FRANK JOTZO. New coal plants wouldn’t be clean, and would cost billions in taxpayer subsidies.

Following a campaign by the coal industry, Prime Minister Malcolm Turnbull has argued for new coal-fired power stations in Australia. But these plants would be more expensive than renewables and carry a huge liability through the carbon emissions they produce.  

Major Australian energy companies have ruled out building new coal plants. The Australian Energy Council sees them as “uninvestable”. Banks and investment funds would not touch them with a barge pole. Only government subsidies could do it.

It may seem absurd to spend large amounts of taxpayers’ money on last century’s technology that will be more costly than renewable power and would lock Australia into a high-carbon trajectory.

But the government is raising the possibility of government funding for new coal plants, with statements by Deputy Prime Minister Barnaby Joyce, Treasurer Scott Morrison and Environment and Energy Minister Josh Frydenberg. The suggestion is to use funding from the Clean Energy Finance Corporation. For this to happen, presumably the CEFC’s investment mandate would need to be changed, or the meaning of “low-emissions technologies” interpreted in a radical way.

It should come to nothing, if minimum standards of sensible policy prevailed.

But an ill wind is blowing in Australia’s energy and climate policy debate. The situation in parliament is difficult, and the Trump presidency is giving the right wing in the Coalition a boost.

Definitely not ‘clean’

Proponents of new coal plants call them “clean coal”. They have appropriated a term that normally means burning coal in power stations with carbon capture and storage, a technology that filters out most of the carbon dioxide. But this is expensive and has made little progress.

Turnbull and others are simply suggesting Australia build the latest generation of conventional coal-burning plants. They are not clean – merely marginally less polluting than the old plants running now.

A new high-efficiency coal plant run on black coal would produce about 80% of the emissions of an equivalent old plant. An ultra-supercritical coal plant running on black coal emits about 0.7 tonnes of CO₂ per megawatt hour of electricity, or about 0.85 tonnes using brown coal. That is anything but clean.

For comparison, typical old “dirty” black coal plants in operation now emit around 0.9 tonnes, so the improvement from replacing them with the latest technology is not large. Gas plants produce between 0.4-0.6 tonnes, much less than the suggested new coal plants. Gas has the added benefit of being able to respond flexibly to demand. A plant with carbon capture and storage might emit around 0.05 tonnes, and renewables zero.

The Australian grid average right now is around 0.8 tonnes and gradually falling. New coal would tend to keep that average higher over the long term.

A single typically sized new coal plant could blow out in the order of 5 million tonnes of CO₂ each year – about 1% of Australia’s current annual emissions – and would have an expected lifetime of 40-60 years. It would also pollute the air locally, as all coal plants do, causing damage to people’s health.

If we wanted to make up for the extra coal emissions by doing more in industry, transport or agriculture, then this would come at a cost in those parts of the economy. In-depth research has shown that decarbonisation of Australia’s economy needs to have zero-carbon electricity supply at its core.

What if we don’t care about the climate?

Building coal power plants is expensive. The average lifetime cost of producing power with ultra-super critical plants in Australia is estimated at around A$80 per megawatt-hour. This assumes financing is available at standard interest rates and that the plant runs at high capacity.

Given the risk that the plants will be liable under stricter carbon limits in the future, the financing costs are bound to be higher, probably north of A$100 – and may be as much as A$160. If the plant is not fully utilised, as is already the case for existing coal plants, average costs will be even higher.

By comparison, wind farms now get built at an average cost of A$75 per megawatt-hour, and solar parks at around A$110. Both are expected to come down to perhaps A$50 by 2025. New coal plants take many years to prepare and build, so 2025 is the relevant comparison.

In fact, the overall comparison costs for renewables are even lower. This is because wind and solar built in 2025 would be replaced in the 2050s with even cheaper systems.

There are extra costs associated with wind and solar – for instance, through pumped-hydro storage or more gas-fired power plants to balance supply. But these costs are far less than the underlying cost of renewables.

