Reporter: Jonathan Holmes
Date: 16/04/2007
JONATHAN HOLMES: When the great Snowy Mountains scheme was finally completed in 1974, almost no one had even heard of global warming. But back then, emission-free, renewable energy from falling water provided 20 per cent of Australia's electricity. Thirty years later, with climate change a looming reality, hydro's share has fallen to 7 per cent. And despite five years of growth, wind power contributes less than 1 per cent. Yet the Federal Government won't increase Australia's renewable energy target. Both government and opposition are obsessed with coal.
MALCOLM TURNBULL, MINISTER FOR THE ENVIRONMENT AND WATER RESOURCES: A key focus of our whole energy and greenhouse policy is ensuring that we have the means to clean up coal.
KEVIN RUDD, OPPOSITION LEADER: If we're serious about climate change, we've got to be serious about clean coal.
JONATHAN HOLMES: But clean coal is at least a decade and a half away and no one knows what it will cost. Meanwhile, Australia's greenhouse emissions from electricity generation are soaring. Across the Pacific, in the state of California, they're focussing on wind, and sun, and steam from deep beneath the earth.
ARNOLD SCHWARZENEGGER, GOVERNOR OF CALIFORNIA, USA: California has taken the leadership in moving the entire country beyond debate and denial to action.
CALIFORNIA ASSEMBLYMAN LLOYD LEVINE: 33 per cent renewable energy by 2020 is a very ambitious target, but we need to meet it.
JONATHAN HOLMES: Tonight on Four Corners, if California is the place the future happens first, is Australia in danger of being left behind?
VINOD KHOSLA, KHOSLA VENTURES: Most industrial advantage in the world comes through innovation and if Australia stays with coal power they won't have that.
JONATHAN HOLMES: For at least five years, the Howard Government has repeated a mantra. Renewable energy is all very well, but it can't provide an answer to Australia's clean energy needs.
MALCOLM TURNBULL, MINISTER FOR THE ENVIRONMENT AND WATER RESOURCES: You cannot run a modern economy on wind farms and solar panels. It's a pity that you can't but you can't.
JONATHAN HOLMES: The great city of Los Angeles. Its industries and its spreading suburbs are powered overwhelmingly, by a single utility Southern California Edison. From its grid control centre in Alhambra, SCE manages almost 30,000 megawatts of electricity more than half of Australia's entire capacity. By law, in three years' time, one fifth of that power will have to come from renewable energy and that doesn't include the 28 per cent that already comes from major hydro schemes and nuclear power.
PEDRO PIZARRO, SOUTHERN CALIFORNIA EDISON: We've just signed this very large contract for 1,500 megawatt wind development project. We have a large contract for at least 500 megawatts of a very innovative solar technology. We have contracts for geothermal and biomass and small hydro and importantly those long term contracts then allow players to go to the banks to get financing to get these new projects built.
JONATHAN HOLMES: In the Californian state capital, Sacramento, Republican Governor Arnold Schwarzenegger has teamed up with the Democrat-dominated state legislature to set some of the most ambitious emissions reduction and renewable energy targets in the world.
ARNOLD SCHWARZENEGGER, GOVERNOR OF CALIFORNIA, USA: 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.
JONATHAN HOLMES: The Howard Government too, has a renewable energy target. It's resulted in a mushrooming of wind turbines along the shores of the Southern Ocean, where the Australian wind blows hardest. The Mandatory Renewable Energy Target - or MRET, for short - was first announced by the new Howard Government back in 1997, as it prepared for the climate change conference in Kyoto. But compared to California's, its goals were modest.
JOHN HOWARD, PRIME MINISTER OF AUSTRALIA: The Government will work with the States and Territories to set a mandatory target for electricity retailers to source an additional 2 per cent of their electricity from renewable energy sources by the year 2010.
JONATHAN HOLMES: The MRET scheme awarded a tradeable certificate, originally worth around $40, for every megawatt hour of new renewable electricity. Effectively, it more than doubled the market price for renewable energy. The scheme favoured the cheapest renewable technology and that turned out to be wind power.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: We have seen a massive expansion in the wind industry as a result of that. We've seen $3 billion invested in the industry, and we've seen a 80-fold increase in the amount of energy produced from wind as a result of that scheme so far, and it's still...and they're still putting up wind farms. In fact, the only complaint I get about the MRET is that it's too successful, that in fact, will reach its target ahead of schedule.
JONATHAN HOLMES: The target was set at 9,500 gigawatt hours of new renewable energy by 2010 and it will be comfortably reached. But that won't achieve the Prime Minister's stated goal of increasing renewables' share of electricity generation by 2 per cent. Quite the reverse.
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: The proportion of renewable energy has declined in overall, sort of, national terms... at this stage by about 2 per cent. Renewable energy currently generates about 8 per cent. We're generating more electricity than we were in 2001, but we're a smaller proportion of the national market.
JONATHAN HOLMES: In the past decade, Australia's economy has grown much faster than the planners anticipated, and even as generation from renewables increased, generation from traditional fossil fuels has grown faster. In 2003, a formal review of the MRET scheme, chaired by Senator Grant Tambling, recommended that it be extended by ten years, and the target more than doubled. The government refused to do either. In its eyes, reducing greenhouse greenhouse gas emissions is a secondary goal. The main purpose of MRET was to foster innovative Australian industries, and wind power doesn't qualify.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: We just saw towers being erected, and turbines being bought in from Europe. No R & D being done here of any great consequence. Some, uh... manufacture of blades and some assembly - not manufacture - but some assembly of turbines being done here, but the vast majority of the big turbines are being bought in from overseas, stuck on top of towers. That technology is proven.
JONATHAN HOLMES: To the windfarm entrepreneurs, it seemed a curious argument. 70 per cent of the cost of the average windfarm is spent in Australia. Blades and towers are made here. Only the turbines themselves are imported.
ROB GRANT, CEO, PACIFIC HYDRO: We would like to import less, but, uh... it's about getting the lowest cost renewable to market, and we do that by sourcing the lowest cost equipment which currently comes out of Denmark - no different to any other electricity-generating technology, be it coal or be it gas.
REPORTER: What do you mean no different? I mean, the coal is Australian.
ROB GRANT, CEO, PACIFIC HYDRO: The equipment comes from overseas.
JONATHAN HOLMES: Just down the road from Codrington Wind Farm is the town of Portland - home to Alcoa's giant aluminium smelter, and to a modest engineering company, Keppel Prince. Keppel Prince's founder, Steve Garner, set up the company to do subcontracting work for the smelter. But in 2001, he seized his chance, and began to win contracts to manufacture the giant towers that house wind turbines. The wind business has provided good jobs for more than a hundred workers at Keppel Prince, and a couple of hundred more elsewhere in Portland. But like the wind, says Steve Garner, it's business that comes and goes, as policies shift and change.
STEVE GARNER, GM, KEPPEL PRINCE ENGINEERING: It hasn't been steady, it's been a real rollercoaster, and, uh... that's caused a lot of grief for us, but, um... we've now completed some seven or eight projects, windfarms, throughout Australia.
JONATHAN HOLMES: By last year, it was clear the government's renewable target would soon be reached. With no further incentive, the wind industry was dying. What saved Keppel Prince's new business was the Victorian Government decision last year to set its own Renewable Energy Target, called VRET. It mandates that 10 per cent of the State's electricity must come from renewable sources by 2016. New South Wales and Western Australia have recently announced similar schemes. But the federal government is scornful.
JONATHAN HOLMES: Don't you accept that if it had not been for the State schemes, like the VRET and now, the NSW renewable energy target, the renewable energy industry in this country would have fallen flat on its face?
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: No, I don't accept that at all. In fact, most of this investment was already happening. In fact, the vast majority of the investment happened before the States decided to put in place Mickey Mouse schemes that were publicly popular, and had very limited effect, and to date, have had very limited effect in investment decisions. They may have an effect in investment decisions in the future, that's to be seen.
JONATHAN HOLMES: And what's been the consequence of that VRET policy, in terms of what your company is doing?
ROB GRANT, CEO, PACIFIC HYDRO: Well, we were able to immediately start construction at Portland, with the first stage of the Portland project at, uh... Cape Bridgewater, uh... we were able to put a number of other projects back into planning process, uh... we were able to increase our staff by about 25 per cent, and we're actively pursuing, you know, two or three windfarms for construction over the next four or five years.
JONATHAN HOLMES: In the tower blocks of Sydney's CBD, the money men and women scour the globe for investment opportunities, and there are profits to be made from renewable energy. Allco Finance Group's Wind Energy division is headed by Danish wind expert Steen Stavnsbo. He'll invest, he says, anywhere in the world where the policies, as well as the winds, are strong enough.
