When the power went out in South Australia in September, linking renewable energy to concerns about electricity reliability, it lit the fuse on something unthinkable only a short time before — a return of coal.
As governments grow frustrated by tight gas supplies because of new exports and moratoriums on exploration, the numbers are being done on a new generation of supercritical coal plants of the sort being built by the thousands overseas.
In what has become a pincer movement on renewables, Energy and Environment Minister Josh Frydenberg has been hammering state governments to abolish parochial renewable energy targets and lift moratoriums on conventional and unconventional gas exploration. Mining Minister Matt Canavan has followed up with calls that Australia stick with coal.
By all reasonable projections, coal will remain the backbone of Australia’s, indeed the world’s, electricity supply for decades to come. With the debate framed, Malcolm Turnbull said Australia should be a world leader in demonstrating that carbon emissions can be lowered by replacing ageing electricity generators with new technologies to produce cleaner coal.
As the world’s largest coal exporter, it would be in Australia’s economic interest to do so.
Until now, few have publicly championed the construction of new-generation coal plants of the type being built to tackle pollution in China and to bring the first reliable supplies of electricity to many parts of South Asia and Africa.
New-generation coal plants are also being built in Germany and Japan as both battle to replace generation lost from nuclear.
And the number of projects could increase if US President Donald Trump delivers on his pledge to lift restrictions on US agencies funding new coal plants in other parts of the world.
Trump has highlighted gas and clean coal as the backbone of his energy policies, designed to reduce costs for manufacturing and break the US dependence on oil supplies from the Middle East.
The new-generation, high-efficiency coal plants produce half the carbon dioxide emissions of existing ones, making them comparable with gas.
If the emissions can be captured and stored, they are 90 per cent more efficient than the plants reaching the end of their productive life around the country.
It’s fair to say former industry minister Greg Hunt raised the blood pressure of conservation and renewable energy groups when he offered aluminium company Alcoa access to low-interest renewable energy funding to build an efficient gas plant to keep its Portland smelter.
The Greens said they would rather have Victoria’s largest export business shut down.
Canavan’s call for new coal plants to be considered has sent anti-coal campaigners apoplectic.
There are deep politics at play.
And all of this is rapidly emerging as an existential threat to the renewable energy target, which underpins investment in large-scale wind and solar projects.
The federal government is betting that electricity security and prices will be more electorally attractive than the allure of renewable energy for voters.
Canavan says research commissioned by the Turnbull government estimates Australia’s emissions would be cut by up to 27 per cent if the country’s coal-based power general ran on ultra-supercritical technology.
Research carried out by the federal Department of Industry, Innovation and Science shows emissions would be reduced even further — by up to 34 per cent — if the technology in development was adopted across Australia.
Canavan says not enough emphasis has been put on the technological developments occurring in coal and gas-fired power.
Australia’s reluctance to consider the new coal technology is not shared by other parts of the world.
The latest world outlook from the International Energy Agency has tipped annual Australian coal production to rise from 408 million tonnes two years ago to 467 million tonnes in 2040.
Slowing demand for coal in Europe and the US would be offset by increased demand in Asia and the developing world.
According to the IEA, this would fuel $104 billion worth of investment in coal supply in Australia to 2040, to cater to the expanding Asian demand.
The Minerals Council of Australia says there are more than 725 high-efficiency, low-emissions plants already in operation in East Asia alone.
A further 1100 plants are under construction or in the pipeline.
The IEA Clean Coal Centre says China’s embrace of HELE technologies has already reduced its annual emissions by 450 million tonnes of CO2.
“With HELE coal technologies such as clean as gas plants, countries accounting for nearly half of global C02 emissions are deploying these technologies to meet their emissions targets under the 2015 Paris Agreement,” the IEA says.
The IEA 2016 Outlook says coal generation is the most affordable energy option in East Asia and would remain competitive in 2025.
Even in China, which has committed to building renewable energy equal to the US electricity supply, coal will continue to provide more than half of the energy needs. A new five-year plan for electricity released last week by the National Energy Administration in China says coal-fired power capacity will rise from about 900 gigawatts last year to as high as 1100 gigawatts by 2020.
China will increase non-fossil-fuel sources from about 12 per cent to 15 per cent of the country’s energy mix over the same period.
The Minerals Council says it is “simply common sense” that new coal technologies be considered as part of Australia’s efforts to meet its emissions reduction targets while maintaining affordable and secure energy supply.
“If Australia ignores the ability of new super-efficient coal generation to provide affordable, baseload energy with a sharply lower carbon footprint, then the costs of our energy transition will be higher and the reliability of our energy system will be lower,” the Minerals Council says.
Even if this were so, however, existing energy regulations would make it difficult to consider building a new baseload coal plant of any kind. This is because of the favourable treatment given to renewables in dispatching to the grid.
