What do we sell when they don’t want our coal?

Print Friendly

To meet the Paris climate goals of limiting global warming to 2°C requires a complete global decarbonisation of all energy use by around 2050.

Reading these columns and elsewhere of recent times one could almost be excused for thinking that electricity is the only way we use energy.

It has reached the point that in common discourse the word ‘Energy’ has started to be used when the meaning is ‘Electricity’. Many references to ‘Energy Storage’ for example turn out to mean exclusively ‘Electricity Storage’.

To put things in perspective, it is interesting to examine Australia’s energy ‘end use’ by type. Interpreting the 2014-15 Australian Energy Statistics data by sector and end use fuel type gives the following picture:

AUS energy end use

In this view the really big end-use sector is transport energy, it can also be seen that heat as an end use is also very significant. However, for the Australian economy a major ‘Use’ of energy is that we sell it as one of our major sources of export earnings. If we add exports as a ‘Use’ to the pie chart we get the following results:

AUS energy use 2

So Australian energy ‘use’ is actually 79% about selling it. We sell large amounts of energy in the forms of Coal (11,063PJ in2014_15) , LNG (1,363PJ ) and Uranium oxides (3,053 PJ) .

To understand how important this is in financial terms, it is interesting to sort and rank Australia’s trade data, both imports and exports, as follows:

AUS trade 2015

We see that coal is our number two largest source of export income after iron ore. In previous years it has been number one. We see that LNG took the number 4 spot and as we are reading a lot lately, that export earner continues to grow.

Looking at the import side we see that we very much need those exports to balance our major imports, cars and electronic / electrical goods are way up the top. Oil and petroleum products (petrol and diesel) are sitting at number three and growing fast both because our demand is growing and our local production is shrinking.

Note that uranium does not even make it into the top 18 exports shown in the figure. The relative market values of the energy commodities are very important as well as the volumes of energy. In 2014-15, our average value of coal sold was around $3.40/GJ, for LNG it was $12.40/GJ and Uranium just around $0.30/GJ.

Refined oil product imports on the other hand cost us $19.50/GJ even with the prevailing low costs of oil at around $50 per barrel. Thus swapping fossil fuel exports for uranium exports GJ for GJ would be a disastrous financial outcome for the Australian economy.

So who buys our coal and LNG? The DFAT trade data shows the breakdown of coal sales by value as:

AUS coal exports

Interestingly, for some reason our Australian government agencies feel that the destination of LNG sales is confidential. However, the US government’s Energy Information Administration is happy to suggest to the world that it looks like this:

AUS LNG exports 2016

What this makes clear is that our most important energy customers are in the Asian region and Japan is absolutely on top of the list. It is also of considerable relevance that Japan, South Korea and China are the source of the bulk of our imported motor vehicles and electronic goods.

If the world is to decarbonise, these key trading partners of ours must be part of that shift. It is very apparent that they are already leading.

Reducing coal use will be the first target and we are already hearing of exactly such moves from China, India and Japan in recent times ( Thermal coal use plummet , Japan’s thermal power drop ). LNG is actually likely to be in greater demand in the near to medium term in a decarbonising world.

Noting recent commentary on the cost of gas generation versus renewables in Australia and the availability of renewable electricity options with storage / flexibility (Concentrating Solar Thermal is a key example), it may be that natural gas no longer has the key role as a ‘transition’ fuel for Australia’s own use that it was once thought to. Instead, we should increasingly recognise it as a ‘transition energy export’.

What can be the long term opportunity for energy exports? I and many others argue that it should be zero emissions hydrogen based fuels. Japan and South Korea in particular are putting major efforts into hydrogen fuel cell vehicles. Japan, which imports 91% of its primary energy is planning for major imports of hydrogen from around 2030 onwards.

The Olympic Games in Tokyo are only 3 years away, and investments to make hydrogen a star of this event are well advanced, with the focus on the buses, cars and the fuel cell powered athletes village.