STEEN STAVNSBO, HEAD OF ALLCO WIND ENERGY: We look for areas where there's a firm energy policy in place that sees the cost of carbon emissions come through, to aid the renewable energy investments. We seek policies that truly, uh... promote new investment in renewable energy projects.
JONATHAN HOLMES: In December last year, Allco Finance Group of Sydney signed the biggest single windpower agreement in the world. Here in the Tehachapi Hills, between the Mojave Desert and the Pacific Ocean, it will finance a windfarm to supply 1,500 megawatts of power to Southern California Edison. That's twice the capacity that's already here, and almost twice as much as all Australia's windfarms put together.
HAL ROMANOWITZ, PRESIDENT, OAK CREEK ENERGY SYSTEMS: Over here on these hills, we'll have another about 500 megawatts. And there'll be another 300 megawatts over the top of the hill back over here, so it's, uh... 1500 megawatts takes a fair bit of land.
JONATHAN HOLMES: Allco's local partner, Hal Romanowitz, is one of the pioneers of wind power in the Tehachapi. The new turbines, he says, will be much larger and more efficient than those he has already.
HAL ROMANOWITZ, PRESIDENT, OAKCREEK ENERGY SYSTEMS: They'll be, uh... big animals - the biggest ones will be a hundred metre.
JONATHAN HOLMES: A hundred metres?
HAL ROMANOWITZ, PRESIDENT, OAK CREEK ENERGY SYSTEMS: So, a 100-metre rotor diameter - a football field right up on a, uh... blade turning around.
JONATHAN HOLMES: Huge as it is, the Allco deal is only the start. In the next ten years, Southern California Edison expects to be buying three times as much windpower from this one area - a massive 4,500 megawatts, as much as six big coal-fired power stations.
PEDRO PIZARRO, SOUTHERN CALIFORNIA EDISON: We like wind resources. They contribute good renewable energy, and that said, there is the intermittency issue. It would absolutely not be feasible to serve all of our needs from wind exclusively, because again, the wind sometimes blows, sometimes it doesn't.
JONATHAN HOLMES: Intermittency is often raised in Australia as a severe disadvantage of wind and solar energy. But SCE's technical experts say they could cope with up to 15 per cent of their power coming from wind, without major problems.
RON LITZINGER, SOUTHERN CALIFORNIA EDISON: It takes a mix of everything to make the grid work. And wind has the most, uh... intermittency issues, but I think, um... the wind forecasting and the solar forecasting tools are improving. Uh, those generators submit much more predictable and balanced schedules, and I think, as with anything, as technology improves, we can... we can overcome this issue.
JONATHAN HOLMES: Renewable energy gets a 30 per cent upfront tax credit from the federal government in Washington. Partly as a result, electricity from wind costs SCE less than it would pay for power from a new gas-fired plant. Gas in California is much more expensive than it is in Australia.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: They pay almost twice as much for their electricity as we do in Australia. I'm sure you're not suggesting that we double the price of electricity. Our government is aiming at keeping the price of electricity down. Sure, it's going to rise as we move into these other technologies. As well as that, California has some natural advantages that Australia doesn't have and quite frankly one of them we don't want, and that is that California lives on a fault line. Their production of geothermal electricity as a result of the movement of the plates, the production of hot water, which we see as geysers in Yellowstone Park, is significant in their renewable energy mix.
JONATHAN HOLMES: In the hills of Sonoma County north of San Francisco, they've been harvesting steam for 40 years. Though it bubbles to the surface here and there the real reservoirs of superheated water the two or three kilometres down. Half California's renewable energy comes from geothermal power stations like this. Even without a subsidy operators like Calpine Company are making good money.
LARRY SESSIONS, CALPINE CORPORATION: It's all dependent on the fluctuation of natural gas price but we are very competitive and very profitable.
JONATHAN HOLMES: Of course, it's base load power?
LARRY SESSIONS, CALPINE CORPORATION: Yes. That is one luxury about the renewables for geothermal is that it is a base load unlike wind and solar, which fluctuate.
JONATHAN HOLMES: The Cooper Basin in the vast flat outback of northern South Australia has no steaming geysers, no volcanoes, no subterranean magma. It's one of the most geologically stable regions in the world. Yet here, believes Adrian Williams, once the chief engineer of the Snowy Mountains Corporation, is a geothermal resource that's potentially the biggest in the world.
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: If we look around, as far as the eye can see, we've delineated an amount of energy that can produce power equal to 15 Snowy Mountain schemes. That's absolutely huge. About ten new large coal-fired power stations, it would be equal to except that in this case they'll be simple, single-storey and quite modest buildings. Very simple.
JONATHAN HOLMES: And not burning anything?
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: Zero.
JONATHAN HOLMES: In September 2003, thanks to a six-million dollar research grant from the federal government, a small company called Geodynamics began drilling its first test hole near Innamincka. They drilled day and night through 3.5km of sedimentary clay and shale that acts like a vast insulating blanket. Beneath the sediment is a layer of mildly radioactive granite several kilometres deep. For eons, the heat produced by its radioactive decay has had nowhere to go.
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: We're looking at 3.5 thousand metres down at the hottest rocks on earth outside volcanic regions and that's quite special because temperature, apart from giving us more energy, gives us a huge increase in the efficiency with much we can convert that energy into electricity.
JONATHAN HOLMES: When the drill bits reached the granite, Geodynamics' chief scientist, Dr Doone Wyborn, got a surprise. He's expected hot dry rock. What he found, stored in fractures in the granite, was water under colossal pressure.
DR DOONE WYBORN, CHIEF SCIENTIST, GEODYNAMICS LIMITED: We've been monitoring the pressure in the well head for a number of years now and it's at an incredibly high pressure. Here, the pressure is actually high enough to force the water 3.5km into the air.
JONATHAN HOLMES: 3.5km?
DR DOONE WYBORN, CHIEF SCIENTIST, GEODYNAMICS LIMITED: 3.5km.
JONATHAN HOLMES: Geodynamics' plan is simple enough in principal. Water well be pumped down injection wells through the overlying sediment and into the granite beneath. From there it will seep through natural fractures in the rock which will heat it to 250 degrees. The superheated water, still under pressure, will return to the surface via production wells and pass through a heat exchanger before being pumped back under ground in a closed loop. From the heat exchanger, a second closed loop of fluid will heat steam to drive a turbine and generate electricity, potentially a lot of it.
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: We're looking at hundreds of megawatts into the grid by 2015, and that's just this company. Other companies are looking to do the same. By 2020 there will be several thousand megawatts going into the grid. By 203 there's no reason why hot rocks, I think, can be producing ten per cent of Australia's power. We're not limited by resource, we've got a huge resource just to keep going.
JONATHAN HOLMES: And zero emissions?
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: Absolutely zero emissions. And no demand on water. All the water we use naturally exists within the fractured rocks and all we do is recirculate that. So we have absolutely zero demand for water and zero emissions.
JONATHAN HOLMES: More than a year ago Geodynamics' first test production well was producing a satisfying plume of steam. They were hoping by this time to have a two-megawatt test generator up and running. But early last year, after their hired drilling rig had left, a subcontractor dropped equipment down the hole and blocked it. There's a global oil rush on and there were no rigs valuable to drill another hole.
DR DOONE WYBORN, CHIEF SCIENTIST, GEODYNAMICS LIMITED: So in the end we bought our own drilling rig. That rig was being manufactured at the moment in Houston. It's due to set sail to Australia in May and be onshore in June and we should be drilling in July.
JONATHAN HOLMES: The mishap may have cost Geodynamics more than a year's delay. They'd applied for a 75 million-dollar grant from the federal government's Low Mission Technology demonstration fund to help pay for a 40-megawatt test power plant but most of the funds, first $500 million, has already been allocated, a lot of it to clean-coal technologies.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: Geodynamics have received very generous support from this government. Over 10 million dollars has been made available to Geodynamics. A good proportion of that they've already spent but because they've had trouble with their technology, their drilling, they haven't spent all the money we've given them. They need to prove their technology works. That's not to say they won't succeed. I hope they do and I'm encouraging them. I keep giving them more and more money. They've had a series of grants.
JONATHAN HOLMES: Do you think potentially this technology would make it unnecessary to build, for example, nuclear power stations in Australia?
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: It's a choice Australia has, I guess, isn't it? At the end of the day it'll be cost that determines what happens. It's also a matter of resource and there's no doubt that the geothermal resources in Australia are absolutely huge.
