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IEA says Australia’s coal plans don’t match climate realities

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thermal_coalThe International Energy Agency has again questioned Australia’s commitment to extract thermal coal from huge new reserves in Queensland, saying the economics of these remote projects are “increasingly questionable”.

In its latest World Energy Outlook, the conservative Paris-based organisation says it is clear that thermal coal demand in China peaked three years ago and is declining, and the fate of new Australian thermal coal provinces are increasingly dependent on what happens in India.

Under the IEA’s central policy scenario, which assumes that the world does nothing more to address climate change, coal demand in India is expected to rise.

But if the Paris climate change agreement to keep average global warming below 2°C is met, then the IEA says India’s power system mix will change rapidly: Solar will become the biggest single source of electricity by 2035, and the share of unabated coal-fired generation will shrink from more than 75 per cent now to just 7 per cent.

iea projections scenarios

This graph above illustrates the difference in effort between the IEA’s central policy scenario (upon which the Australian government appears to rely) and the 450 Scenario that Australia and the rest of the world have signed up to as part of the Paris accord.

It is not the first time that the IEA has questioned the economics of the vast coal projects in the Galilee and Surat Basins.

Back in 2013, the IEA said low coal prices raised concerns about the economic feasibility of projects in the Galilee Basin and said “coal in its current form is simply unsustainable.”

Now, little more than a week after the Paris agreement came into force, the IEA’s analysis suggests that the only hope for Australia’s coal mines is if the world ignores that global pact.

But even then it has caveats. Coal imports, it notes, are politically unpopular in India and policy-makers – such as the country’s energy minister – have repeatedly stated their intention to reduce or eliminate coal imports.

And coal is now creating huge pollution issues in Indian cities, just as it did in China, which has now cut back significantly on coal use and all but halted imports.

“A scenario in which India successfully and persistently reduces its imports cannot be discarded,” the IEA says, even of its central “new policies” scenario, where no further action on climate change is taken beyond the pledges already made.

“In light of the declining import trend in China, the need to tap new deposits in Australia’s Surat and the remote Galilee Basins becomes increasingly tied to the trajectory foreseen for coal imports in India,” the IEA notes.

“A tapering of India’s imports would make the economics of remote projects that require infrastructure development increasingly questionable.”

In its 450 scenario, where the world does take action to limit warming to 2°C, the use of thermal coal in India power stations is dramatically reduced – falling to 10 per cent of total generation from its current levels of 75 per cent.

By 2040, renewable energy accounts for 57 per cent of total generation (solar 15 per cent, wind 15 per cent), despite the fact that overall demand will have tripled as the economy grows and all houses are connected to the grid.

Gas makes up most of the remainder. Around 130GW of fossil fuel capacity – almost entirely coal-fired generators – is retired by 2040.

Interestingly, because of the falling cost of solar, daytime prices will be below $30/kWh – far below current prices for coal power. Around one-third of the solar is located on rooftops.

Such a scenario, of course, is at complete odds with the Australian government outlook.

Its future energy plans are based on the Energy White Paper prepared by the Abbott government, under the auspices of former energy minister Ian Macfarlane, who now heads the mining lobby in Queensland. Despite supposedly framing an energy plan out to 2040 and beyond, it took no account of climate change.

Indeed, at the current climate conference in Marrakech, and barely one week after Australia ratified the treaty, energy minister Josh Frydenberg was lobbying US energy minister Ernest Moniz about the actions of big US donors to environmental groups in Australia fighting the Galilee projects.

The Coalition government – and the Queensland Labor government for that matter – argues that environmental groups are the biggest threat to the coal projects, and is introducing a series of laws in an attempt to combat their influence, including rules about their funding and spending, and curbs on their ability to take legal action.

iea generation fossil fuel 450

But as the IEA report illustrates, the biggest threat to the project economics are the realities of the global coal trade, and the need to combat climate change, and for India to maintain clean air in its cities.

“The lesson here for governments and investors is simple – that those who exit fossil fuels and embrace solar and wind will reap financial rewards and avoid major stranded-asset risks,” says Tim Buckley, senior energy analyst with IEEFA.

“This will remain so regardless of recent political upheaval in the US.

“In the unlikely event that short-term tailwinds for the US coal sector continue and a slowdown sets in on renewable energy deployment as a result of the new presidential administration, the IEA analysis shows that emerging economies are now well placed to assume global low-carbon technology leadership.”

The IEA view on coal is not the only embarrassment to the Turnbull government. As we reported on Wednesday, the IEA made a mockery of Australia’s scare campaign against renewable energy, saying it was likely that renewables would account for nearly 60 per cent of total electricity generation around the world by 2040.

The Turnbull government has argued that policies aiming for 50 per cent renewable energy by 2050 are “reckless” and unattainable. But the IEA trajectory shows that is exactly where a solar and wind-rich country like Australia will need to be.

