OPINION: Rejecting clean coal is like scoring own goal
Summary: The announcement of plans relating to the closure of the Liddell power station brings into sharper focus the need to efficiently deal with the wider question of coal plant closures expected over the next two decades.....
These closures are due to ageing assets. The goal of Australia’s energy and climate policy framework should be to deliver reliable energy at least cost while meeting the nation’s emissions reduction objectives.
To achieve this goal, we should apply a technology-neutral approach to all energy sources while avoiding subsidies, quotas or other non-market-oriented interventions.
After all, the track record of governments attempting to pick winners or mandate technologies — whether through regulatory intervention or by handing out subsidies — is not an auspicious one.
The most economically efficient and socially beneficial outcomes are achieved when governments set the policy goals and then allow markets to deliver the investment, innovation, technologies and business models needed to achieve those goals at the lowest cost.
So if we cannot extend the life of existing capacity, it is imperative that all energy technologies are allowed to compete on their merits when it comes to replacing retiring capacity.
The challenge is a big one. In the medium term, it’s estimated between 2012 and 2030 almost 40 per cent of our low-cost baseload plant is likely to retire.
Over the past decade Australia has moved from having some of the lowest to some of the highest energy prices in the developed world.
As Goldman Sachs recently noted, wholesale electricity prices are forecast to be $120-$130 megawatt hour in the medium term — an increase of 20-30 per cent on current expected prices.
This is hurting the international competitiveness of Australian businesses — including the mining operations which are significant energy users — while also affecting families struggling to pay ever-increasing electricity bills.
According to recent figures from Essential Research, the proportion of Australians who want power costs kept down as an energy policy priority has increased from 28 per cent to 37 per cent between June and December this year — a higher priority than either maintaining network reliability or reducing emissions.
And a recent KPMG report on energy poverty also described the “devastating” impact of energy prices as a fixed proportion of spending for low-income households, with particular impact on indigenous communities as well as poor households with big families in public housing estates. As a country, we should be focusing on how to reduce energy costs, not just limiting increases, as well as reducing emissions and improving reliability.
And on all three goals of cost, reliability and emissions, there are good reasons why high-efficiency low-emission (HELE) coal power should be part of the mix of energy technologies competing to replace retiring baseload power.
AGL’s assessment of its options for Liddell considered a suite of renewable, gas and batteries responses and costed this at $83 per MWh.
In comparison, the COAL 21 Fund and the Minerals Council of Australia has commissioned an independent study from Solstice Development Services and GHD which showed:
• USC or HELE black coal is the lowest-cost generation option at $40-$78 per megawatt hour in (2017 prices) on a long run marginal cost basis, which is equivalent to the LCOE measure.
• Other synchronous generation had higher wholesale costs, including combined cycle gas at $69-$115 per MWh and open cycle gas at $179-$430 per MWh.
• Variable renewable energy, which is not available 24 hours a day, had higher costs with wind at $64-$115 per MWh. At an assumed average capacity factor of 37 per cent for wind, it also requires “firming” or back up generation to emulate baseload performance.
• In the longer term, the opportunity for viable carbon capture and storage options (which would reduce emissions by up to 90 per cent) is costed at $69-$165 per MWh.
HELE coal is well placed to deliver on this and remains the cheapest form of new dispatchable electricity in Australia with the benefit of much lower emissions than older subcritical coal technology.
HELE coal-fired plants produce more electricity using less coal by harnessing new generation technology and materials. HELE plants operate at higher temperatures and air pressure to more rapidly convert water to steam, significantly improving the efficiency of boilers and turbines which saves fuel and reduces carbon dioxide emissions by up to 50 per cent.
It’s not a new technology — Japan began adopting these technologies in the 1990s — and Australians are entitled to ask themselves this: if it’s good enough for other advanced economies why aren’t we using HELE to lower costs and reduce emissions?
Turning our back on these economic and environmental benefits for ideological reasons rather than on rational policy grounds would be a big political own goal for Australia.