Who better to sell hydrogen to Japan and our other Asian energy customers than Australia. Hydrogen can be made by a variety of methods; electrolysis using electricity, reforming natural gas, gasification of biomass or coal and thermal decomposition of water using solar concentrators as well as more early stage experimental approaches using photocatalysis for example.

In a zero carbon world, it is Australia’s vast and world leading solar resource that seems most prospective, although gasification or reforming processes combined with geo-sequestration of CO2 could well prove very competitive.

Japan GasChem ship

Japan is 6,000km away, we are not going connect a DC transmission line to them and they are unlikely to want to rely on connections to China for their energy. Moving an energy dense liquid fuel by ship is the bread and butter of the global petroleum industry.

A tanker can cross the globe consuming fuel that represents about 2% of its payload energy. In other words long distance fuel transport in tanker ships is about 98% efficient in energy terms.

To adapt international shipping to hydrogen, studies in Japan are considering three likely options; as cryogenic liquid analogous to LNG, by combining it chemically and reversibly with toluene as an organic hydride, or converting it to ammonia by combining it with atmospheric nitrogen for either direct final use as a fuel or conversion back to hydrogen.

The cryogenic option is being actively considered by Kawasaki Heavy Industries who have a specific project in mind based on gasification of Latrobe Valley brown coal.

Hydrogen liquefaction is technically feasible and analogous to natural gas liquefaction, however it is considerable more challenging as the temperature is -253°C compared to -162°C for LNG[1]. The organic hydride approach is also feasible however is challenged by a much reduced payload, with the toluene carrier compound having to take the trip in both directions with a limited amount of hydrogen carrying capacity.

Use of ammonia as the transport vector seems to be increasingly favoured. Ammonia synthesis is the second biggest chemical process by volume globally and is very well established. Ammonia is already shipped and traded globally. Liquid ammonia actually contains more hydrogen per litre than liquid hydrogen itself.

The conclusion I offer is that Australia as an energy exporting economy, should be keeping the future of energy exports at the forefront of consideration in all discussions of energy and climate policy and investment decisions. Attention should be given to bilateral / multilateral agreements with our key trading partners, like Japan, that move energy trade towards zero emissions fuels in a win-win manner.

State and Territory governments considering the encouragement of emissions free transport should consider that facilitating use of hydrogen fuel cell vehicles from Japanese and Korean manufacturers will help to synergise a hydrogen use and import market from those same countries.

The Australian Renewable Energy Agency, the Clean Energy Finance Corporation and others should consider future trade in hydrogen based fuels both directly but also via the synergies that may exist as they consider the approaches that can be applied to advancing renewable energy use within Australia.

[1] Note that the work (electricity) required to cool something tends to infinite as absolute zero of -273°C is approached.


Keith Lovegrove is Head of Solar Thermal, ITP Energised Group.


RenewEconomy Free Daily Newsletter

Share this:

  • Tim Forcey

    With Keith’s inspiration, there is also this.

    “Meeting the future needs of Australia’s energy customers with renewable energy chemicals”.

  • Sean Williams

    Hydrogen – really? Do you have any idea of the costs and safety implications of H2. I know that Toyota is spending billions on it, but most of the rest of the transport industry thinks Toyota is barking mad. Can someone please explain to me how problems such as hydrogen embrittlement and distribution of H2 liquid to every ‘petrol station’ in the land are to be overcome?

    • Just_Chris

      Hydrogen embrittlement is solved by using the correct alloys to store hydrogen. Hydrogen will probably be distributed via pipelines to refuelling stations that will compress it on site.

      • Sean Williams

        Chris, correct answer to the wrong question. Can someone please explain to me how problems such as hydrogen embrittlement and distribution of H2 liquid to every ‘petrol station’ in the land are to be overcome ECONOMICALLY. Stainless steels are the answer to the embrittlement issue, but the investment to put in place a network of H2 fuelling stations across the country would make the NBN seem like petty cash. Japan may be a special case, but I think Australian govts are merely flying a kite for this technology.