If the world is to reach its ambition of capping global warming by 1.5°C, then the transition will need to be even quicker and all “unabated” fossil fuel generation will need to be retired by 2040.

Australia this week was ranked among the worst performing countries on climate change policies by at least two different independent analyses.

  

  • Chris Fraser

    If that’s wholesale $30/MWh then yes solar is a bargain.

    • Mike Dill

      As solar PV becomes even more prevalent and cheaper, the demand for electricity at a price higher than AU$0.15/kWh during the day will be minimal. At that price, very little coal is viable. As storage takes off, the evening peaks disappear, and even then coal and gas will be pressed. See what is happening in SA and guess that the remainder of AUS will be going the same way.

      • Rod

        Yes, we in SA have fallen behind a bit recently with residential PV. Not sure if that is due to the economy or aging population.
        Even so, at 20% – 30% of homes with PV the NEM Watch app has generation around 30% of total State generation during the day at this time of year.
        If we start to see community scale PV and business PV take off we will be exporting much more wind and importing less FF generated power from Vic.
        If we see more East, West installed PV the peaks can be pushed out further.

  • Keith

    Hi Giles,
    Not wishing to be a pedant, but it is important. The Paris agreement did not specify 2C. It specified substantially below 2C with a goal of 1.5C. This is what the Pacific Island nations convinced the world was needed. I thought the IEA had a plan to examine 1.5C, but perhaps they aren’t ready to face that (yet). It is very confronting especially for the coal industry.

    Also (sorry for pedantry again), Indian Minister Goyal has been quite explicit about India ceasing import of thermal coal within 3 years and he says he is on target.

    • Keith, you are quite right, and i thought i mentioned “well below” 2C somewhere. But the IEA scenario is based on 2C, so in fact if countries were to meet the paris target, then the impact on coal, and the uptake of solar and wind will be even more dramatic, and australia’s current policy position even more futile and self-defeating.

      • Keith

        Hi Giles,

        I’ve now read the IEA summary in which they mention briefly 1.5C and merely state that the prospect is too confronting to the fossil fuel industry, so they didn’t go further.

        Either it is time that the IEA addressed the current reality (goal of 1.5C and not 3C+) or they make clear that their reports do not have a bearing on the current situation.

        • Yes, it is extraordinary that the IEA’s “central scenario” is the one where temps rise by 3°C. Not sure who they trying to kid. Well, I do actually, but anyway …

  • Adam Smith

    Shouldn’t the IEA go and put that question to the Indian company Adani? It is not Malcolm Turnbull or Josh Frydenberg who are proposing to develop the Galilee mine, it is an Indian company with super critical power stations in India. Also, the QLD Labor government are the body who have approved the EA and Mining Lease and given it critical status. Think you will also find that the Indian government is seeking to stop import of coal for government owned power stations.

  • Kenshō

    “Coal imports, it notes, are politically unpopular in India and policy-makers – such as the country’s energy minister – have repeatedly stated their intention to reduce or eliminate coal imports.”

    What is India’s renewable energy target?

    • Ken Dyer

      Not only are coal imports unpopular in India (they have a 50 million coal stockpile at the moment), they are about to launch a $2billion renewable energy equity fund.
      https://cleantechnica.com/2016/11/17/india-will-launch-2-billion-renewable-energy-equity-fund/
      Not only that but India is about to award 1GW of wind capacity next month.
      https://cleantechnica.com/2016/11/17/india-will-award-1-gw-wind-capacity-next-month/

      The Adani mine is dead in the water. Why else would Aurizon write off its investment in the rail line to Abbott Point? This hoax is only being kept going because the Queensland Government is too gutless to tell it like it really is, and incur the wrath of the far right idiots who inhabit that part of the State. Any talk of jobs and growth brought about by the Adani mine is a lie.

      • Adam Smith

        A 50 million stockpile of coal would be burnt in India within about a month! The proposed Carmichael mine, as it is now proposed, will only produce 30 mtpa, which in currently only about 5% of the coal used in India annually and, based on their proposed doubling of domestic production will end up being about 2%! India is proposing an ambitious plan of 175 GW of renewables by 2030 from around 43GW now. That will still only represent 40% of power requirements, which means they are forecasting around 437 GW of energy demand by 2030. To put that into perspective the Australian NEM demand is currently around 18GW! So between now and 2030 India needs massive amounts of coal. After 2030 they still need massive amounts of coal.

        • Peter F

          That assumes that India’s energy per capita use climbs to something like peak western levels. There is no way that will happen because now a) Indian consumers cannot yet afford the profligate ways of the west and b) Whatever products they do buy from refrigerators to televisions, AC units and lighting as well as industrial products from machine tools to steel mills use about 1/3rd to half the energy per unit of output than the typical equipment installed in the west over the last 30-50 years.

