The central organising principle of the Finkel review is the adoption of a technology neutral approach to energy policy. Although that is an important step forward, the review falls short of its own guiding principle in two fundamental respects.
First, the review describes itself as a “once in a generation” opportunity to develop a reliable, low emissions energy system. Then it studiously ignores the only zero emissions baseload energy source available – nuclear power. That’s despite the fact that more than half the world’s population live in countries that have access to nuclear power. The review team justifies this on the basis there is no point recommending options that are politically difficult. In other words, the once in a generation review has missed a once in a generation opportunity to prod Australia’s major political parties into a genuine and comprehensive technology neutral approach.
Second, the review implies that new High Efficiency Low Emissions (HELE) coal generation does not qualify as “clean energy”. There are at least three reasons why this is a flawed presumption, with potentially adverse consequences for the cost and reliability of Australia’s energy system.
First, the emissions baseline adopted in the review’s modelling is completely arbitrary – it is high enough to include open cycle gas generation and just low enough to exclude new coal generation. The reality is that new super-efficient coal generation has played a fundamental role in reducing global CO2 emissions over recent decades.
In our case, replacing Hazelwood with a new HELE plant would bring CO2 emissions savings of more than 50 per cent. Similar savings would be achieved with HELE replacements for the Yallourn plant in the Latrobe Valley and the Liddell plant in NSW, due for retirement over the next decade. A new state-of-the-art plant has been proposed for north Queensland that would help remedy their energy shortfall and high energy costs.
We would simply be emulating the efforts of dozens of countries to meet their Paris climate targets.
Germany is building new low emissions coal plants that can ramp up and down to integrate with intermittent renewables. Japan, the pioneer of HELE technology, has plans for an additional 45 coal plants. China has built 400 new units to replace old, polluting plants and has plans for hundreds more.
A recent IEA Clean Coal Centre report noted that China’s recent embrace of HELE technology had reduced its emissions footprint by 450 million tonnes of CO2 per annum. Meanwhile India has more than 600 plants planned and South-East Asia is building dozens of plants over the next decade.
In other words, if the government adopts the implicit Finkel review baseline, the only country in East Asia that doesn’t regard new super-efficient coal plants as clean energy will be Australia, the world’s largest coal exporter.
The Finkel review counters that its recommendations do not prohibit or even discourage new coal-fired generation in Australia. On this logic, the Renewable Energy Target did not disadvantage coal and gas generation either. The problem is the empirical evidence does not support this proposition – over the last eight years of the operation of the RET not a single new baseload coal or gas generation unit was built.
And is it really plausible that an Australian government, of any political stripe, will support new power generation – of any kind – if it does not meet the government’s own (arbitrary) classification of “clean energy”. A related point is that any emissions baseline should take account of the fact that Australia’s wind and solar farms only produce energy about one-third of the time and need to be backed up by coal or gas. There is no zero emissions renewable energy. Some say batteries are the answer. Maybe. That said, it was only a year ago that the Chief Scientist warned that if you took all the batteries from all the mobile phones, laptops and cars and used them as a back-up global energy system you would have nine seconds of power.
The bottom line is cost. New coal generation is the cheapest energy option around and it is the most reliable. That’s as true in Australia as it is in East Asia where 1250 new HELE units are under construction or planned. This technology is not subject to the vagaries of volatile gas markets or that of the weather. As the old coal plants are retired over the next decade, a singular reliance on gas markets and renewables with batteries or pumped hydro is quite a risk play on our industrial base.
The best, more affordable and reliable energy mix is a balanced one with contributions from gas, renewables, new HELE coal, and later from carbon capture and storage as well as (eventually) nuclear. To get there we need a genuine and comprehensive technology neutral approach.
The Finkel review has made a valuable contribution to this objective but with a couple of important exceptions.
Brendan Pearson is chief executive of the Minerals Council of Australia. This op-ed first appeared in the Financial Review.