        • Just_Chris

          You have 2 very different problems there. One is Japan who’s population density is great enough to justify a pipe network. The other is Australia which is large and sparsely populated. In Australia you’d probably transport electricity to the “petrol” station and make the hydrogen on site, in Japan you’d probably use a pipe.

          In both cases you are not replacing like for like. The size of a hydrogen refuelling network should be much smaller than a petrol refuelling network because hydrogen fuel cell vehicles are more efficient, so you need less fuel, and because by the time they are being rolled out at scale a good % of the vehicles on the road should be electric and hence charged at home. I would also think that because of the higher cost of the fuel that the types of vehicles that use hydrogen would probably be disproportionately not the type you’d see at the local small petrol station. If all the city cars are electric with mainly buses, taxis and large trucks being hydrogen based there may be a pretty dramatic drop in the number of fuelling stations. Although I assume a lot of these local stations would transition to shops or entertainment centres with a fast charger(s) for electric vehicles. Fast charging of course being a total oxymoron because it really isn’t that fast – a 50 kW modern fast charger is capable of putting the equivalent of about 1.5 litres of petrol into my leaf in 25 min. I geuss the plus side is I can travel 100 km on that tiny amount of energy but I think people get the point. You’ll want something to do while your car charges.

          • nakedChimp

            Even Japan will use BEVs eventually.
            They already run electric trains.

            The only thing that counts would be heating in densely populated areas.. but methane from power2gas might be better suited for that as.

  • Chris Jones

    Anyone who thinks that hydrogen will be a viable carrier of energy in the near future hasn’t thought about the problem long enough. Given that the vast majority of hydrogen in the world is produced from natural gas (and releasing plenty of carbon monoxide) I would think the gas companies are rubbing their hands with glee. Transport emissions will be lowered as more of our energy comes from wind, solar and hydro. Hydrogen will continue to fuel rockets, but for those of us unlikely to ever sit atop a Falcon 9, H2 will remain a cool demonstration in classrooms for many years to come.

    • nakedChimp

      SpaceX isn’t using hydrogen (yet).
      They fly with oxygen and RP-1.

  • Andy Boothroyd

    I can see why you might hope to replace one fuel export with another, but its just wishful thinking to if you think hydrogen is going to be it. There are so many fundamental problems with it anyway but the main point is that battery storage is now and will be far cheaper. Japan will phase out coal, but replace it with renewable energy + battery storage, not highly expensive hydrogen imports from Australia. A better solution for the problem being posed here (which is a crash in export revenues from the phase out of coal in Asia) is there on that chart – the huge amount spent on importing oil for transportation. Australia should focus on electrifying its transport sector fuelled by the abundant renewable energy available.The other part of the solution is connected – Australia has the 4th largest reserves of lithium, the main component of battery storage:

    • Sean Williams

      Half right. Batteries are not going to have high enough energy density for decades to be used to power trucks. A solution needs to be found for that, and hydrogen is a contender.

      • nakedChimp

        Oh, Tesla is so going to show you..

        • Sean Williams

          Your faith in one man’s abilities knows no bounds …

      • Andy Boothroyd

        as nakedchimp says – its being worked on and wont be decades away: – a few years. Way before a hydrogen infrastructure could be put in place. And we already have an electricity infrastructure.

        • Sean Williams

          Andy, depending upon what you’re talking about, it is decades away. If you mean a souped delivery van, yes fine, there will be these in cities. If you mean a semi, the sort that thousands of which ply our outback roads, then you need a breakthrough in battery technology. As your article says, the best that Tesla can hope for with current technology is a range of 300km. And that aint going to cut the mustard.

    • nakedChimp

      And we better start to educate our kids properly instead of turning them into miners.

      • ben

        Ahem. You need graduates in Mining Engineering, Geology, Geophysics, Chemistry, Computer Science, Metallurgy, Statistics and so on to have a successful mining industry. PhDs even.

