King coal’s throne looking shaky

Australia asks where power will come from

Elon Musk’s intervention in Australia’s energy crisis is widening a divide over the future of coal. The billionaire Tesla founder, who has promised to help provide South Australia with clean energy, sees no place for the fossil fuel. That conflicts with the federal Government’s push for it to remain a mainstay source of electricity generation.

“Coal doesn’t have a long-term future,” Musk said in Adelaide this month “The writing’s on the wall.”

His declaration in blackout-plagued South Australia, where the entrepreneur announced plans to build the world’s biggest battery to support the state’s power grid, has rankled lawmakers.

Energy Minister Josh Frydenberg accused the state of using a celebrity to paper over its patchy clean energy record. Tesla’s battery plan “is a lot of sizzle for very little sausage,” said Frydenberg. Deputy Prime Minister Barnaby Joyce said Musk’s plan “doesn’t make a hell of a lot of difference” to the nation’s struggles over energy security.

Most of Australia’s states and territories — free to determine their own energy and climate policies — beg to differ. Just hours after Musk’s announcement, the neighbouring state of Victoria closed the door on new coal-fired power stations, saying energy companies would rather invest in renewables.

And Queensland, where India’s Adani Group is planning the US$16.5 billion ($22.45b) Carmichael coal mine, expects a move to clean energy will completely wipe out its carbon emissions by 2050.

Energy policy is a fraught subject in Australia, which gets 76 per cent of its electricity from coal-fired power stations.

A series of power cuts in South Australia in the past year spurred fears of more widespread blackouts and raised questions about why one of the world’s largest coal and natural gas producers is struggling to keep the lights on.

The nation’s largest and dirtiest power generator, AGL Energy, says its investment appetite for coal has reversed in just a few years. The economics of building new coal plants don’t stack up and increasingly renewables will dominate base-load power, AGL chairman Jeremy Maycock said this month.

Australians overwhelmingly want the Government to focus on clean energy, according to a June poll by the Sydney-based Lowy Institute.

“It’s highly improbable that AGL will be constructing new coal-fired power stations because we don’t think the economics are likely to favour that,” said Maycock. “As the largest generator we want to play our fair share in the country’s emissions reduction targets.”

In 2009, Malcolm Turnbull lost his job as leader of the Liberal Party to Tony Abbott, due to Turnbull’s support for an emissions trading programme that was eventually installed by a Labor Party Government in 2012.

After defeating Labor in 2013, Abbott’s Liberal-National coalition dismantled the levy on carbon emissions, claiming it was responsible for higher electricity costs, and cut targets for wind and solar power generation.

While in power, Abbott claimed coal was “good for humanity” and his Government attacked wind farms for being “ugly.” Since seizing the leadership almost two years ago, Turnbull has toned down the Government’s attack on renewables.

In March Turnbull announced a plan to boost capacity at Australia’s largest hydro-electric power project, in a bid to tackle surging electricity prices and supply constraints.

Yet the climate issue continues to create rancour within Turnbull’s party.

When Chief Scientist Alan Finkel proposed last month that Australia gradually increase its renewable target to 42 per cent by 2030, at least 22 members of his ruling coalition spoke out about it. Renewable energy generation provided 17.3 per cent of Australia’s annual electricity generation in 2016, according to an annual report from the industry-led Clean Energy Council.

Abbott, who remains a Government backbencher, is now calling for the Government to subsidise the building of new coal-fired power plants, even as investors shy away. Turnbull has refused to rule it out, while his deputy Joyce has talked up the potential for the Government taking an equity stake in any new plant.

For now, the official political line is that all energy sources need to be in the mix. Just don’t rule out coal.

“When it comes to energy sources, ours

is a technology-- neutral and all - of- t he- above approach,” Frydenberg said in an emailed response to questions. “With a significant amount of base-load generation being phased out over the next 15 years, we need to ensure we are prepared and have enough power to meet future needs,” said the Minister.

Joyce, whose New England electorate in rural New South Wales is home to coal mines, is typically more blunt. Not having any coal-fired power generation in Australia is “an absurdity,” he has said.

Australia exported more coal than any other country in 2015 and has the fourth-largest share of the planet’s coal resources, the Department of Industry, Innovation and Science said in December.

Still, the existing and perceived political and environmental costs attached to coal are deterring lenders.

“The high risk and cost associated with new coal plants make investors and financiers run a million miles from it in Australia,” said Ali Asghar, an analyst with Bloomberg New Energy Finance in Sydney.

“The only way new coal could get built is if the Government funds it and indemnifies any private entity against all future carbon risks.”

And doing so makes little sense, given that the cost of building cleaner, so-called high-efficiency, low-emission coal plants in Australia exceeds that of new projects relying on solar, wind, or gas, Asghar said.

“As solar and wind become cheaper and continue to undermine the economics of operating coal, investment in new coal plants become an even riskier proposition.”

Coal doesn’t have a long-term future . . . the writing’s on the wall Elon Musk