          In any case 437 GW is a fantasy. Germany’s economy is much more industrialised than India’s and is 70% larger yet has peak electrical demand of 68GW

  • Geoff

    I suppose it is confounding for you Giles. How could Gina and Adani dream of developing the Galilee Basin without discussing their Business Plans with you?
    I mean surely Asani would consult you before buying access to Abbott Point.
    Australian quality coal will be generating electricity for decades to come in South Asia.
    CRIKEY. Australian coal and gas exports will be powering chunks of the world for decades.

    • Hooray!

    • Kenshō

      In psychology when people use the word “you” a great percentage of the content are “projections” of personal motivations and characteristics onto others… Qualities like self centredness, self importance and arrogance. What I heard is an analysis of global and country by country trends, nothing more.

      • Adam Smith

        And why is it Kensho that the personal attack is rolled out!

        • Kenshō

          If you look carefully Adam, there’s no personal attack rolled out. It’s left up to Geoff to decide what fits and what doesn’t. However this is typically what happens with “projection”. There’s usually an emotional charge, the person using the word “you” is usually unaware they could be reading their own motivations into others. On the other hand, when people are conscious of the mechanics of perception, conscious of their feelings, the tendency for projection is reduced. The way I called it is Geoff brought other motivations into the discussion that I really didn’t see evident. Can you see evidence in the article of Geoff’s claims?

          • Adam Smith

            However the tone of your comment is to infer that Geoff is self centred, self important and arrogant, which is interesting because that is what Geoff was inferring about Giles. If the IEA are reported accurately, they are barking up the wrong tree as it is not Australia that is developing the Carmichael Mine, it is a private Indian company. It is also the QLD Labor government that have approved the mine and given it critical status. Sure the Federal government can be said to be complicit by affirming the QLD governments approval, but in all of this the real issue to be addressed is the coal use by Indian power stations. The IEEFA, IEA, Clinton Foundation and all the parties throwing resources at this should look at why India has a differentiated COP agreement and what that will do for the environment and Global Climate change. In 20 years time, when we are all headed for temperatures greater than 2 degrees, the world will look back and realise that Carmichael was nothing in the scheme of things.

          • Kenshō

            Is your last sentence suggesting climate change is not human induced? I’m not clear of your orientation and worldview, so I went to look back over your previous comments and they’re private. This takes away from your credibility because it prevents me seeing you in a greater context. Are you a paid employee or do you have significant investments in fossil fuel? In the past when I had some spare cash, I had investments in Australian Ethical Investment. Worth considering:
            https://www.australianethical.com.au

          • Adam Smith

            Kensho, for your records, I believe in renewables and I believe fossil fuel use should eventually stop, limiting the impact to the environment and I invest in what makes money. You see, this is my point, why do you and others in this website have to go personal? Just play the ball not the man.

          • Kenshō

            No I genuinely asked questions. Am seeking you to speak for yourself. Fantastic you see a role for renewables, yet do you think climate change is human induced? With making money, Australian Ethical Investment has a triple bottom line – investments are based upon economic, environmental and social justice values and these are not in conflict. Investments which don’t consider the broadest context are vulnerable to all kinds of risks as a result of ethical factors being corrected in the future.

    • trackdaze

      Even adani has moved on and are building a solar manufacturing complex in india.

      Perhaps they could ship a few panels out to the gallilee basin?

      Good analysis below kensho

    • Chris Fraser

      Hope my banks and super funds keep right away from them. Geniuses.

    • nakedChimp

      Hey look, the FF shill is back.

  • Malcolm M

    The Liberal Party policy, upon which electors chose them, states “The Turnbull Government will double large scale renewable energy in Australia over the next four years.”

    Interesting that apart from the GoldWind development at Glenn Innes all other new wind farms are Labour initiatives, and so don’t count toward the goal of doubling large scale renewable energy.

    https://www.liberal.org.au/our-plan/protecting-our-environment

    • Adam Smith

      Ok Malcolm, lets have a look at the facts and history, it was John Howard’s Liberal government that introduced the RET in 2001. The RET remains Liberal policy and in the next 4 years the current renewable energy generation in Australia should increase from the current 4 GW (excluding hydro) to around 10GW. If it does not, then the Retailers will be penalised. So when you say Labor (not Labour) initiative, what are you talking about?

      • Malcolm M

        Apart from GoldWind, all other new wind farm developments are through reverse auctions of the Labour ACT government, which (as I understand from Reneweconomy) doesn’t count for the RET. New renewable investments through ARENA and the Clean Energy Finance Corporation could count as being delivered in this term of the Liberal government, but the government has tried to kill both.

