The recent coordinated push for new coal-powered electricity generators in Australia comes as the industry is on its last legs.
The intensified push for government handouts can be seen as a last-ditch attempt for the coal industry to squeeze some money out of the unwise investments it made at the end of the mining boom.
Here are the facts and figures that point toward that conclusion:
Illustration: Lance Liu
The coal industry knows that to stop runaway climate change, all coal-powered generators need to close
Australia joined 174 countries and the EU in 2015 in signing the Paris Agreement. In doing so, Australia agreed to do its part in keeping the global temperature rise “well below” 2°C. It also commits countries to achieving net-zero emissions “in the second half of this century.”
That agreement, designed to stop runaway climate change, requires that all of Australia’s coal-fired generators close.
According to the International Energy Agency, Organisation of Economic Co-operation and Development countries such as Australia need to shut down almost all of their coal-fired power stations by about 2035, and the rest of the world will need to phase out coal power by 2050, it says.
With coal-fired power stations taking up to a decade to build, and designed to last 30 or 40 years, building new ones now is obviously inconsistent with those commitments.
In particular, Australia has committed to reducing its emissions by 26 percent below 2005 levels by 2030 — a commitment that is not strong enough to limit global warming at 2°C and will need to be “ratcheted up.”
However, the Australian government recently released projections of the country’s carbon emissions, showing that current policies are going to cause emissions to rise by 2030, not drop, leaving Australia overshooting that commitment by a long way.
In producing those projections, the Department of Environment and Energy assumed that 2,000MW of coal capacity would retire between 2020 and 2030, and that the generation would be taken up by existing coal and some gas (equivalent to about two large power stations).
If, instead, even more coal is built, the already rising emissions would get even worse.
Demand for coal for electricity has been dropping
Meanwhile, even before coal generators begin to close, the demand for their power has been dropping as renewables enter the mix.
According to data from the Office of the Chief Economist, the demand for coal-generated electricity has dropped by more than 15 percent in the past eight years.
Moreover, New South Wales budget papers show that, in that state, where no coal power stations have shut, the government has recently downgraded its projections for domestic consumption by a whopping 20 percent.
Last year it estimated domestic consumption would be 30 million tonnes a year for the next five years. This year it changed that estimate to just 24 million tonnes each year.
In response to the new figures, New South Wales Greens’ energy spokesman Jeremy Buckingham said: “Coal power has been in decline for nearly a decade and it is clear that no one is going to build a new coal-fired power station anywhere in Australia. Coal is the whale oil of the 21st century and should be phased out as rapidly as possible for the sake of the climate.”
New coal is the most expensive form of energy
While the proponents of coal talk about coal power being “cheap and reliable,” they are wrong on both fronts.
According to Bloomberg New Energy Finance, the cost of energy from a new coal power plant would be A$134 to A$203 (US$102 to US$155) per MWh.
That is more expensive than wind, solar or highly efficient combined-cycle gas (costing A$61 to A$118 per MWh, A$78 to A$140 per MWh and A$74 to A$90 per MWh, respectively).
Coal is not ‘reliable’ anymore
Whether or not an energy source is “reliable” depends on what you are relying on it for.
The only people who still think we need the old-fashioned sort of “baseload power” that coal provides — power that is always running regardless of whether you need it — are those in the coal industry. Coal power stations are slow to start up and so cannot respond efficiently to fluctuations in supply and demand.
Old energy systems were built assuming coal would always be running. It was the “baseload” energy and other forms of energy such as gas that would switch on to satisfy the peaks in demand.
In a world where wind and solar energy can produce a lot of energy, but not constantly, baseload needs to be replaced with flexible power that can smooth out the spiky energy supply created by variable sources of renewable energy.
In the short term, that can be gas, but in the longer term, to stop runaway climate change, that service will need to be supplied by renewable sources such as battery storage, hydro, solar thermal with storage or geothermal.
When competing with renewables, coal generators end up burning costly fuel, even when they are giving the electricity away for free.
Leonard Quong from Bloomberg New Energy Finance said when releasing a recent report: “In the grid of the not-too-distant future, coal’s baseload operation becomes a curse, not a blessing.”
In addition, UK’s National Grid chief executive Steven Holliday recently said: “The idea of baseload power is already outdated.”
The coal mining industry has a backlog of projects it cannot get off the ground
According to the Office of the Chief Economist’s most recent Resources and Energy Major Projects Report, there are 37 major coal mining projects that are currently in the works.
However, that number has dropped since the last report a year ago and, in that time, no new projects have moved along the pipeline from “committed” to “completed.”
If all the projects still listed as being actively pursued were to reach completion, they would produce almost 300 million tonnes of coal each year.
That list is a “salient reminder, if one is needed, that vast amounts of proposed new coal capacity, much with most approvals in place, remains waiting for a favorable market,” Energy and Resource Insights principal researcher Adam Walters said.
Most of those projects were begun during the mining boom, when commodity prices were high. With prices depressed, they have stayed on the books, but are not progressing, he said.
The push for rejuvenating the coal industry with government subsidies is the sort of thing that could help the industry get some of these projects back on track, Walters said.
The global coal industry recently saw its biggest player, Peabody, go bankrupt in the US. If companies are forced to take write-downs for these projects by admitting they will never go ahead, it could mean the end for some of the companies.
At his National Press Club address last week, Australian Prime Minister Malcolm Turnbull appeared to point to this as the reason he is now looking to subsidize the most expensive and dirtiest form of energy, saying that it could help our mining industry.
“As the world’s largest coal exporter, we have a vested interest in showing that we can provide both lower emissions and reliable baseload power with state-of-the-art, clean, coal-fired technology,” he said.
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