So renewables including system integration costs will be cheaper than new coal plants, perhaps by quite a margin. Let’s say, very conservatively, that renewables are A$20 per megawatt-hour cheaper. For the coal plant that’d be an extra cost of A$150 million per year, or A$6 billion over 40 years. The extra cost could be much higher if the plant was retired before the 2060s or not run at full capacity.

The subsidy required would be potentially billions of dollars for each plant. That’s billions of dollars from the taxpayer or electricity user, in order to supply power with high carbon emissions that are then locked in for half a century. It should not happen in a country that prides itself on rational economic policy.

Instead, government should set its sights on the long-term economic opportunities for Australia in a low-carbon world, and chart a path for the transition of the energy system.

Turnbull referred to Australia’s position as a coal exporter. But a revolution is under way in energy technologies. While coal will continue to be used in existing plants, the times of growing coal use are over. Already more than 70% of the world’s annual power sector investment goes to renewables.

Australia is lucky in that there are no limits to the amount of renewable energy that could be produced. New industries can be built around it. We should invest in the industries of the future, not sink more money into the technologies of last century.

Frank Jotzo is Director, Centre for Climate Economics and Policy, ANU. This article was first published in The Conversation on February 2, 2017.

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5 Responses to FRANK JOTZO. New coal plants wouldn’t be clean, and would cost billions in taxpayer subsidies.

  1. Max Bourke says:

    Jotzo is a first rank researcher so it now requires a serious investigative journalist to dig into how much and by what means is big coal buying the sort of inlfuence it has obtained? Otherwise taxpayers are going to have decades of pain!

  2. Laurie Mills says:

    Australia can move to 100% renewable energy by installing 20 Gigawatts of pumped-hydro storage. No coal or gas is needed!

    The Snowy Mountains Scheme Tumut 3 has 1.6 Gigawatts of pumped hydro storage (8% of the requirement) and has been operating reliably since 1973.

    There is an excellent ABC Science Show Podcast on it here:

    http://www.abc.net.au/radionational/programs/scienceshow/pumped-hydro-for-the-cloudy-windless-days,-and-nights/7767724#transcript

  3. derrida derider says:

    The really silly thing is that the Government is doing this because it thinks it will maintain demand for coal. But the emissions intensity of ANY coal plant is directly proportional to the amount of carbon it oxidises – by definition a more efficient one burns less coal for a given MW.

    So so-called “clean” coal (ie not including CCS) must reduce coal demand in direct proportion to its cleanliness! If in fact we can meet our 2030 targets with clean coal then ipso facto we will have done it by burning less coal – with exactly the same effects on coal mining as achieving the target any other way.

  4. Dog's Breakfast says:

    Hard to believe, isn’t it? Someone should tell Malcolm that we also have plenty of sunshine. And wind, come to think of it.

  5. PeterF says:

    Frank you are being too kind to the coal proponents.
    Around the world today contracts are being signed for solar at A$32-50, wind around US$45-65 even offshore wind is as low as $75 and the rate of decline in costs is continuing so by 2025 we can expect large scale renewables for about $30/MWhr (we don’t need any offshore wind).

    If we follow poor little Scotland’s example and install one wind turbine a day by 2025 we can have 18GW of wind and by then we will have about 14GW of solar so on windy clear spring and autumn days we will not need any thermal generation at all.

    Also by then we will probably have 2-3GW of behind the meter and distribution based storage as well as 8GW of hydro and 2GW of biomass waste to energy etc. If we want to we can add another 3GW of deferred load through power to heat etc

    That is enough to carry you through a mild night on the weekend so with gas covering the peak peaks and the best old coal plants still running, getting more than 65% utilisation on your new coal plant is going to be a stretch. In a drought year you might hit 80% but in a flood year with lots of hydro and a mild summer it might be down to 50%. Thus as you say the breakeven is more like $160+ inflation.

    Feeding all that into a spreadsheet and allowing for current coal prices and capitalised construction costs. The subsidy or price increment will be $700-800m per power plant in the first year and increasing every year by approximately double the rate of inflation. In fact even if the fuel was free a new coal plant can’t compete

    Laurie says we need about 20MW of pumped hydro. With demand response, behind the meter batteries and some despatchable renewables like biomass, landfill gas etc. we probably only need 6-10 GW of pumped hydro

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