maximum price from CO2 emitters. This will simply drive up power prices for everybody without accelerating research and development of new, clean technologies.”

Third there is a need for government to make clear what it plans to do with the windfall income it receives from the initial sale of carbon certificates. If too much is spent on subsidising consumption for vulnerable energy users, carbon certificates will not succeed in driving the next, very expensive phase of technology testing.

“The new clean technologies like oxyfuels, carbon capture and storage and IGCC (integrated gasification combined cycle) are still unproven at scale. That’s where we need to go now.

“But to do so involves risking hundreds of millions, sometimes billions of dollars to build full-size clean plants. It is here where money from carbon trading can make a huge difference, in funding the trials that will help us to understand which of these technologies work best.”

Mr van Schagen says that a major “missing link” in Australia’s impetus to clean technologies is a good understanding of our ability to transport and store CO2 safely and economically.

“Australia appears to have plenty of available sites for storage, though they are not always conveniently located. There needs to be major study of long-term carbon storage sites and transport corridors nationally. It may well be the role of Government to cover the risks in this regard that the private sector probably won’t want to take.”

In the long run, he feels, Australia’s clean energy solution will probably involve blending and combining the best features of coal – its low cost, high energy density and ready availability for producing power – with those of solar and wind, to produce systems which have overall a lower carbon footprint, as well as the ability to capture and store the carbon.

However, he warns, a major concern in the short run is the lack of confidence in the power sector about which technology option to go with – at a time of rising demand for energy to fuel economic growth. “If you go with an old technology, high carbon process could put you out of business. On the other hand if you go with a new clean but expensive technology and carbon prices don’t rise enough, you go equally broke.

"CCSD research results suggest in the absence of longer term certainty, the often referred to dash-to-gas could result, or worse still, investment in new power generation plant in Australia be postponed long enough to create a situation where demand exceeds generated supply. Most Australians would regard this as almost unthinkable, but it is a real risk, and short-term, poorly-planned measures to overcome it are likely to prove very costly for electricity consumers.”