Nursing an ageing coal-powered energy engine-room and likely to face rapid falls in the price of coal exports, Australia needs a plan for energy transition, Fiona J Beck and Kylie Catchpole write.
Last month, the G7 leaders released a joint statement committing to net-zero emissions by 2050, and an “end to direct government support for unabated international thermal coal power generation by 2021.”
‘Abated’ power generation refers to when emissions are offset by carbon capture and utilisation or storage (CCUS). So far, CCUS for coal power generation has seen very little commercial success, despite substantial global investment, meaning this statement applies to the vast majority of coal power generation.
The communique calls on all countries, especially big emitters, to follow suit, but in Australia the Morrison government appears to be standing staunchly behind coal.
As stated by former Deputy Prime Minister Michael McCormack, the government believes coal “pays for a lot of hospitals. It pays for a lot of schools. It pays for a lot of barista machines that produces the coffee inner city types sit around drink and talk about the death of coal.”
It is true that coal still accounts for the majority of electricity generation in Australia, resulting in a national electricity emissions intensity roughly 50 per cent higher than the global average. On top of this, Australia is also the biggest coal exporter in the world, with exports of thermal coal, which is used for power generation, worth $20 billion in 2019.
So, what does the future look like? Well, Australia has some of the best renewable resources in the world, and the land to harvest them, and making the most of these assets is critical.
Renewable energy is the cheapest new-build power in Australia, and the country already has the highest installation rate per capita. In 2019, the share of electricity provided by wind increased by 19 per cent, and that provided by solar by a whopping 46 per cent.
However, the rapid uptake of renewables was partially driven by the Renewable Energy Target, which lapsed in 2019 and has not been replaced. The resulting policy uncertainty has made it more difficult for renewable projects to secure investment.
In addition, the lack of a co-ordinated approach to planning in recent years, as well as Australia’s longstanding grid and transmission bottlenecks, have meant that projects have suffered delays as well as being forced to reduce output.
The Australian Electricity Market Operator has recently developed an integrated system plan proposing upgrades to the grid, with strategically placed interconnectors and energy storage as well as the development of renewable energy zones.
The plan indicates that, with foresight and targeted investment, Australia “can manage the transition out of coal to a future industry structure that provides $11 billion in net benefits to energy consumers.”
Instead, the government is developing Australia’s Long-term Emissions Reduction Strategy, to be presented at the United Nations Climate Change Conference in November, and Australia’s Technology Investment Roadmap will be key to this strategy.
Its first statement, announced in 2020, identified ‘clean’ hydrogen and CCUS as priorities for investment, but also clearly indicated that the government is not looking to give up coal anytime soon, stating that “the existing coal fleet provides critical system stability”.
There are risks associated with this approach. The government’s definition of ‘clean’ hydrogen includes hydrogen made from coal and gas combined with CCUS.
While CCUS technologies could be a useful part of the decarbonisation toolbox, residual emissions that cannot be captured can be significant. They are also unlikely to be able to compete on a cost basis with renewable technologies.
At the same time, the reduction in demand for international thermal coal exports is inevitable, and Australia needs to recognise this and support local communities that rely on economic activity from those exports in that transition.
The international energy agency has stated: “The world has a viable pathway to building a global energy sector with net-zero emissions in 2050, but it is narrow and requires an unprecedented transformation of how energy is produced, transported, and used globally”.
Still, the number of countries that have pledged to achieved net-zero emissions can be attributed to around 70 per cent of current global emissions.
Globally, there is more solar capacity being installed each year than any other technology. In China, India, and in much of Europe, it is now cheaper to build new solar farms than to run existing coal plants. All of this means there could be a rapid reduction in demand for Australian coal exports, and the country needs to be prepared.
Given the speed and scale of these international developments, a focus on gas, CCUS, and hydrogen produced from coal and gas could leave Australia with expensive stranded assets. It also does nothing to help traditionally fossil-fuel dependent communities adapt to the new, global, renewable energy economy.
The government’s approach diverts attention and investment from renewable technologies at a time when it needs to do what it can to accelerate their implementation, for the sake of Australia’s energy future.