JONATHAN HOLMES: But geothermal operators in the Cooper Basin will have one profound disadvantage in trying to compete with nuclear energy. They'll have to pay for transmission lines to take their power 500 kilometres to the nearest grid connection ironically at BHP's giant uranium mine at Roxby Downs. That could add 50% per cent to the price of geothermal power a cost Australia's established coal-fired power stations never had to face.
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: I mean, remember the entire network, the generation infrastructure, the transmission and distribution infrastructure, was all established with government money and now the private sector has been left on it's... not necessarily on it's own but it is being left to come up with the overwhelming majority of the money to develop the new infrastructure.
JONATHAN HOLMES: There's another plentiful renewable resource in Australia's vast outback. Not wind, nor hot rocks, but sun. In the view of its enthusiasts, solar power can save the world and the Australian economy too.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: When you look on a global scale this is really the big one. China has huge deserts, and it is the biggest single Chinese resource, potentially. India has huge deserts. The United States has huge deserts. These are the major carbon emitters in the world.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: It's an economic opportunity. We have a plan to be a part of a growing and very vibrant, and as we're now seeing, extremely exciting world market.
JONATHAN HOLMES: In the red heart of Australia, three remote Aboriginal communities draw power from the sun. This is a pilot station for what its makers claim could be the solar technology of the future.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: We buy lots of cheap glass by way of mirrors and we concentrate it about 500 times. And we literally take light and convert it directly into electricity with very, very efficient photovoltaic technology.
JONATHAN HOLMES: The photovoltaic cells at the heart of the system are at the global cutting edge. Originally developed to power satellites in space, they're the result of a collaboration between the mighty Boeing Corporation and a small private company with an office and workshop in a back lane in the Melbourne suburb of Hawthorn.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: A solar panel that you'd see on the roof of a house is about two-thirds of a square metre and maybe 80 to 100 watts. This is one of our solar panels and it's about 550 watts. So you can see the difference in area. It's about 1500 times more effective than a normal solar panel.
PETER COSTELLO, COMMONWEALTH TREASURER: Today is a great day because under the Low Emission Technology Demonstration Fund...
JONATHAN HOLMES: Six months ago, Solar Systems' technology was given a major vote of confidence by the Federal Government.
PETER COSTELLO, COMMONWEALTH TREASURER: And in particular, the Federal Government is setting aside today $75 million to build the largest solar energy plant in the world.
JONATHAN HOLMES: The Treasurer was exaggerating. For 20 years, a solar power station has been up and running in California that has twice the capacity of the 154-megawatt demonstration plant that Solar Systems plans to build at Mildura in Victoria.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: The real one will be about five times the size of this and this whole unit moves and tracks the sun.
JONATHAN HOLMES: But it's still an ambitious project. Of the hundreds of millions it will cost, 75 million will come from Canberra, another 50 from Victorian taxpayers. Those grants, says Dave Holland, are:
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: Absolutely critical in the acceleration of the commercialisation process. The grants that we've received are aimed at driving the cost curve down so that we can both create a new industry and start to have a significant impact on emissions.
STEVE BRACKS, PREMIER OF VICTORIA: It went to Victoria because of our 10 per cent VRET target...
JONATHAN HOLMES: But as Victorian Premier Steve Bracks pointed out, while one-off grants can help build demonstration plants, only structural schemes like VRET can make their output competitive with coal-fired electricity.
STEVE BRACKS, PREMIER OF VICTORIA: If that wasn't there, this would not be here in Victoria. And if VRET goes, this project will not proceed in Victoria in the future.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: For everybody to be competitive we need to understand the real cost of energy. And all immature technologies will need access to an economy that recognizes the cost of emissions. VRET and the New South Wales RET and WARET and those other systems should be seen as transitional to where we're going. And I think the government's behind them, see them as that, and I think they're important transitional measures, but that's what they are.
JONATHAN HOLMES: In California, the fluctuating price of fossil fuels especially oil and gas has driven the development of solar power, or halted it in its tracks. In the late 80's, when the oil price was high, a vast tract of the Mojave Desert was covered in solar mirrors. But then the oil price fell, and for 15 years, no more solar plants were built. What goes around, comes around. In the past few years oil and gas prices have soared again, and the United States' insatiable appetite for energy has showed no signs of slowing. Americans worry, not just about global warming, but about their dependence on imported oil and gas. Now, in the Nevada desert a few miles from Las Vegas, a 64-megawatt solar thermal power station is nearing completion apart from those in California, the biggest in the world. Compared with Solar System's advanced photovoltaics, parabolic trough technology is simple. It depends not on the sun's light, but on its heat. Until the plant's completed, its long rows of mirrors are turned towards the ground. But in a couple of weeks from now, they'll start tracking the sun.
ROBERT CABLE, ACCIONA SOLAR POWER: As the sun's coming up over here in the east the parabolic structure moves like this, so it's always tracking the sun. The glass reflector panels here reflect about 92 per cent of the light that hits them onto this receiver tube here, concentrates about 70 times. So there's 70 suns on this receiver tube that heat the fluid that we use up to 390 degrees. That then goes back to the power plant to a heat exchanger, it makes steam, and the steam generates power going through a steam turbine generator, very traditional to most power plants throughout the world.
JONATHAN HOLMES: Parabolic trough technology is tried and tested but at present, it's far from cheap. What makes it economically viable in Nevada is that its output matches demand.
ROBERT CABLE, ACCIONA SOLAR POWER: The nice thing about this technology is it matches the load of Las Vegas, or most cities here in the US very, very well. It makes about five times more on a June day, for instance, than a January day. So when people have their air conditioners on, the hotels, casinos have their air conditioners running, we're making power.
JONATHAN HOLMES: Keeping these cavernous casinos cool in the heat of a Nevada summer uses colossal amounts of power. In California too, utilities are prepared to pay a high price for a renewable resource which, unlike wind, can be relied on to produce power at the right time.
PEDRO PIZARRO, SOUTHERN CALIFORNIA EDISON: The wind tends to blow less here when the weather is hot so solar has a much better coincidence with our peak needs. Therefore, a kilowatt hour of sun - that summer peak hour - has greater value to us.
JONATHAN HOLMES: The prices paid for solar power - the renewable energy targets, the Federal tax credits - all these have persuaded Dr David Mills, former Sydney University academic turned solar entrepreneur, to move to California. Those factors, plus the financial backing he's found at 3000 Sand Hill Road, in the heart of silicon valley. This enclave of quiet, low-rise buildings is the headquarters of Californian venture capital. Mills's Australian company, Solar Heat and Power, is now a partner in a new US-registered company, Ausra. Its biggest single backer is a man with an awesome reputation for turning the future into money - Sun Microsystems founder and venture capitalist extraordinaire Vinod Khosla. Khosla Ventures plans to invest more than twenty million dollars in Ausra. And Vinod Khosla, unusually, has taken a seat on the board. Khosla believes the world is on the brink of an energy revolution as profound as the dawn of the computer age that made him his first fortune. And he wants to be in it.
VINOD KHOSLA, KHOSLA VENTURES: I think there's opportunities to invest in this new paradigm that are great investment opportunities. So we hope to make a great rate of return in addition to doing good for the climate.
JONATHAN HOLMES: What specifically about David Mills's technology excited you in the first place?
VINOD KHOSLA, KHOSLA VENTURES: Simple - it's cheap. It can compete with clean-coal technologies.
JONATHAN HOLMES: The only place in the world, so far, where you can see David Mills's technology in action is in the grounds of a coal-fired power station in NSW's Hunter Valley. It's a pilot plant whose gently creaking mirrors concentrate the sun's heat onto a single fixed pipe suspended above. It's the very opposite of Solar Systems' space age photovoltaic technology.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: It's so simple it's almost agricultural with pieces that will last a long time in the open. That tends to be galvanized steel as you use in farm machinery. The mirrors are close to the ground so the structure is reduced. There are fixed absorber pipes, not moving ones.
JONATHAN HOLMES: And the mirrors are comparatively flat?
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: We use flat reflectors. The other competing technologies, such as parabolic trough, have to use reflectors which are actually slightly melted and formed into the correct shape, which is much, much more expensive. We just bend our...flat glass into the correct shape, and...only slightly. All of these kinds of things have been put together to get the cost as low as possible.
JONATHAN HOLMES: The solar array at Liddell Power Station isn't yet connected to anything. But by the end of the year, an array double this size will be feeding high-pressure steam to the power station's boilers, marginally reducing its use of coal and therefore its greenhouse gas emissions. State owned Macquarie Generation has invested 5 million dollars in the project.