  • Ian

    A better way to transport hydrogen obtained from natural gas and coal is to ship the natural gas and the coal to the end consumer Japan and China etc. Rather than reforming or gasifying these fuels as an added wasteful step they can be directly combusted into water and Carbon dioxide, this can be sequestered into the atmosphere and transported by winds back to Australia as a useful low-grade source of heating for processes such as bleaching of corals and drying of farm land. Elevated sea levels will provide a useful tourism boost as fine diving sites will be established in every major city, right in the streets and buildings that are now only a meter or so above current sea levels.

    • Sean Williams


    • ben

      Very black

  • JHM

    The author’s focus on replacing energy exports is over stated. Replacing just NET energy exports would suffice. For example, from the chart above coal and natural gas exports are about $36B and $16B, respectively and $52B comboned, while crude and petroleum net imports are about $22B. So net carbon exports is only about $30B. So replacing $30B net is a much smaller problem than $52B gross.

    But let’s look at the other two big import categories, electrinics and electrical equipment and vehicles & parts, $28B and $26B, respectively and $54B combined. Likely much of this is coming from the same countries that are importing fuel from Australia, Japan, China and Korea. So strategies that move electronic and vehicle manufacturing from Asian back to Australia will serve to balance trade.

    The obvious product that ties this altogether is the electric vehicle including its enormous batteries. What y’all need is a Gigafactory. At a minimum build the batteries in country. This makes excellent use of mineral resource, cheap renewable energy, and a talented workforce. Of the top, this reduces a fraction of imports. Next, fill the roads with electric vehicles. This will cut oil imports. Even if Australia never becomes a huge battery or EV exporter, just source domestic markets will improve trade imbalance and make the economy more self-sufficient.

    The basic reality that the whole global economy will need to wrestle with going into a post carbon economy is what is truly worth trading internationally. In the fossil fuel world, much of the trade has been motivated by a need to import fuels. But trade in fuels is clearly going into structural decline. When a country needs to import less fuel because they are sourcing more renewable energy domestically, it improves their trade balance. So every net importer has a motive to reduce fuel imports. But this also lifts the need for those countries to export goods just to pay for the fuel they need. This is the counter trade that exists only to pay the fuel bill. So as fuel trade declines, so does this counter trade. So going into a post carbon world, we could see all international trade decrease as a fraction of the economy. For energy exporting countries, it will be critical to work on sourcing all sorts of goods domestically. The question should not be, what do we export as an alternative? But rather, what should source domestically and import less?

  • tsport100

    Interesting read… right up until the mention of hydrogen! The only sell-able ‘advantage’ hydrogen fuel cell cars have is they fill faster… the disadvantages are a more like a laundry list, starting with the fact that fuel cell cars are electric vehicles with an FC that acts as a range extender. Based on current battery development trends where energy density doubles every 5 years while costs halve over the same period, FC cars stand no chance of becoming economically viable.

    This isn’t just my opinion, Dr Dieter Zetsche, chairman of the board for Mercedes’ Daimler parent company, says hydrogen fuel cell technology is losing relevance as batteries become more capable. Toyota has recently also conceded that batteries are where the market is heading and their obsession with developing $1M FC demonstrators has left them way behind on long range EV R&D..

    FC cars are EVs with an unnecessary inefficient energy delivery system added with the only benefit being a faster ‘fill’ rate..

    • Eb

      While battery EVs may be the winner for urban car driving, for large, long-haul trucks and trains like the Indian-Pacific plus boats carrying >100 passengers, hydrogen fuel cells or engines may be a more technically feasible option for greenhouse emission free transport, see Alstom’s fuel cell train due for deployment in Germany next year:

      although the economics may require much higher diesel prices than the <$0.80/litre most big users pay in Australia due to the Diesel Fuel Excise rebate.

      • tsport100

        Our two biggest energy export markets, Japan and China, have a solution for power supply to high speed long distance train networks, so no demand for fuel cell trains there. Overhead catenary system for trucks are well established in mine haul truck applications and Siemens have had a similar ‘eHighway’ system trial running in Sweden for the past year.

        • BushAxe

          Batteries with wireless charging seems to be the likely way forward at this stage, however a solution is needed for long distance rail (ie Australian deserts) where electrification of long distances is unrealistic.