Australian Prime Minister Malcolm Turnbull, once an advocate for carbon-friendly policies, is turning back the clock by reverting to coal to meet rising power demand and reduce energy costs.
Turnbull announced government plans in early February for the construction of new generation coal-fired power plants and the launch of a US$3.8 billion infrastructure fund dedicated to the development of so-called “clean coal” initiatives.
The proposed new plants are being billed as cleaner, safer and more efficient than the country’s existing polluting coal plants, many of which are scheduled to be decommissioned in coming years.
Coal is a deeply divisive and emotional issue in Australia, where a strong and well-organized environmental lobby has successfully promoted the use of more renewable energy sources and galvanized protests against polluting plants.
The coal lobby, on the other hand, points to the many jobs the mines and plants create. Yet Turnbull’s plan for “ultra super critical” coal-fired power stations is arguably out of step with private sector trends.
Several local energy companies, including AGL, operator of the 2,200 megawatt Loy Yang brown coal power plant in Victoria, have announced they will decommission their existing power stations, as they transition to natural gas and other cleaner fuel sources.
Australia’s official renewable energy target is for 20% of the country’s energy mix to come from renewable sources such as solar, wind, geothermal and wave by 2030.
The transition is being driven in large part by the private sector, with local banks and overseas renewable companies such as China’s Goldwind and Spain’s Acciona making substantive investments across a range of innovative renewable sources.
France’s Societe Generale, an investment bank, recently committed US$38 million to a hybrid solar-hydro power plant in the northeastern state of Queensland.
The state boasts more than 3,000 energy producing hours of sunshine per year and has over half a dozen solar projects set to come online by the end of this year with government support. A private project near Perth on the country’s western coast, meanwhile, has started to harness the energy of waves in the Indian Ocean to produce power.
The transition to renewable energy sources, however, has become politicized by coal-friendly politicians, including from Turnbull’s ruling Liberal Party. They argue renewable energy requirements have pushed up power costs to the detriment of households, investment and industrial competitiveness.
Coal advocates seized on freak storms in December that caused a dangerous and unprecedented power blackout in South Australia as indication that renewable sources were unreliable. (Independent findings have not substantiated these claims.)
Australia is the world’s largest exporter of coal, with the majority of its shipments destined for Asia. Currently three times more of the fuel is exported than consumed domestically.
According to the Australian Mining Atlas, a federal government publication, the country has more than 43 billion tons of recoverable coal, representing the world’s fifth-largest resource pile and 7% of the world’s recoverable black coal. Much of the exports to Asia are metallurgical coal used to produce steel rather than power.
Currently around three-quarters of Australia’s electricity is coal-fired, though natural gas use has been growing in several states. Whether Australia’s power prices are unusually high, as coal-friendly politicians in Turnbull’s Liberal Party have recently blamed on the shift towards more renewable use, is debatable according to international price comparisons.
The Australian Energy Council, an energy business trade group, wrote in April last year that “Australia’s power prices, at equivalent purchasing power exchange rates, were lower than the OECD average of 23.03 US cents per kilowatt-hour.
The study also showed that Australia’s 2014 electricity prices were low by overall international standards. More recent estimates, including from Green Energy Markets, an environmental intelligence advisory, put average Australian power prices at between 25 to 30 US cents per kilowatt-hour.
Global coal prices have recently rebounded strongly after a downturn in 2015 that resulted in the mothballing of many Australian mines. Glencore, one of Australia’s largest coal producers, has seen its shares triple in value from under A$100 (US$77) in early 2016 to over A$300 at present, according to Australian Stock Exchange statistics.
Stanmore Coal made headlines in 2015 when it bought Rio Tinto’s shuttered Isaac Plains mine in Queensland for a nominal A$1 (0.76 US cents). The company started shipping coal from the mine to South Korea in May 2016 and posted a A$4.7 (US$3.6 million) million profit by year’s end.
With mothballed mines coming back online, Turnbull’s so-called “clean coal” initiative aims to continue using the carbon-emitting fuel for power production. In a publicity stunt in parliament on February 9, his Liberal Party treasurer Scott Morrison passed around a lump of coal for MPS to stroke and touch.
“This is coal, don’t be afraid, don’t be scared,” Morrison said. But in picking a fight with environmentalists and businesses pushing for more carbon-friendly renewable energy use, it is Turnbull’s increasingly wobbly government that likely has more to fear.