GRANT EVERY-BURNS, MANAGING DIRECTOR, MACQUARIE GENERATION: We decided that it's time to stand, it's time to be counted. The world is changing. But at the same time coal fired-power stations are absolutely necessary for supply of energy to the nation. And the question we had was, "How do you use what you've got "and make it better than it is?"
JONATHAN HOLMES: But the fact is, even the completed project, which will be ten times this size, will reduce the power station's emissions by a mere 1 per cent. The Federal Government has also invested in Solar Heat and Power's pilot plant. So far, it's underwhelmed.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: We've put over three million dollars into that company through our innovation grants to see them develop the pilot. But, again, they haven't yet proved that that technology works. They've produced steam, but they haven't run a turbine. Therefore, they haven't generated electricity. I hope that works. I hope they come back to us and say "Now, seeing as we've got this working "we're going to build one that's a hundred times bigger than that."
JONATHAN HOLMES: Vinod Khosla and David Mills say they're about to do just that - but not in Australia.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: Globally, if we're going to be meaningful for the climate we have to grow at an enormous rate, an exponential rate. And, therefore, we need big plants very soon.
VINOD KHOSLA, KHOSLA VENTURES: Our whole hope is to take the wonderful technology that was developed in Australia and prove that it can be scaled to hundreds of megawatts much, much faster than the company was doing on its own, hopefully, within the year.
JONATHAN HOLMES: Within the year?
VINOD KHOSLA, KHOSLA VENTURES: That's the plan.
JONATHAN HOLMES: An agreement with at least one major Californian utility will be signed within weeks, they claim. Within three years, they expect to build a one gigawatt plant - more than three times bigger than the plants in the Mojave Desert. It'll cover thirty square kilometres of ground. A solar plant of that scale, David Mills claims, could make some of the cheapest electricity in America.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: If we build them small, they're very expensive. If we build them big, they're very cheap. So we expect that by the gigawatt scale these plants... I mean, it just pops out of the spreadsheets. These plants will be simply the same price in terms of electricity per kilowatt hour that a normal coal plant is in the United States.
JONATHAN HOLMES: All very well, say the sceptics. But solar power, even on a massive scale, can't offer base-load electricity, 24 hours a day.
JOHN HOWARD, PRIME MINISTER OF AUSTRALIA: Solar is a nice, easy, soft answer. There's this vague idea in the community that solar doesn't cost anything and it can solve the problem. It can't. It can't replace base-load power generation by power stations.
JONATHAN HOLMES: Mills and Khosla aim to prove that wrong. The technology to store heat, and release it later, so that solar stations can produce base-load power, is just around the corner they claim.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: Turns out this is actually quite easy to do. So we're very active in this. We'll be offering commercial storage systems up to, say, 24 hours within a year.
JONATHAN HOLMES: Up to 24 hours?
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: Hm-hm.
VINOD KHOSLA, KHOSLA VENTURES: That's what's so exciting about David Mills' technology. It is the first thing I've seen in renewable power that can both meet the utilities requirements and meet the cost targets to be competitive and spread rapidly.
JONATHAN HOLMES: The potential for solar power in the vast deserts of Australia is almost unlimited. But David Mills has no plans to build here yet - not until the energy policy changes. "Neither solar thermal, nor any other low-emission technology", he says, "can compete with the artificially low price of Australian coal".
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: Right now they're running coal plants, really at the marginal cost of the fuel, in Australia, not planning for the future and not factoring in the cost of new coal plant in that price. And, it means that a nuclear plant cannot compete with three cent coal, coal generation, a carbon sequestration coal plant cannot compete with that. So to get any of these clean technologies in, you're going to have to have a new price structure for clean energy.
JONATHAN HOLMES: For 10 years, the Howard government has stubbornly resisted putting a price on greenhouse gas emissions, until the rest of the world agrees to do so too. But by last year, more and more voices from the business world - including the energy industry - were urging it to change its mind.
BRAD PAGE, CEO, ENERGY SUPPLY ASSOCIATION OF AUSTRALIA: Our association, representing more than 40 electricity and downstream natural gas companies, does now hold the position that we think that carbon and greenhouse gas emissions do need to be priced and we firmly believe that the way that you achieve least cost abatement is to actually be able to then trade in those emissions.
JONATHAN HOLMES: Last December, the government executed a classic U-turn.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: Well, the response is that I've got an open mind on carbon trading, and that I'm looking forward to the results of the submissions that have gone to the Prime Minister's Task Group.
JONATHAN HOLMES: At the end of May, the Prime Minister's Task Group will make recommendations on a possible emissions trading system. The mining companies, the aluminium industry and the generators - the groups that would suffer most from the imposition of a significant price on carbon emissions - have representatives on the Task Group. The renewable energy industry does not.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: They have already received massive support from this government and they have had every opportunity, and I'm sure they've taken it, to make submissions to that task group to put their argument strongly, to argue them based on fact, not emotion, to argue them in a way where their facts stack up.
JONATHAN HOLMES: But the industry is worried. It's likely that the Task Group will recommend the introduction of a national carbon trading system, initially at least, that puts a low price on carbon emissions well under $20 per tonne of carbon dioxide. That wouldn't be enough to make renewables competitive.
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: Wind, solar, biomass, those sorts of technologies would not be competitive with a tax as low as $15 - $20.
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: So what we are talking to the Government about is an emissions trading scheme alongside a market mechanism that continues to deliver an incentive to any renewable energy project or other clean energy or low emissions project.
JONATHAN HOLMES: So you need emissions trading plus?
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: Absolutely.
JONATHAN HOLMES: Though it's short on hard numbers, the Federal ALP says that it will give extra support to renewable energy.
PETER GARRETT, SHADOW MINISTER FOR CLIMATE CHANGE, ENVIRONMENT AND HERITAGE: We're committed to the establishment of a national emissions trading scheme that works effectively and that succeeds in its actual, necessary role and task which is to start seeing emission reductions happen. And we're committed to a mandatory renewable energy target which is sufficient to enable renewables to do the kind of job that they can do in reducing emissions.
JONATHAN HOLMES: Both at the same time?
PETER GARRETT, SHADOW MINISTER FOR CLIMATE CHANGE, ENVIRONMENT AND HERITAGE: No question about that.
JONATHAN HOLMES: But the coalition's hostility to higher renewable energy targets hasn't changed. What the industry fears most is that the Howard Government will present the states with an ultimatum: if you want national emissions trading, get rid of your 'Mickey Mouse' schemes - the state-based mandatory renewable energy targets.
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: Well, that will collapse clean energy industry in Australia and it will ensure that we do what we are criticised for doing now which is bringing in imported technology forever.
JONATHAN HOLMES: For the Government, reducing emissions - and encouraging expensive renewables - comes second to maintaining the competitiveness of Australia's established export industries.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: In my opinion, a scheme can or can't work because it does or doesn't keep jobs in Australia. If we just simply impose a scheme in Australia that disadvantages jobs and industry in Australia, then we might as well just ship jobs offshore.
JONATHAN HOLMES: But Vinod Khosla warns Australia that if it neglects renewables in favour of clean coal, it may find that it's backed a losing horse.
VINOD KHOSLA, KHOSLA VENTURES: Most of the attempts at clean coal are half-hearted and very far away. I suspect, when we get there, we will find those technologies are very expensive. And I believe if you're going to do something about climate change, we need technologies that can be more cost-effective than clean coal technologies. And solar thermal is one of the most promising areas to do that. So I encourage everybody, whether it is the Department of Energy in the United States, or the Australian Government, to invest in these alternatives, at least as much as in clean coal technologies.
JONATHAN HOLMES: According to the Energy Supply Association of Australia, increasing the current federal target for renewables tenfold need not unduly strain the Australian economy, or overstretch our wallets.
BRAD PAGE, CEO, ENERGY SUPPLY ASSOCIATION OF AUSTRALIA: If you were to have a 20 per cent renewable target by 2020, across the board for the whole of Australia, then you're probably going to add somewhere around 10 per cent to the production cost of electricity, so that would translate into, maybe, 4-6 per cent at the retail end.
JONATHAN HOLMES: If it helps, however slightly, to make a planet that's liveable for their children, a rise of 6 per cent over the next dozen years might not seem, to most Australians, such a dreadful price to pay.
