January 7, 2011
Australia's Coal in Context
Submitted to the Interdepartmental Task Group in response to the Discussion Paper: "A Cleaner Future for Power Stations" on behalf of Peabody Energy by Frank Clemente PhD*
* Frank Clemente is Professor of Social Science and Energy Policy at Penn State University where his research specialization is the socioeconomic impact of energy policies on communities, businesses and families. He is a Senior Member of the Graduate Faculty and former Director of the University's Environmental Policy Center. His energy related research has been funded by the National Science Foundation, Rockefeller Foundation and Ford Foundation. He holds a doctorate in demographic studies from the University of Tennessee where he recently was named Distinguished Alumnus. He has published over 100 articles in various media including Oil & Gas Journal, Public Utilities Fortnightly, World Oil, Electric Perspectives , The Journal of Commerce, and Electric Light & Power.
Australia's Coal in Context
Précis
Coal is Australia's greatest energy and financial resource and must be the cornerstone of any affordable and sustainable energy policy designed to meet climate change goals. Coal accounts for over 85% of the Commonwealth's fossil fuel reserves and reliably produces about 75% of electricity at low prices, which significantly buffer the higher costs of other fuels-including gas and renewables. The coal industry is the source of socio-economic stability, accounting for 3.7% of national GDP– providing jobs, income, business opportunities and tax revenues throughout the nation. With $55 billion in annual export revenues, coal is Australia's leading export, consistently supporting the balance of trade and enabling Australia to avoid the worst consequences of global recession. In a politically volatile world, Australia's coal is the epitome of energy security.
Further, while all of these contributions can be documented for the present as well as the past, coal is also a fuel of the future. No other source of energy possesses coal's scale of abundance, availability, distribution pattern, affordability, reliability, security and versatility. ABARE has projected, for example, that Australia will need 50% more electricity over the next 20 years. This electricity will be needed to continue growth in commodity production and to improve Australia's economic well-being. In addition, energy planners must be ever cognisant of the increasing need for Australia to import oil – a risky and expensive source of supply. In a world approaching peak oil, Australia's vast endowment of coal will facilitate the development of coal to liquid facilities to further enhance energy security, provide needed transportation fuels and control costs.
While coal has been a cornerstone of socio-economic progress, it has also been a matter of concern over emissions of CO2. But coal’s amenability to advanced clean technologies is an increasingly important attribute, allowing both the world and Australia to take advantage of immense reserves. And these reserves will be sorely needed. In a recent presentation to the World Energy Council, Gregory Boyce, Chairman and Chief Executive Officer of Peabody Energy, described the global situation: “There are approximately 3.6 billion people in the world who lack adequate energy access, and another 2 billion will require power as the world population grows over the next 20 years. So we are on a path to have 5 to 6 billion people without adequate access to electricity in as little as 20 years, which is flatly unacceptable.” Boyce said, “The greatest crisis confronted in the 21st Century is not a future environmental crisis predicted by computer models, but a human crisis today that is fully within our power to solve.” This spectre of energy deprivation in the context of climate change was clearly enunciated in the 2009 Copenhagen Accord: “We should cooperate in achieving the peaking of global and national emissions as soon as possible... bearing in mind that social and economic development and poverty eradication are the first and overriding priorities of developing countries..."
Following this logic, Boyce laid out the “Peabody Plan” – a global roadmap to eliminate energy inequality by 2050 and reindustrialize economies while steadily improving carbon dioxide emissions through five key actions: (i) Work to eliminate energy poverty by ensuring at least half of new generation is fueled by coal, the dominant baseload power source. (ii) Replace the 1,000 gigawatts of traditional coal plants with supercritical and ultrasupercritical plants, which are more efficient, have a reduced carbon emissions rate and are carbon capture ready; (iii) Develop at least 100 major projects around the world that capture, store or use carbon dioxide; (iv) Deploy coal conversion such as CTL plants; and (v) Commercialise and deploy next generation clean coal technologies (e.g. CCS) as the technological path to near zero emissions. By replacing the global fleet with advanced coal technologies, Boyce said avoided carbon dioxide emissions would equate to removing the entire U.S. automobile fleet, more than 325 million automobiles from the road, without waiting for CCS.