      • So, the previous scheme, known as MRET, was indeed introduced by Howard government, and was killed by the Howard government in 2005 when Macfarlane decided it was “too successful”. The Labor government’s VRET tried to fill in the gap, but was not enough for Vestas and others to pack up and take their manufacturing elsewhere. The current RET was introduced by Labor, came into effect in 2009 and the current Coalition tried to kill it, and succeeded only in reducing it and creating enough uncertainty that little investment has gone ahead. The retailers are not penalised. The penalty is paid by consumers and the revenue goes to the government. Cosy arrangement,

        • Adam Smith

          Giles thanks for backing me up, so just to summarise, the Libs originally introduced the RET and whilst in power will see a doubling of renewables by 2020.

          • You sure know how to spin some Sh**. Just to repeat: The Libs created the MRET and scrapped it. Labor created the RET and the Libs tried to scrap it, They couldn’t, so they slashed it by one third.

  • Leigh Ryan

    Half of Australia’s Coal is coking coal used mainly for steel production, this won’t help Adani of course but i am wondering if those who want all coal mines shut down have given any thought to that, Thermal Coal for power production though is another matter i think they are holding out for clean coal technology which just won’t happen and anyway sequestration is environmentally insane it looks to me as though our poiticians must be or expect to be remunerated rather heavily by supporting coal, as an industry i can see it’s place in Australia’s history but seriously it has no future except perhaps in the development of Humus on a large scale for our farming sector which of course would lead to increased crop yields and less chemical intervention hmmm Monsanto wouldn’t like that, well i guess it’s a choice between Coal and Monsanto hmmm.

    • nakedChimp

      There is research and even production of green-steel.
      It’s a bit more expensive, but doesn’t need those amounts of coking coal.

      • Keith

        Hi nakedChimp,

        65% of US steel is manufactured in Electric Arc Furnaces (EAF) that don’t use coking coal….These mostly use recycled steel and there is an efficient industry for reprocessing steel.

        China has much lower EAF steel production, as until recently it hasn’t had a lot of steel to be recycled, but that is changing.

        I’ve written about this recently. http://seekingalpha.com/article/3785906-metallurgical-coal-future

  • Radbug

    The only people who love the Donald are the flyover people. And they want a New Deal.New Deals cost a yuge amount of (printed) money. This ain’t 1932. The Obama administration will depart leaving a monstrous national debt before the Donald even says the words on Inauguration Day. Interest rates are skyrocketing and bond prices are collapsing simply on the prospect of his Presidency. Soon the equity markets are going to follow the bond markets. Try finding capital for a smelly project like Adani’s in that environment!

    • Kenshō

      ABC’s electoral analyst Anthony Green said the American people don’t technically elect their President and it depends on their electoral system also relying upon electoral college votes. If I’ve understood it correctly, I will be more interested in what unfolds after Inauguration Day, when Trump will no longer be chiefly focused upon getting there.

  • MaxG

    Really? “Australia’s coal plans don’t match climate realities” … who would have thought? The latest and greatest news…
    … of course they don’t; with the two major parties still in play, this will not change. In fact, as we can see, it gets worse by the day.

  • Kenshō

    Now that emissions are capped, shouldn’t scientists be able to measure a decrease in the rate of change of temperature increases? The hypothesis is global warming would now be slowing down. It’s important to clarify this. It will confirm global warming is correlated with human actions.

    • Kenshō

      Looking at this other article, appears too soon to ask the above question. Maybe the rate of temperature increase is remaining constant?

      “Carbon emissions from 2016 will only be about 0.2 percent more than in 2015, despite a steady 3 percent growth in the world’s economy, according to a new report from the Global Carbon Project. Before 2014, emissions were increasing at an average rate of 2.3 percent per year…”
      “It’s difficult to say whether the trends from the last three years portend a turning point for global emissions — Glen Peters”
      http://reneweconomy.com.au/declining-coal-means-flat-global-emissions-third-year-running-67148/

    • Kenshō

      Looking at this other article, appears too soon to ask the above question. Maybe the rate of temperature increase is remaining constant?

      “Carbon emissions from 2016 will only be about 0.2 percent more than in 2015, despite a steady 3 percent growth in the world’s economy, according to a new report from the Global Carbon Project. Before 2014, emissions were increasing at an average rate of 2.3 percent per year…”
      “It’s difficult to say whether the trends from the last three years portend a turning point for global emissions — Glen Peters”
      http://reneweconomy.com.au/declining-coal-means-flat-global-emissions-third-year-running-67148/

    • neroden

      There’s a huge lag time between stuffing carbon into the air and temperature response, and worse, there’s year-to-year fluctuations. So it takes several years to tell.

    • Diego Matter

      Another problem to answer this question is how can we quantify the feedback loops kicking in, like escaping methane from the thawing thundra.