Date: 16/04/2007
JONATHAN HOLMES: When the great Snowy Mountains scheme was finally completed in 1974, almost no one had even heard of global warming. But back then, emission-free, renewable energy from falling water provided 20 per cent of Australia's electricity. Thirty years later, with climate change a looming reality, hydro's share has fallen to 7 per cent. And despite five years of growth, wind power contributes less than 1 per cent. Yet the Federal Government won't increase Australia's renewable energy target. Both government and opposition are obsessed with coal.
MALCOLM TURNBULL, MINISTER FOR THE ENVIRONMENT AND WATER RESOURCES: A key focus of our whole energy and greenhouse policy is ensuring that we have the means to clean up coal.
KEVIN RUDD, OPPOSITION LEADER: If we're serious about climate change, we've got to be serious about clean coal.
JONATHAN HOLMES: But clean coal is at least a decade and a half away and no one knows what it will cost. Meanwhile, Australia's greenhouse emissions from electricity generation are soaring. Across the Pacific, in the state of California, they're focussing on wind, and sun, and steam from deep beneath the earth.
ARNOLD SCHWARZENEGGER, GOVERNOR OF CALIFORNIA, USA: California has taken the leadership in moving the entire country beyond debate and denial to action.
CALIFORNIA ASSEMBLYMAN LLOYD LEVINE: 33 per cent renewable energy by 2020 is a very ambitious target, but we need to meet it.
JONATHAN HOLMES: Tonight on Four Corners, if California is the place the future happens first, is Australia in danger of being left behind?
VINOD KHOSLA, KHOSLA VENTURES: Most industrial advantage in the world comes through innovation and if Australia stays with coal power they won't have that.
JONATHAN HOLMES: For at least five years, the Howard Government has repeated a mantra. Renewable energy is all very well, but it can't provide an answer to Australia's clean energy needs.
MALCOLM TURNBULL, MINISTER FOR THE ENVIRONMENT AND WATER RESOURCES: You cannot run a modern economy on wind farms and solar panels. It's a pity that you can't but you can't.
JONATHAN HOLMES: The great city of Los Angeles. Its industries and its spreading suburbs are powered overwhelmingly, by a single utility Southern California Edison. From its grid control centre in Alhambra, SCE manages almost 30,000 megawatts of electricity more than half of Australia's entire capacity. By law, in three years' time, one fifth of that power will have to come from renewable energy and that doesn't include the 28 per cent that already comes from major hydro schemes and nuclear power.
PEDRO PIZARRO, SOUTHERN CALIFORNIA EDISON: We've just signed this very large contract for 1,500 megawatt wind development project. We have a large contract for at least 500 megawatts of a very innovative solar technology. We have contracts for geothermal and biomass and small hydro and importantly those long term contracts then allow players to go to the banks to get financing to get these new projects built.
JONATHAN HOLMES: In the Californian state capital, Sacramento, Republican Governor Arnold Schwarzenegger has teamed up with the Democrat-dominated state legislature to set some of the most ambitious emissions reduction and renewable energy targets in the world.
ARNOLD SCHWARZENEGGER, GOVERNOR OF CALIFORNIA, USA: 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.
JONATHAN HOLMES: The Howard Government too, has a renewable energy target. It's resulted in a mushrooming of wind turbines along the shores of the Southern Ocean, where the Australian wind blows hardest. The Mandatory Renewable Energy Target - or MRET, for short - was first announced by the new Howard Government back in 1997, as it prepared for the climate change conference in Kyoto. But compared to California's, its goals were modest.
JOHN HOWARD, PRIME MINISTER OF AUSTRALIA: The Government will work with the States and Territories to set a mandatory target for electricity retailers to source an additional 2 per cent of their electricity from renewable energy sources by the year 2010.
JONATHAN HOLMES: The MRET scheme awarded a tradeable certificate, originally worth around $40, for every megawatt hour of new renewable electricity. Effectively, it more than doubled the market price for renewable energy. The scheme favoured the cheapest renewable technology and that turned out to be wind power.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: We have seen a massive expansion in the wind industry as a result of that. We've seen $3 billion invested in the industry, and we've seen a 80-fold increase in the amount of energy produced from wind as a result of that scheme so far, and it's still...and they're still putting up wind farms. In fact, the only complaint I get about the MRET is that it's too successful, that in fact, will reach its target ahead of schedule.
JONATHAN HOLMES: The target was set at 9,500 gigawatt hours of new renewable energy by 2010 and it will be comfortably reached. But that won't achieve the Prime Minister's stated goal of increasing renewables' share of electricity generation by 2 per cent. Quite the reverse.
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: The proportion of renewable energy has declined in overall, sort of, national terms... at this stage by about 2 per cent. Renewable energy currently generates about 8 per cent. We're generating more electricity than we were in 2001, but we're a smaller proportion of the national market.
JONATHAN HOLMES: In the past decade, Australia's economy has grown much faster than the planners anticipated, and even as generation from renewables increased, generation from traditional fossil fuels has grown faster. In 2003, a formal review of the MRET scheme, chaired by Senator Grant Tambling, recommended that it be extended by ten years, and the target more than doubled. The government refused to do either. In its eyes, reducing greenhouse greenhouse gas emissions is a secondary goal. The main purpose of MRET was to foster innovative Australian industries, and wind power doesn't qualify.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: We just saw towers being erected, and turbines being bought in from Europe. No R & D being done here of any great consequence. Some, uh... manufacture of blades and some assembly - not manufacture - but some assembly of turbines being done here, but the vast majority of the big turbines are being bought in from overseas, stuck on top of towers. That technology is proven.
JONATHAN HOLMES: To the windfarm entrepreneurs, it seemed a curious argument. 70 per cent of the cost of the average windfarm is spent in Australia. Blades and towers are made here. Only the turbines themselves are imported.
ROB GRANT, CEO, PACIFIC HYDRO: We would like to import less, but, uh... it's about getting the lowest cost renewable to market, and we do that by sourcing the lowest cost equipment which currently comes out of Denmark - no different to any other electricity-generating technology, be it coal or be it gas.
REPORTER: What do you mean no different? I mean, the coal is Australian.
ROB GRANT, CEO, PACIFIC HYDRO: The equipment comes from overseas.
JONATHAN HOLMES: Just down the road from Codrington Wind Farm is the town of Portland - home to Alcoa's giant aluminium smelter, and to a modest engineering company, Keppel Prince. Keppel Prince's founder, Steve Garner, set up the company to do subcontracting work for the smelter. But in 2001, he seized his chance, and began to win contracts to manufacture the giant towers that house wind turbines. The wind business has provided good jobs for more than a hundred workers at Keppel Prince, and a couple of hundred more elsewhere in Portland. But like the wind, says Steve Garner, it's business that comes and goes, as policies shift and change.
STEVE GARNER, GM, KEPPEL PRINCE ENGINEERING: It hasn't been steady, it's been a real rollercoaster, and, uh... that's caused a lot of grief for us, but, um... we've now completed some seven or eight projects, windfarms, throughout Australia.
JONATHAN HOLMES: By last year, it was clear the government's renewable target would soon be reached. With no further incentive, the wind industry was dying. What saved Keppel Prince's new business was the Victorian Government decision last year to set its own Renewable Energy Target, called VRET. It mandates that 10 per cent of the State's electricity must come from renewable sources by 2016. New South Wales and Western Australia have recently announced similar schemes. But the federal government is scornful.
JONATHAN HOLMES: Don't you accept that if it had not been for the State schemes, like the VRET and now, the NSW renewable energy target, the renewable energy industry in this country would have fallen flat on its face?
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: No, I don't accept that at all. In fact, most of this investment was already happening. In fact, the vast majority of the investment happened before the States decided to put in place Mickey Mouse schemes that were publicly popular, and had very limited effect, and to date, have had very limited effect in investment decisions. They may have an effect in investment decisions in the future, that's to be seen.
JONATHAN HOLMES: And what's been the consequence of that VRET policy, in terms of what your company is doing?
ROB GRANT, CEO, PACIFIC HYDRO: Well, we were able to immediately start construction at Portland, with the first stage of the Portland project at, uh... Cape Bridgewater, uh... we were able to put a number of other projects back into planning process, uh... we were able to increase our staff by about 25 per cent, and we're actively pursuing, you know, two or three windfarms for construction over the next four or five years.
JONATHAN HOLMES: In the tower blocks of Sydney's CBD, the money men and women scour the globe for investment opportunities, and there are profits to be made from renewable energy. Allco Finance Group's Wind Energy division is headed by Danish wind expert Steen Stavnsbo. He'll invest, he says, anywhere in the world where the policies, as well as the winds, are strong enough.
