The Minerals Council of Australia has launched an extraordinary attack on the climate policies of the world’s leading economic institutions, and suggested that Australia throw its evolving energy supply into reverse and abandon renewable energy in favour of more coal.
In a display of logistical gymnastics, the Minerals Council suggests that Australia’s rising electricity costs could be addressed by adopting the most expensive “clean” technologies – carbon capture and storage and nuclear – neither of which would be available in Australia for well more than a decade.
The suggestion, and its call to abandon the renewable energy target, are included in its submission to the energy white paper. Its basic assumption, of course, is that the world shouldn’t, and won’t act on climate change.
The figures it quotes from the International Energy Agency on coal forecasts, for instance, use those scenarios which the IEA itself says are completely inadequate to address climate change.
The Mineral Council also attacks the notion of “carbon budgets”, refusing to even contemplate the idea of stranded assets. It says “carbon budgets’ are the inventions of “anti-mining activists” and involve “incomplete analysis”.
Actually, they are promoted most vigorously by the IEA – a highly conservative body which said last year that two thirds of known fossil fuel reserves would have to stay in the ground if climate change is to be addressed. As leading funds managers Jeremy Grantham noted last week, one wonders about the wisdom of spending $670 billion each year looking for new fossil fuel reserves, given that “peak demand” will be a reality within a decade.
The Minerals Council also wants Australia to use the G20 summit it chairs to push the World Bank to reverse it’s effective ban on financing new coal plants in developing countries – a policy that has been adopted by a range of public financing institutions in Europe and north America.
This will not go down well with the G20 nations, who already fear that Australia will push the organization to irrelevance by refusing to engage in the major mega themes of the world economy, and insisting on pushing what is in effect a domestic political agenda.
As for electricity costs, the MCA manages to blames carbon and renewables almost entirely for the doubling in electricity prices since 2007. Network costs, which account for more than half those rises, barely get a mention and not even a complete sentence; retail margins, which accounts for a major part of the rises, no mention at all. Gas prices, which are starting to feed through to electicity bills in Queensland, also get no mention at all.
Instead, the MCA insists on carbon capture and storage and nuclear as the solutions. When President Obama insisted on all new coal fired plants in the US last September, the coal industry immediately dropped its pretense that CCS was a viable, or even a nearly viable technology.
Citigroup said Kemper, the leading CCS pilot facility in the US, had suffered cost over-runs and delay, and solar PV and wind energy are way cheaper. Citi puts the levellised cost of energy (LCOE) of a new integrated coal gasification plant (IGCC) with CCS at 15.6c/kwh ($156/MWh). That is way above the LCOE of solar PV (13.6c/kWh), even though many recent solar PV contracts had been written at nearly half that price. But Citi noted that solar is getting cheaper.
Even Australia’s Bureau of Resource and Energy Economics agrees that CCS will price coal out of the market. It does not even consider the cost before 2025, because it does not accept the technology will be available, but when it is, it will be vastly more expensive that solar and wind energy, the two core technologies. It has also re-appraised its cost of nuclear, particularly in light of the recent UK experience, which priced the nuclear contract at more than $170/MWh, rising with inflation, over the next 35 years. That would be four times the wholesale price of electricity in Australia, although BREE is yet to factor in all the components that make up the cost of nuclear.