Wind and solar have no fuel running costs and make their money from subsidies received for electricity supplied to the grid, so they can bid into the market at effectively zero cost. Fossil fuel plants must cover running costs from money received. Coal plants work best when they are running at full capacity all the time and lose efficiency if they are expected to vary output to back up renewables.
It is for this reason that new coal plants and a bigger renewable energy target are incompatible.
This is why green groups argue any new coal-fired power station would be considered very unlikely to operate at sufficient capacity over its lifetime to justify the cost.
Such groups believe the market demand for renewable energy would likely see most new-generation coal stations operating as back-up rather than baseload.
“If you are serious about integrating climate and energy policy, you have to have a plan to transition to near or net zero emissions before 2050,” Climate Institute chief executive John Connor says.
“Building new ultra-supercritical coal (USC) now with lifetimes beyond then is in direct conflict with that. Indeed, if we replace all our power plants with USC, we would have massive, high-cost disruption for little outcome on national emissions — barely moving the dial on average emissions intensity of our electricity system.’’
The impact on Australia’s overall emissions would be even less because electricity represents only about a third of total emissions. To reach the government’s current 2030 target of 26 to 28 per cent by 2030 solely through changes to the electricity sector, electricity emissions would need to fall to close to zero.
Green groups say replacing existing coal stations with slightly cleaner coal stations might cut power emissions by 27 per cent but it prevents emissions falling any further in the future.
The trump card is that investors would consider any new coal stations far too risky.
This position is supported by Australian Industry Group national policy adviser Tennant Reed.
“New coal-fired generators are unlikely to bring prices down because they require even higher prices to be bankable; they are a poor fit to stabilise the grid because they are less flexible than gas and more expensive to operate as back-up; and their long life and limited ability to reduce emissions sits badly with Australia’s commitments to steep emissions reductions in coming decades,” Reed says.
There is another way to look at it, however. The Minerals Council says it is evident there will be changes to Australia’s energy generation over coming decades to replace ageing generation.
“But as we renovate our system we must ensure both grid stability and to keep energy costs as affordable as possible,” it says. “If we fail to do so, we will reduce living standards, de-industrialise our economy and limit opportunities for future generations.
“We do not argue that all coal plants should be replaced by another coal plant. No energy source should be guaranteed market share, but the option of HELE coal must be on the table.”
The mining industry believes coal is the most competitive option available.
Analysis by the World Coal Association indicates that replacing subcritical coal generation with supercritical coal technology saves CO2 at a cost of about $25 a tonne in southeast Asia, $15 a tonne in the rest of non-OECD Asia and just over $40 a tonne in Africa.
“It can deliver baseload power and it can deliver 50 per cent lower emissions with the promise of further substantial emissions reductions with the deployment of carbon capture and storage technologies,” the council says.
Various studies have assessed the cost of avoided emissions for the large scale renewable energy target at about $80 a tonne and the cost of small-scale solar and wind at about $250 to $640 a tonne. These numbers do not include the integration costs of increasing the renewable generation as you move towards 40 per cent of renewable generation.
Analysis by BAEconomics estimates integration costs in the range of $37 to $53 per MWh when wind penetration reached between 30 and 40 per cent. Renewable energy supporters say the cost of wind and solar will continue to fall and that advances in battery storage will make energy supplies more reliable and allow a greater penetration of renewables on the grid.
Given the decades-long horizon, it is inevitable improved technologies will provide many answers, and some surprises.
Carbon capture and storage is making headway but still requires high levels of government support to achieve the critical mass needed for widespread adoption.
The “moonshot” is that the billions of dollars being poured into research of nuclear fusion will pay off. It could bring a new age of abundant, reliable and emissions-free power. Fusion energy leaves no radioactive waste. It is safe, unlike (nuclear) fission energy.
Fusion research is taking place at two levels. The three-decade-long International Thermonuclear Experimental Reactor project has fresh impetus. Equally promising are results from a growing number of privately funded groups researching smaller scale fusion plants that, if successful, could be game-changers and dramatically speed deployment.
Australia recently joined ITER, which Australian Nuclear Science Technology Organisation chief executive Adi Paterson says is a “landmark in the history of nuclear science in Australia”.
“Fusion energy holds the promise of a large-scale and carbon-free source of energy based on the same principle that powers our sun and stars,” Paterson says.
“If achieved at a large scale, it would answer some of the world’s most pressing questions relating to sustainability, climate change and security.”
Carbon capture and storage and fusion energy are not yet proven but given the 40-year horizon for decarbonisation, they hold the promise of an alternative pathway.
If fusion power becomes a reality (potentially feasible within a decade) there will be little need for other types of power generation.
This is why plenty of people, Bill Gates included, say money is better spent now on research and development rather than inferior technologies that are proving to be unfit for purpose.