STEEN STAVNSBO, HEAD OF ALLCO WIND ENERGY: We look for areas where there's a firm energy policy in place that sees the cost of carbon emissions come through, to aid the renewable energy investments. We seek policies that truly, uh... promote new investment in renewable energy projects.
JONATHAN HOLMES: In December last year, Allco Finance Group of Sydney signed the biggest single windpower agreement in the world. Here in the Tehachapi Hills, between the Mojave Desert and the Pacific Ocean, it will finance a windfarm to supply 1,500 megawatts of power to Southern California Edison. That's twice the capacity that's already here, and almost twice as much as all Australia's windfarms put together.
HAL ROMANOWITZ, PRESIDENT, OAK CREEK ENERGY SYSTEMS: Over here on these hills, we'll have another about 500 megawatts. And there'll be another 300 megawatts over the top of the hill back over here, so it's, uh... 1500 megawatts takes a fair bit of land.
JONATHAN HOLMES: Allco's local partner, Hal Romanowitz, is one of the pioneers of wind power in the Tehachapi. The new turbines, he says, will be much larger and more efficient than those he has already.
HAL ROMANOWITZ, PRESIDENT, OAKCREEK ENERGY SYSTEMS: They'll be, uh... big animals - the biggest ones will be a hundred metre.
JONATHAN HOLMES: A hundred metres?
HAL ROMANOWITZ, PRESIDENT, OAK CREEK ENERGY SYSTEMS: So, a 100-metre rotor diameter - a football field right up on a, uh... blade turning around.
JONATHAN HOLMES: Huge as it is, the Allco deal is only the start. In the next ten years, Southern California Edison expects to be buying three times as much windpower from this one area - a massive 4,500 megawatts, as much as six big coal-fired power stations.
PEDRO PIZARRO, SOUTHERN CALIFORNIA EDISON: We like wind resources. They contribute good renewable energy, and that said, there is the intermittency issue. It would absolutely not be feasible to serve all of our needs from wind exclusively, because again, the wind sometimes blows, sometimes it doesn't.
JONATHAN HOLMES: Intermittency is often raised in Australia as a severe disadvantage of wind and solar energy. But SCE's technical experts say they could cope with up to 15 per cent of their power coming from wind, without major problems.
RON LITZINGER, SOUTHERN CALIFORNIA EDISON: It takes a mix of everything to make the grid work. And wind has the most, uh... intermittency issues, but I think, um... the wind forecasting and the solar forecasting tools are improving. Uh, those generators submit much more predictable and balanced schedules, and I think, as with anything, as technology improves, we can... we can overcome this issue.
JONATHAN HOLMES: Renewable energy gets a 30 per cent upfront tax credit from the federal government in Washington. Partly as a result, electricity from wind costs SCE less than it would pay for power from a new gas-fired plant. Gas in California is much more expensive than it is in Australia.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: They pay almost twice as much for their electricity as we do in Australia. I'm sure you're not suggesting that we double the price of electricity. Our government is aiming at keeping the price of electricity down. Sure, it's going to rise as we move into these other technologies. As well as that, California has some natural advantages that Australia doesn't have and quite frankly one of them we don't want, and that is that California lives on a fault line. Their production of geothermal electricity as a result of the movement of the plates, the production of hot water, which we see as geysers in Yellowstone Park, is significant in their renewable energy mix.
JONATHAN HOLMES: In the hills of Sonoma County north of San Francisco, they've been harvesting steam for 40 years. Though it bubbles to the surface here and there the real reservoirs of superheated water the two or three kilometres down. Half California's renewable energy comes from geothermal power stations like this. Even without a subsidy operators like Calpine Company are making good money.
LARRY SESSIONS, CALPINE CORPORATION: It's all dependent on the fluctuation of natural gas price but we are very competitive and very profitable.
JONATHAN HOLMES: Of course, it's base load power?
LARRY SESSIONS, CALPINE CORPORATION: Yes. That is one luxury about the renewables for geothermal is that it is a base load unlike wind and solar, which fluctuate.
JONATHAN HOLMES: The Cooper Basin in the vast flat outback of northern South Australia has no steaming geysers, no volcanoes, no subterranean magma. It's one of the most geologically stable regions in the world. Yet here, believes Adrian Williams, once the chief engineer of the Snowy Mountains Corporation, is a geothermal resource that's potentially the biggest in the world.
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: If we look around, as far as the eye can see, we've delineated an amount of energy that can produce power equal to 15 Snowy Mountain schemes. That's absolutely huge. About ten new large coal-fired power stations, it would be equal to except that in this case they'll be simple, single-storey and quite modest buildings. Very simple.
JONATHAN HOLMES: And not burning anything?
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: Zero.
JONATHAN HOLMES: In September 2003, thanks to a six-million dollar research grant from the federal government, a small company called Geodynamics began drilling its first test hole near Innamincka. They drilled day and night through 3.5km of sedimentary clay and shale that acts like a vast insulating blanket. Beneath the sediment is a layer of mildly radioactive granite several kilometres deep. For eons, the heat produced by its radioactive decay has had nowhere to go.
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: We're looking at 3.5 thousand metres down at the hottest rocks on earth outside volcanic regions and that's quite special because temperature, apart from giving us more energy, gives us a huge increase in the efficiency with much we can convert that energy into electricity.
JONATHAN HOLMES: When the drill bits reached the granite, Geodynamics' chief scientist, Dr Doone Wyborn, got a surprise. He's expected hot dry rock. What he found, stored in fractures in the granite, was water under colossal pressure.
DR DOONE WYBORN, CHIEF SCIENTIST, GEODYNAMICS LIMITED: We've been monitoring the pressure in the well head for a number of years now and it's at an incredibly high pressure. Here, the pressure is actually high enough to force the water 3.5km into the air.
JONATHAN HOLMES: 3.5km?
DR DOONE WYBORN, CHIEF SCIENTIST, GEODYNAMICS LIMITED: 3.5km.
JONATHAN HOLMES: Geodynamics' plan is simple enough in principal. Water well be pumped down injection wells through the overlying sediment and into the granite beneath. From there it will seep through natural fractures in the rock which will heat it to 250 degrees. The superheated water, still under pressure, will return to the surface via production wells and pass through a heat exchanger before being pumped back under ground in a closed loop. From the heat exchanger, a second closed loop of fluid will heat steam to drive a turbine and generate electricity, potentially a lot of it.
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: We're looking at hundreds of megawatts into the grid by 2015, and that's just this company. Other companies are looking to do the same. By 2020 there will be several thousand megawatts going into the grid. By 203 there's no reason why hot rocks, I think, can be producing ten per cent of Australia's power. We're not limited by resource, we've got a huge resource just to keep going.
JONATHAN HOLMES: And zero emissions?
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: Absolutely zero emissions. And no demand on water. All the water we use naturally exists within the fractured rocks and all we do is recirculate that. So we have absolutely zero demand for water and zero emissions.
JONATHAN HOLMES: More than a year ago Geodynamics' first test production well was producing a satisfying plume of steam. They were hoping by this time to have a two-megawatt test generator up and running. But early last year, after their hired drilling rig had left, a subcontractor dropped equipment down the hole and blocked it. There's a global oil rush on and there were no rigs valuable to drill another hole.
DR DOONE WYBORN, CHIEF SCIENTIST, GEODYNAMICS LIMITED: So in the end we bought our own drilling rig. That rig was being manufactured at the moment in Houston. It's due to set sail to Australia in May and be onshore in June and we should be drilling in July.
JONATHAN HOLMES: The mishap may have cost Geodynamics more than a year's delay. They'd applied for a 75 million-dollar grant from the federal government's Low Mission Technology demonstration fund to help pay for a 40-megawatt test power plant but most of the funds, first $500 million, has already been allocated, a lot of it to clean-coal technologies.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: Geodynamics have received very generous support from this government. Over 10 million dollars has been made available to Geodynamics. A good proportion of that they've already spent but because they've had trouble with their technology, their drilling, they haven't spent all the money we've given them. They need to prove their technology works. That's not to say they won't succeed. I hope they do and I'm encouraging them. I keep giving them more and more money. They've had a series of grants.
JONATHAN HOLMES: Do you think potentially this technology would make it unnecessary to build, for example, nuclear power stations in Australia?
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: It's a choice Australia has, I guess, isn't it? At the end of the day it'll be cost that determines what happens. It's also a matter of resource and there's no doubt that the geothermal resources in Australia are absolutely huge.
