Pacific island calls for end to coal, as Abbott's Australia digs in | RenewEconomy

Pacific island calls for end to coal, as Abbott’s Australia digs in

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A letter from the climate change front line – the Pacific island nation of Kiribati – is calling for a global moratorium on new coal mine development. Meanwhile, in Australia, we have a government that champions coal, and an electricity market that’s still wedded to fossil fuels.

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In a week dominated by debate over the level of inadequacy of the Abbott government’s 2030 emissions reduction target, the Prime Minister is about to be delivered a timely wake up call. Arriving in his inbox on Thursday will be a letter from the President of the Republic of Kiribati, calling on all world leaders to commit to an end to coal.Screen Shot 2015-08-13 at 1.38.50 pm

Of course, Kiribati is one of those Pacific island nations that is considered to be among the most vulnerable to the effects of climate change. So it is for this reason – and because, well, science – that Kiribati President Anote Tong wants a global and immediate moratorium on all new coal mines and coal mine expansions, and he wants the leaders of the world to support this cause before the Paris climate talks in December.

“The construction of each new coal mine undermines the spirit and intent of any (climate) agreement we may reach, particularly in the upcoming COP 21 in Paris,” Tong writes in the letter.

“Kiribati, as a nation faced with a very uncertain future, is calling for a global moratorium on new coal mines. It would be one positive step towards our collective global action against climate change and it is my sincere hope that you and your people would add your positive support in this endeavour.”

But what are the chances that Tony Abbott is listening? As Ben Oquist from The Australia Institute commented on Thursday, this is a Prime Minister who has championed coal at every turn, and whose government has been instrumental in expediting the development of one of the biggest coal projects in the Southern Hemisphere: a coal mine in in Queensland’s Galilee Basin that will generate 4 billion tonnes of CO2 over its life.

It is also a government which, as we reported here, has created a $5 billion fund that will invest in coal power plants and supporting infrastructure in the far north, and which has been openly encouraging Townsville to push for a coal-fired generator, over solar or wind.

Add to this a slightly bemusing report, released on Thursday, from the Australian Energy Market Operator, that, while flagging the withdrawal of around 4.5GW of generating capacity across the NEM, is also apparently weighing up the addition of 21GW of new capacity, nearly 10 per cent of which (2GW) would come from new-build coal plants.

As noted by the report – AEMO’s 2015 Electricity Statement of Opportunities (ESOO) – the NEM’s current installed capacity (51,363 MW) is made up of coal (54%), gas (24%), wind energy (6%), hydro/wave (16%), and “other” (1%).

In 2014, 1,074MW of generation capacity previously considered committed was commissioned, while 1,078MW of thermal baseload generation capacity – entirely coal and gas power, as you can see in the table below – was withdrawn.

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“A lot has changed in 12 months,” said AEMO CEO Matt Zema in a statement accompanying the report, “not least within the energy industry which continues to undergo a rapid transformation.”

The report itself elaborates on this point, noting that the energy market of today is much more complex than it was historically, with rapid growth in areas like demand side management, rooftop solar PV, intermittent generation including wind and large-scale solar, and storage technologies. And – it adds – “the retirement of traditional thermal generation.”

AEMO also suggests that the market will rely on more sharing of electricity between the states, as the NEM profile changes. It warns this could test reliability standards in the next 10 years, but only in the strict 0.002 per cent of the time when supply may be threatened – hardly a cause for panic.

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So why are new coal plants still being proposed for Australia’s future energy mix?

It’s not because they’re cheaper. As Bloomberg New Energy Finance’s Kobad Bhavnagri noted last month, Australian consumers can already install large-ish rooftop solar systems and battery storage for cheaper than they can get electricity from the grid, making the uptake of these two technologies “unstoppable.”

Indeed, according to BNEF, 33GWh of battery storage and 37GW of solar PV will be installed in Australia by 2040; part of that rapid NEM transformation AEMO was talking about.

But as Bhavnagri pointed out in the same July presentation, when it comes to existing coat plants, the renewable energy industry still needs renewable energy certificates in order to compete.

So, unless there is a mechanism to force out coal-fired generation, the uptake of large-scale renewables without subsidies on the main grid may not occur until after that coal-fired capacity is retired, after 2030, as Giles Parkinson wrote last month: Hence the importance of the longer-term renewables policy.

So far, though, that  longer-term policy certainty has not been forthcoming. According to AGL Energy CEO Andrew Vesey, his company is not ready to “pull the trigger” on any large-scale renewable energy investments because of the lack of clarity still lingering over the now legislated renewable energy target.

“A lot more needs to be done to provide the clarity we need,” Vesey told an analysts briefing on Wednesday. “We are ready to act if good opportunities come around … but we are not close to pulling the trigger.”

Vesey particularly pointed to the big differences between the Coalition and Labor on emissions targets, and how that impacted on various policies, and suggested this was unlikely to be resolved until after the Paris climate change conference.

AGL is also cited by AEMO as the likely builder of new coal generation – a 2,000MW extension of the Bayswater generator. But Vesey himself appears to have ruled this out, except in the unlikely event that CCS becomes economic, or even feasible.

Meanwhile, the value of other coal and gas generators have been written down, and Morgan Stanley said in a research note on Thursday that Origin Energy may have to write down some of its generation assets too.

The investment bank said that the balance sheet values of some of Origin’s assets “still look surreal,” and pointed in particular at the value for “Energy markets” of $12.2 billion.

“We estimate that +/-$A3 billion has been invested in developing or acquiring power generation assets. This looks hard to defend as the level of profits from this segment at the EBIT level approximate about $A1 billion p.a. based on our forecasts.” The assets Origin has bought include the Eraring coal fired power station in NSW, and some gas assets.

As for AEMO, it says it is currently tracking 21,689MW of proposed new generation capacity, including 55.4 per cent (12,021MW) wind, 27.9 per cent (6,040MW) gas, 9.2 per cent (2,000MW) coal, 1.3 per cent (287MW) solar, 3.1 per cent (666MW) water and 3.1 per cent (676 MW) other generation.

AEMO’s Zema said in his statement that, because these new generation capacity projects were proposed only, and not yet committed, they were not incorporated in the 2015 ESOO.

“AEMO will continue to monitor the status of generation projects, and keep the market informed of developments … Investment opportunities could and would need to occur through schemes supporting renewable energy generation, to meet localised consumption growth pockets, or to manage intermittent generation,” he said.

So, on top of having a federal government outlook and an energy system that are “patently at odds with any sensible global climate policy,” TAI’s Oquist reminds us that “Australia also happens to have a larger share of the world seaborne coal market than Saudi Arabia has of the world oil market.

“The three mega-coal mines proposed for Queensland’s Galilee basin, if completed, would pour an additional 100 million tonnes of coal per year into the world market, further lowering the coal price and increasing greenhouse gas emissions.”

What does all this mean for Kiribati – the nation that, as Greenpeace executive director Kumi Naidoo put it, is experiencing first hand that the threat of sea level rise is not just some scientific modelling or projection, but a reality, that will only get worse?

Probably, it means they will need to look past Australia for global – or even local – support of the push to quit coal. At least for now.

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2 Comments
  1. Alastair Leith 5 years ago

    “The construction of each new coal mine undermines the spirit and intent of any (climate) agreement we may reach, particularly in the upcoming COP 21 in Paris,” Tong writes in the letter.

    x10

  2. George Michaelson 5 years ago

    The inherent hysteresis in the future sea level rise makes this a symbolic gesture only. I agree for other reasons we should cease coal, but lets be clear that remediation of the effects on pacific nations is a cost we’ll have to bear irrespective, for 50-100 years or more.

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