It is not possible for any individual nation – including Australia – to develop a path to meet international climate change policy goals without full recognition of the scale of the challenge, either at the global level or within the nation itself. In the International Energy Agency’s (IEA) “blue map scenario" the world needs to reduce CO2 emissions from electric generation 76% by 2050. In Australia, this reduction would occur in the face of a projected population increase of 21 million people and GDP growth of well over 200%.
Unfortunately, the plan delineated in the Interdepartmental Task Group (ITG) Discussion Paper "A Cleaner Future for Power Stations" will do little to get Australia where it needs to go. The plan to dramatically increase Australia’s dependence on unabated natural gas generation is “a bridge to nowhere” regarding climate change. As David Hamilton, Director for Global Warming for the Sierra Club pointed out in 2010, "Gas doesn't get us there.” Natural gas requires CCS and therefore is not a low GHG solution. There is overwhelming evidence that unabated natural gas power plants cannot lead to international climate change policy goals. Yet, by requiring CCS only for new coal plants, Australia is proceeding to both institutionalise and expand dependence on unabated gas for electricity – effectively locking in unacceptable levels of GHG emissions for the next generation of Australians. In fact, modelling of Australia’s future energy mix by the AEMO shows that CCS will need to be applied to all fossil fuel generation technologies in order to achieve Australia's 2050 emission reduction targets. The myopic focus on coal with CCS in the ITG document has a number of limitations including at least three fundamental flaws:
(1) It ignores the environmental and socioeconomic benefits of systematically replacing traditional coal power plants with advanced generation facilities – especially supercritical units, which have carbon emissions that are 15% below the existing fleet average and as much as 40% lower than older plants that are being replaced. Professor Janos Beer at MIT has stated, "Increased efficiency of power generation is the most predictable and cost effective method for CO2 emissions reduction. It is also the only practical method for mitigating CO2 emissions now, and it remains important for future plants equipped with CCS to reduce the energy cost of CO2 capture."
(2) The ITG document not only leaves virtually all of Australia's incremental GHG emissions from power generation on the table, but will also actually increase such emissions. First, in the case of CO2, requiring CCS for all coal power plants while leaving gas power plants unabated is a non sequitur. Virtually all incremental fossil fuel emissions from power generation in Australia will come from gas, not coal.
Projected Incremental generation to 2030
Second, increased dependence on gas will lead to greater emissions of methane – a GHG up to 72 times more powerful than CO2. In fact, there is increasing recognition that when the entire fuel cycle is considered, methane emissions from gas generally vitiate the argument that gas is cleaner than coal. Professor Robert Howarth at Cornell University recently concluded: “Using the best available science, we conclude that natural gas is no better than coal and may in fact be worse than coal in terms of its greenhouse gas footprint when evaluated over the time course of the next several decades." In Australia, the Greens have warned against the significant increase in methane emissions that will come from CSG: "Methane is a far more potent greenhouse gas than carbon dioxide."
(3) The ITG document virtually guarantees that the next generation of Australian families, businesses and institutions will pay an ever-increasing amount for electricity for at least three reasons: (i) encouraging construction of an extensive fleet of gas power plants that cannot meet climate change goals without expensive retrofitting sometime in the future, (ii) subsidising alternative energies such as wind and solar which are demonstrably more expensive technologies due to intermittency and distance from the electrical load, and (iii) making Australia utterly dependent upon a hypothetical source of supply from coal seam gas – a source that would have to increase over 1800% in the next 20 years to meet projections. Apart from the methane problem, CSG has other environmental consequences. A recent report by JP Morgan on CSG concluded; "water risks could translate into project cost increases, government intervention, changes to regulations and potential disruption to long-term gas supply contracts." In other words, the ITG approach risks precious investment dollars by promoting the construction of an entire fleet of gas plants which may become stranded assets.
Conclusion
Coal is both an energy and financial bulwark for Australia, providing reliable, secure and affordable supply – particularly of electricity. Australia's coal resources are vast and clean coal technologies are opening the door to a sustainable low carbon future.