JONATHAN HOLMES: But geothermal operators in the Cooper Basin will have one profound disadvantage in trying to compete with nuclear energy. They'll have to pay for transmission lines to take their power 500 kilometres to the nearest grid connection ironically at BHP's giant uranium mine at Roxby Downs. That could add 50% per cent to the price of geothermal power a cost Australia's established coal-fired power stations never had to face.
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: I mean, remember the entire network, the generation infrastructure, the transmission and distribution infrastructure, was all established with government money and now the private sector has been left on it's... not necessarily on it's own but it is being left to come up with the overwhelming majority of the money to develop the new infrastructure.
JONATHAN HOLMES: There's another plentiful renewable resource in Australia's vast outback. Not wind, nor hot rocks, but sun. In the view of its enthusiasts, solar power can save the world and the Australian economy too.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: When you look on a global scale this is really the big one. China has huge deserts, and it is the biggest single Chinese resource, potentially. India has huge deserts. The United States has huge deserts. These are the major carbon emitters in the world.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: It's an economic opportunity. We have a plan to be a part of a growing and very vibrant, and as we're now seeing, extremely exciting world market.
JONATHAN HOLMES: In the red heart of Australia, three remote Aboriginal communities draw power from the sun. This is a pilot station for what its makers claim could be the solar technology of the future.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: We buy lots of cheap glass by way of mirrors and we concentrate it about 500 times. And we literally take light and convert it directly into electricity with very, very efficient photovoltaic technology.
JONATHAN HOLMES: The photovoltaic cells at the heart of the system are at the global cutting edge. Originally developed to power satellites in space, they're the result of a collaboration between the mighty Boeing Corporation and a small private company with an office and workshop in a back lane in the Melbourne suburb of Hawthorn.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: A solar panel that you'd see on the roof of a house is about two-thirds of a square metre and maybe 80 to 100 watts. This is one of our solar panels and it's about 550 watts. So you can see the difference in area. It's about 1500 times more effective than a normal solar panel.
PETER COSTELLO, COMMONWEALTH TREASURER: Today is a great day because under the Low Emission Technology Demonstration Fund...
JONATHAN HOLMES: Six months ago, Solar Systems' technology was given a major vote of confidence by the Federal Government.
PETER COSTELLO, COMMONWEALTH TREASURER: And in particular, the Federal Government is setting aside today $75 million to build the largest solar energy plant in the world.
JONATHAN HOLMES: The Treasurer was exaggerating. For 20 years, a solar power station has been up and running in California that has twice the capacity of the 154-megawatt demonstration plant that Solar Systems plans to build at Mildura in Victoria.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: The real one will be about five times the size of this and this whole unit moves and tracks the sun.
JONATHAN HOLMES: But it's still an ambitious project. Of the hundreds of millions it will cost, 75 million will come from Canberra, another 50 from Victorian taxpayers. Those grants, says Dave Holland, are:
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: Absolutely critical in the acceleration of the commercialisation process. The grants that we've received are aimed at driving the cost curve down so that we can both create a new industry and start to have a significant impact on emissions.
STEVE BRACKS, PREMIER OF VICTORIA: It went to Victoria because of our 10 per cent VRET target...
JONATHAN HOLMES: But as Victorian Premier Steve Bracks pointed out, while one-off grants can help build demonstration plants, only structural schemes like VRET can make their output competitive with coal-fired electricity.
STEVE BRACKS, PREMIER OF VICTORIA: If that wasn't there, this would not be here in Victoria. And if VRET goes, this project will not proceed in Victoria in the future.
DAVE HOLLAND, MANAGING DIRECTOR, SOLAR SYSTEMS: For everybody to be competitive we need to understand the real cost of energy. And all immature technologies will need access to an economy that recognizes the cost of emissions. VRET and the New South Wales RET and WARET and those other systems should be seen as transitional to where we're going. And I think the government's behind them, see them as that, and I think they're important transitional measures, but that's what they are.
JONATHAN HOLMES: In California, the fluctuating price of fossil fuels especially oil and gas has driven the development of solar power, or halted it in its tracks. In the late 80's, when the oil price was high, a vast tract of the Mojave Desert was covered in solar mirrors. But then the oil price fell, and for 15 years, no more solar plants were built. What goes around, comes around. In the past few years oil and gas prices have soared again, and the United States' insatiable appetite for energy has showed no signs of slowing. Americans worry, not just about global warming, but about their dependence on imported oil and gas. Now, in the Nevada desert a few miles from Las Vegas, a 64-megawatt solar thermal power station is nearing completion apart from those in California, the biggest in the world. Compared with Solar System's advanced photovoltaics, parabolic trough technology is simple. It depends not on the sun's light, but on its heat. Until the plant's completed, its long rows of mirrors are turned towards the ground. But in a couple of weeks from now, they'll start tracking the sun.
ROBERT CABLE, ACCIONA SOLAR POWER: As the sun's coming up over here in the east the parabolic structure moves like this, so it's always tracking the sun. The glass reflector panels here reflect about 92 per cent of the light that hits them onto this receiver tube here, concentrates about 70 times. So there's 70 suns on this receiver tube that heat the fluid that we use up to 390 degrees. That then goes back to the power plant to a heat exchanger, it makes steam, and the steam generates power going through a steam turbine generator, very traditional to most power plants throughout the world.
JONATHAN HOLMES: Parabolic trough technology is tried and tested but at present, it's far from cheap. What makes it economically viable in Nevada is that its output matches demand.
ROBERT CABLE, ACCIONA SOLAR POWER: The nice thing about this technology is it matches the load of Las Vegas, or most cities here in the US very, very well. It makes about five times more on a June day, for instance, than a January day. So when people have their air conditioners on, the hotels, casinos have their air conditioners running, we're making power.
JONATHAN HOLMES: Keeping these cavernous casinos cool in the heat of a Nevada summer uses colossal amounts of power. In California too, utilities are prepared to pay a high price for a renewable resource which, unlike wind, can be relied on to produce power at the right time.
PEDRO PIZARRO, SOUTHERN CALIFORNIA EDISON: The wind tends to blow less here when the weather is hot so solar has a much better coincidence with our peak needs. Therefore, a kilowatt hour of sun - that summer peak hour - has greater value to us.
JONATHAN HOLMES: The prices paid for solar power - the renewable energy targets, the Federal tax credits - all these have persuaded Dr David Mills, former Sydney University academic turned solar entrepreneur, to move to California. Those factors, plus the financial backing he's found at 3000 Sand Hill Road, in the heart of silicon valley. This enclave of quiet, low-rise buildings is the headquarters of Californian venture capital. Mills's Australian company, Solar Heat and Power, is now a partner in a new US-registered company, Ausra. Its biggest single backer is a man with an awesome reputation for turning the future into money - Sun Microsystems founder and venture capitalist extraordinaire Vinod Khosla. Khosla Ventures plans to invest more than twenty million dollars in Ausra. And Vinod Khosla, unusually, has taken a seat on the board. Khosla believes the world is on the brink of an energy revolution as profound as the dawn of the computer age that made him his first fortune. And he wants to be in it.
VINOD KHOSLA, KHOSLA VENTURES: I think there's opportunities to invest in this new paradigm that are great investment opportunities. So we hope to make a great rate of return in addition to doing good for the climate.
JONATHAN HOLMES: What specifically about David Mills's technology excited you in the first place?
VINOD KHOSLA, KHOSLA VENTURES: Simple - it's cheap. It can compete with clean-coal technologies.
JONATHAN HOLMES: The only place in the world, so far, where you can see David Mills's technology in action is in the grounds of a coal-fired power station in NSW's Hunter Valley. It's a pilot plant whose gently creaking mirrors concentrate the sun's heat onto a single fixed pipe suspended above. It's the very opposite of Solar Systems' space age photovoltaic technology.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: It's so simple it's almost agricultural with pieces that will last a long time in the open. That tends to be galvanized steel as you use in farm machinery. The mirrors are close to the ground so the structure is reduced. There are fixed absorber pipes, not moving ones.
JONATHAN HOLMES: And the mirrors are comparatively flat?
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: We use flat reflectors. The other competing technologies, such as parabolic trough, have to use reflectors which are actually slightly melted and formed into the correct shape, which is much, much more expensive. We just bend our...flat glass into the correct shape, and...only slightly. All of these kinds of things have been put together to get the cost as low as possible.
JONATHAN HOLMES: The solar array at Liddell Power Station isn't yet connected to anything. But by the end of the year, an array double this size will be feeding high-pressure steam to the power station's boilers, marginally reducing its use of coal and therefore its greenhouse gas emissions. State owned Macquarie Generation has invested 5 million dollars in the project.
