The future of Australian coal
Khai Trung Le looks at the latest clashes surrounding Australia’s coal future – the closure of Liddell, the country’s oldest coal power plant, and the controversy surrounding the Adani Carmichael coal mine.
On 5 September, Andy Vesey, CEO of AGL Energy, Australia, sent a tweet to Australian MP Tony Abbott, saying, ‘We’re getting out of coal. We committed to the closure of the Liddell power station in 2022, the end of its operating life’. If AGL wanted a more pronounced proclamation of its pivot away from coal than a direct message to the country’s former Prime Minister, the announcement of a AUS$2 billion fund to explore new energy supply may suffice.
The tweet came after the New South Wales Government, former owners of the Liddell coal power plant, announced the 2022 closure of Liddell, the oldest coal-fired station in Australia. The contentious closure is expected to leave a 1,000MW gap in the national electricity market. However, Liddell is just one of many recent battlegrounds surrounding the country’s relationship with coal. Australia produces around 30% of the world’s supply, and has staunch defenders in the coalition government.
The Australian Government has pressured AGL to either extend the life of the plant or sell to another company who would – a concession Prime Minister Malcolm Turnbull claimed Vesey agreed to.
However, AGL has stood by Liddell’s closure. Speaking at the AGL annual general meeting, new Chairman Graeme Hunt stated that the company has been exploring new renewable and gas plants, battery storage and demand management since 2015. Hunt added, ‘We are very optimistic Liddell can be replaced with new technology, without a negative impact on the market in terms of reliability and affordability.’
Former AGL Chairman, Jerry Maycock, conceded that while it would be technically possible to extend the plant’s life span, ‘the costs of doing so in a way that ensures that the plant is even moderately reliable are certain to be substantial’ to AGL or potential buyers.
Deputy Prime Minister Barnaby Joyce told Sky News that two buyers had approached him, but declined to identify them. Possible contestant Origin Energy has ruled itself out of a purchase, with a spokesperson stating, ‘Origin has already announced plans to close our only coal-fired power station, Eraring, by early 2030s and is not looking to buy any new coal plant.’ Another potential buyer, Delta Electricity, stated in September that the company would ‘be interested in having a look’, but expressed concern over the cost of extending the plant’s life beyond 2022.
Delta Company Secretary, Steve Gurnley, said that any potential sale would require ‘some sort of cash injection’ to be viable.
The Liberal Party (LNP) has escalated its rhetoric against AGL, LNP Senator for Queensland, Matthew Canavan, responded to Vesey’s tweet, stating, ‘What a joke! You say you're getting out of coal in 2050!!’ [sic]. LNP backbencher Craig Kelly accused Vesey of ‘speaking with a forked tongue’. He continued, ‘It [does not] surprise me whatsoever – we’ve seen AGL, probably one of the biggest corporate villains, they’ve cut off tens of thousands of Australians […] because of the high cost of electricity.’
Despite AGL’s public declaration to move away from coal, it currently accounts for 86% of the company’s electricity generation and is expected to remain an important part of AGL for several years.
In the Galilee Basin, 1,516km from the Liddell plant, the Carmichael coal mine, better known as the Adani mine after its Indian parent company, has also been a source of contention and testament that the continent wants to stick with conventional energy production. Once open, the mine will include six open cut pits and five underground mines, making it the biggest coal mine in Australia, and among the biggest in the world. Protests involving thousands of people have taken place against the plans.
The Adani mine was originally proposed to operate for 150 years, although this has been scaled down to 60. Initially, the company said over 10,000 jobs would be created. However, an ACIL Allen Consulting economist conceded in court that as few as 1,464 was more likely. Despite a possible annual production of 60 million tonnes, the Adani Group has promised to begin on a smaller scale, starting at 25 million tonnes.
Coal would be transported 200km to Abbot Point Coal Terminal, adjacent to the Great Barrier Reef and also owned by Adani. Analysis by the Institute for Energy Economics and Financial Analysis (IEEFA), USA, found that Abbot Port is due for a AUS$1.5 billion debt refinancing in 2018, and a cumulative debt refinancing of AUS$2.11 billion by 2020. The IEEFA report states, ‘For the purposes of refinancing Abbot Point, Adani needs to demonstrate that Carmichael will progress in order to convince financiers that [Abbot Point] will be fully utilised into the future.’
Tim Buckley, IEEFA Director of Energy Financial Studies, said, ‘To the extent that can be gleaned from the Australian Securities and Investments Commission’s records, Adani’s entire mine, rail and port operation looks to be 100% debt financed and shareholders funds now tally an unprecedented negative AUS$458 billion combined. The value at stake for the Adani Group’s Carmichael mine proposal is far bigger than previously understood.’
Former India Environment Minister, Jairam Ramesh, spoke out against the Adani Group’s environmental credentials, stating to ABC News that he was ‘absolutely appalled’ at the Australia Government’s approval of the Carmichael mine. Ramesh said, ‘Adani Group’s track record on environmental management within [India] leaves a lot to be desired. And if it leaves a lot to be desired domestically, there’s no reason for me to believe that Adani would be a responsible environmental player internationally.’
Committed to hydrocarbons
As several countries move away from coal, Australia’s perseverance may seem out of step. The Carmichael mine will principally supply India with coal, although Laszlo Varro, Chief Economist at the International Energy Agency, warned, ‘It is becoming clear that Chinese coal demand has peaked […] the outlook for imports [to] India and other countries is uncertain.’
Similarly, an energy review from Dr Alan Finkel, Australia’s Chief Scientist, is expected to be rejected after a statement from Energy Minister, Josh Frydenberg, confirming the Government would not proceed with the clean energy target specified in Finkel’s review that would reduce electricity emissions by 28% on 2005 levels.
Despite this, Abbott has been a consistent proponent for heightened coal in Australia, threatening to vote against an ‘unconscionable’ clean energy target. ‘If we can have Snowy 2.0, let’s have Hazelwood 2.0 and get on with it,’ he said, referring to a feasibility study into the expansion of the pumped hydro-electric storage at the Snowy Hydro Scheme and the decommissioned coal plant in Victoria.
While Turnbull has been hesitant to show support for new coal, he has consistently defended existing facilities, and referred to dissenters as ‘reckless’. Speaking at a LNP state conference, he said, ‘Those people who say coal and other fossil fuels have no future are delusional and they fly in the face of all the economic forecasts.’