Despite these documented empirical and technological realities, Australia is marching down a path based on projections, hypotheses, assumptions, expectations and computer estimates. This risky path will unequivocally increase dependence on unabated natural gas – a fuel that (1) is not a GHG solution, (2) can never lead to climate change goals, (3) has a history of high and volatile prices, and (4) assumes an 18 fold supply increase in a nonconventional gas laden with environmental baggage.
To the best of our knowledge, there has been neither an environmental nor a socioeconomic impact analysis of the path proposed in the ITG document. The absence of such analyses speaks volumes about the extent to which one can understand either the logic or the implications of turning away from an established energy foundation to an abstract computer model based on an "expected" source of supply at an "estimated" cost. Coal's contribution to the Commonwealth is not a hypothesis, experiment or unverified projection. Affordable and reliable power from coal is a daily reality. Consumers in Australia, or more particularly their children, should be asking one question; "And what happens to us if the computer models are wrong?"
Australia's Coal in Context
Coal is Australia's greatest energy resource. At the global level, Australia has about nine percent of the world’s coal – an energy resource that significantly exceeds the equivalent oil reserves of the world's largest oil producers:
The Scale of Australia's Coal Resource Relative to Global Oil [2]
Within Australia, coal is far and away the dominant energy source in terms energy equivalence of other fossil fuels:
Australia's Fossil Fuel Resources in TWh Equivalents [3]
Given the magnitude of this endowment, it is not surprising that Australia's coal industry is the continuing cornerstone of socioeconomic growth (see, for example, Coal and the Commonwealth, University of Queensland, 2009, 4). The contribution of coal to the quality of life in Australia is a well documented reality. In fact, coal accounts for 3.7% of GDP.
Coal Based Generation and Australia's Per Capita GDP [5]
The Socioeconomic Benefits of Coal in Australia [6]
· 37,000 employees
· $4.4 Billion in wages and salaries
· 100,000 indirect jobs
· $21 Billion in goods, services, contracts
· $12.9 Billion in taxes and state royalties
· $14 billion in dividends to stockholders , funds and investor
Coal is also Australia's leading export, with $55 billion in export revenues providing a strong backbone to the nation's trade balance.
Value of Australia's Principal Exports 2008-2009 [7]
Coal is the cornerstone of Australia's electricity
Australia's coal has been the foundation of reliable electricity. Coal represents only 57% of generation capacity but produces about 75% of the power.
Australia's Power Begins with Coal
(Generation in TWh [5])
Importantly, coal has kept electricity costs low for Australian consumers:
· "ready availability of low-cost coal has underpinned relatively low-cost electricity (by global standards) in mainland Australia"
· Australia's very large low-cost coal resources underpin cheap reliable electricity and exports" Australian Energy Resource Assessment, [3].
Coal Means Low Cost Electricity in Australia [9,10]
While coal has been a cornerstone of socio-economic progress, it has also been a matter of increasing concern over the potential impact on climate change through emission of CO2. As we move toward a carbon constrained world, however, coal’s amenability to advanced clean technologies will actually be an increasingly important attribute, allowing the world to take advantage of immense reserves. In the area of electricity generation, for example, the two processes of (i) increased efficiency through supercritical and ultra supercritical power plants and (ii) CCS, present a unique opportunity not only to move toward the eradication of poverty, but also to meet the climate change goals enunciated in the Copenhagen Accord. Clean coal technologies work. Since 1990, the United States electric power industry has invested almost $100 billion to control emissions with marked success. The U.S. has made huge strides forward in significantly reducing criteria emissions – particulate matter, sulfur dioxide, carbon monoxide, lead, and ozone and nitrogen oxides – while at the same time substantially increasing coal-based generation and meeting the electricity needs of an expanding population in a growing economy. Clean coal technologies have solved other emissions challenges and now the creative gaze of the scientific and engineering community has turned to the management of CO2. The commercialisation and deployment of the next generation of clean coal technologies will propel continued environmental improvement and steady progress toward the final goal of near zero emissions. Further, a significant portion of the captured CO2 can be utilised productively in such processes as enhanced oil recovery (EOR) and the manufacturing of cement and other products – including food.