GRANT EVERY-BURNS, MANAGING DIRECTOR, MACQUARIE GENERATION: We decided that it's time to stand, it's time to be counted. The world is changing. But at the same time coal fired-power stations are absolutely necessary for supply of energy to the nation. And the question we had was, "How do you use what you've got "and make it better than it is?"
JONATHAN HOLMES: But the fact is, even the completed project, which will be ten times this size, will reduce the power station's emissions by a mere 1 per cent. The Federal Government has also invested in Solar Heat and Power's pilot plant. So far, it's underwhelmed.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: We've put over three million dollars into that company through our innovation grants to see them develop the pilot. But, again, they haven't yet proved that that technology works. They've produced steam, but they haven't run a turbine. Therefore, they haven't generated electricity. I hope that works. I hope they come back to us and say "Now, seeing as we've got this working "we're going to build one that's a hundred times bigger than that."
JONATHAN HOLMES: Vinod Khosla and David Mills say they're about to do just that - but not in Australia.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: Globally, if we're going to be meaningful for the climate we have to grow at an enormous rate, an exponential rate. And, therefore, we need big plants very soon.
VINOD KHOSLA, KHOSLA VENTURES: Our whole hope is to take the wonderful technology that was developed in Australia and prove that it can be scaled to hundreds of megawatts much, much faster than the company was doing on its own, hopefully, within the year.
JONATHAN HOLMES: Within the year?
VINOD KHOSLA, KHOSLA VENTURES: That's the plan.
JONATHAN HOLMES: An agreement with at least one major Californian utility will be signed within weeks, they claim. Within three years, they expect to build a one gigawatt plant - more than three times bigger than the plants in the Mojave Desert. It'll cover thirty square kilometres of ground. A solar plant of that scale, David Mills claims, could make some of the cheapest electricity in America.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: If we build them small, they're very expensive. If we build them big, they're very cheap. So we expect that by the gigawatt scale these plants... I mean, it just pops out of the spreadsheets. These plants will be simply the same price in terms of electricity per kilowatt hour that a normal coal plant is in the United States.
JONATHAN HOLMES: All very well, say the sceptics. But solar power, even on a massive scale, can't offer base-load electricity, 24 hours a day.
JOHN HOWARD, PRIME MINISTER OF AUSTRALIA: Solar is a nice, easy, soft answer. There's this vague idea in the community that solar doesn't cost anything and it can solve the problem. It can't. It can't replace base-load power generation by power stations.
JONATHAN HOLMES: Mills and Khosla aim to prove that wrong. The technology to store heat, and release it later, so that solar stations can produce base-load power, is just around the corner they claim.
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: Turns out this is actually quite easy to do. So we're very active in this. We'll be offering commercial storage systems up to, say, 24 hours within a year.
JONATHAN HOLMES: Up to 24 hours?
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: Hm-hm.
VINOD KHOSLA, KHOSLA VENTURES: That's what's so exciting about David Mills' technology. It is the first thing I've seen in renewable power that can both meet the utilities requirements and meet the cost targets to be competitive and spread rapidly.
JONATHAN HOLMES: The potential for solar power in the vast deserts of Australia is almost unlimited. But David Mills has no plans to build here yet - not until the energy policy changes. "Neither solar thermal, nor any other low-emission technology", he says, "can compete with the artificially low price of Australian coal".
DR DAVID MILLS, CHAIRMAN, AUSRA INC.: Right now they're running coal plants, really at the marginal cost of the fuel, in Australia, not planning for the future and not factoring in the cost of new coal plant in that price. And, it means that a nuclear plant cannot compete with three cent coal, coal generation, a carbon sequestration coal plant cannot compete with that. So to get any of these clean technologies in, you're going to have to have a new price structure for clean energy.
JONATHAN HOLMES: For 10 years, the Howard government has stubbornly resisted putting a price on greenhouse gas emissions, until the rest of the world agrees to do so too. But by last year, more and more voices from the business world - including the energy industry - were urging it to change its mind.
BRAD PAGE, CEO, ENERGY SUPPLY ASSOCIATION OF AUSTRALIA: Our association, representing more than 40 electricity and downstream natural gas companies, does now hold the position that we think that carbon and greenhouse gas emissions do need to be priced and we firmly believe that the way that you achieve least cost abatement is to actually be able to then trade in those emissions.
JONATHAN HOLMES: Last December, the government executed a classic U-turn.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: Well, the response is that I've got an open mind on carbon trading, and that I'm looking forward to the results of the submissions that have gone to the Prime Minister's Task Group.
JONATHAN HOLMES: At the end of May, the Prime Minister's Task Group will make recommendations on a possible emissions trading system. The mining companies, the aluminium industry and the generators - the groups that would suffer most from the imposition of a significant price on carbon emissions - have representatives on the Task Group. The renewable energy industry does not.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: They have already received massive support from this government and they have had every opportunity, and I'm sure they've taken it, to make submissions to that task group to put their argument strongly, to argue them based on fact, not emotion, to argue them in a way where their facts stack up.
JONATHAN HOLMES: But the industry is worried. It's likely that the Task Group will recommend the introduction of a national carbon trading system, initially at least, that puts a low price on carbon emissions well under $20 per tonne of carbon dioxide. That wouldn't be enough to make renewables competitive.
DR ADRIAN WILLIAMS, CEO, GEODYNAMICS LIMITED: Wind, solar, biomass, those sorts of technologies would not be competitive with a tax as low as $15 - $20.
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: So what we are talking to the Government about is an emissions trading scheme alongside a market mechanism that continues to deliver an incentive to any renewable energy project or other clean energy or low emissions project.
JONATHAN HOLMES: So you need emissions trading plus?
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: Absolutely.
JONATHAN HOLMES: Though it's short on hard numbers, the Federal ALP says that it will give extra support to renewable energy.
PETER GARRETT, SHADOW MINISTER FOR CLIMATE CHANGE, ENVIRONMENT AND HERITAGE: We're committed to the establishment of a national emissions trading scheme that works effectively and that succeeds in its actual, necessary role and task which is to start seeing emission reductions happen. And we're committed to a mandatory renewable energy target which is sufficient to enable renewables to do the kind of job that they can do in reducing emissions.
JONATHAN HOLMES: Both at the same time?
PETER GARRETT, SHADOW MINISTER FOR CLIMATE CHANGE, ENVIRONMENT AND HERITAGE: No question about that.
JONATHAN HOLMES: But the coalition's hostility to higher renewable energy targets hasn't changed. What the industry fears most is that the Howard Government will present the states with an ultimatum: if you want national emissions trading, get rid of your 'Mickey Mouse' schemes - the state-based mandatory renewable energy targets.
SUSAN JEANES, CEO, RENEWABLE ENERGY GENERATORS AUSTRALIA: Well, that will collapse clean energy industry in Australia and it will ensure that we do what we are criticised for doing now which is bringing in imported technology forever.
JONATHAN HOLMES: For the Government, reducing emissions - and encouraging expensive renewables - comes second to maintaining the competitiveness of Australia's established export industries.
IAN MCFARLANE, MINISTER FOR INDUSTRY, TOURISM AND RESOURCES: In my opinion, a scheme can or can't work because it does or doesn't keep jobs in Australia. If we just simply impose a scheme in Australia that disadvantages jobs and industry in Australia, then we might as well just ship jobs offshore.
JONATHAN HOLMES: But Vinod Khosla warns Australia that if it neglects renewables in favour of clean coal, it may find that it's backed a losing horse.
VINOD KHOSLA, KHOSLA VENTURES: Most of the attempts at clean coal are half-hearted and very far away. I suspect, when we get there, we will find those technologies are very expensive. And I believe if you're going to do something about climate change, we need technologies that can be more cost-effective than clean coal technologies. And solar thermal is one of the most promising areas to do that. So I encourage everybody, whether it is the Department of Energy in the United States, or the Australian Government, to invest in these alternatives, at least as much as in clean coal technologies.
JONATHAN HOLMES: According to the Energy Supply Association of Australia, increasing the current federal target for renewables tenfold need not unduly strain the Australian economy, or overstretch our wallets.
BRAD PAGE, CEO, ENERGY SUPPLY ASSOCIATION OF AUSTRALIA: If you were to have a 20 per cent renewable target by 2020, across the board for the whole of Australia, then you're probably going to add somewhere around 10 per cent to the production cost of electricity, so that would translate into, maybe, 4-6 per cent at the retail end.
JONATHAN HOLMES: If it helps, however slightly, to make a planet that's liveable for their children, a rise of 6 per cent over the next dozen years might not seem, to most Australians, such a dreadful price to pay.