Following a campaign by the coal industry, Prime Minister Malcolm Turnbull has argued for new coal-fired power stations in Australia. But these plants would be more expensive than renewables and carry a huge liability through the carbon emissions they produce.
Major Australian energy companies have ruled out building new coal plants. The Australian Energy Council sees them as “uninvestable”. Banks and investment funds would not touch them with a barge pole. Only government subsidies could do it.
It may seem absurd to spend large amounts of taxpayers’ money on last century’s technology that will be more costly than renewable power and would lock Australia into a high-carbon trajectory.
But the government is raising the possibility of government funding for new coal plants, with statements by Deputy Prime Minister Barnaby Joyce, Treasurer Scott Morrison and Environment and Energy Minister Josh Frydenberg. The suggestion is to use funding from the Clean Energy Finance Corporation. For this to happen, presumably the CEFC’s investment mandate would need to be changed, or the meaning of “low-emissions technologies” interpreted in a radical way.
It should come to nothing, if minimum standards of sensible policy prevailed.
But an ill wind is blowing in Australia’s energy and climate policy debate. The situation in parliament is difficult, and the Trump presidency is giving the right wing in the Coalition a boost.
Definitely not ‘clean’
Proponents of new coal plants call them “clean coal”. They have appropriated a term that normally means burning coal in power stations with carbon capture and storage, a technology that filters out most of the carbon dioxide. But this is expensive and has made little progress.
Turnbull and others are simply suggesting Australia build the latest generation of conventional coal-burning plants. They are not clean – merely marginally less polluting than the old plants running now.
A new high-efficiency coal plant run on black coal would produce about 80% of the emissions of an equivalent old plant. An ultra-supercritical coal plant running on black coal emits about 0.7 tonnes of CO₂ per megawatt hour of electricity, or about 0.85 tonnes using brown coal. That is anything but clean.
For comparison, typical old “dirty” black coal plants in operation now emit around 0.9 tonnes, so the improvement from replacing them with the latest technology is not large. Gas plants produce between 0.4-0.6 tonnes, much less than the suggested new coal plants. Gas has the added benefit of being able to respond flexibly to demand. A plant with carbon capture and storage might emit around 0.05 tonnes, and renewables zero.
The Australian grid average right now is around 0.8 tonnes and gradually falling. New coal would tend to keep that average higher over the long term.
A single typically sized new coal plant could blow out in the order of 5 million tonnes of CO₂ each year – about 1% of Australia’s current annual emissions – and would have an expected lifetime of 40-60 years. It would also pollute the air locally, as all coal plants do, causing damage to people’s health.
If we wanted to make up for the extra coal emissions by doing more in industry, transport or agriculture, then this would come at a cost in those parts of the economy. In-depth research has shown that decarbonisation of Australia’s economy needs to have zero-carbon electricity supply at its core.
What if we don’t care about the climate?
Building coal power plants is expensive. The average lifetime cost of producing power with ultra-super critical plants in Australia is estimated at around A$80 per megawatt-hour. This assumes financing is available at standard interest rates and that the plant runs at high capacity.
Given the risk that the plants will be liable under stricter carbon limits in the future, the financing costs are bound to be higher, probably north of A$100 – and may be as much as A$160. If the plant is not fully utilised, as is already the case for existing coal plants, average costs will be even higher.
By comparison, wind farms now get built at an average cost of A$75 per megawatt-hour, and solar parks at around A$110. Both are expected to come down to perhaps A$50 by 2025. New coal plants take many years to prepare and build, so 2025 is the relevant comparison.
In fact, the overall comparison costs for renewables are even lower. This is because wind and solar built in 2025 would be replaced in the 2050s with even cheaper systems.
There are extra costs associated with wind and solar – for instance, through pumped-hydro storage or more gas-fired power plants to balance supply. But these costs are far less than the underlying cost of renewables.
So renewables including system integration costs will be cheaper than new coal plants, perhaps by quite a margin. Let’s say, very conservatively, that renewables are A$20 per megawatt-hour cheaper. For the coal plant that’d be an extra cost of A$150 million per year, or A$6 billion over 40 years. The extra cost could be much higher if the plant was retired before the 2060s or not run at full capacity.
The subsidy required would be potentially billions of dollars for each plant. That’s billions of dollars from the taxpayer or electricity user, in order to supply power with high carbon emissions that are then locked in for half a century. It should not happen in a country that prides itself on rational economic policy.
Instead, government should set its sights on the long-term economic opportunities for Australia in a low-carbon world, and chart a path for the transition of the energy system.
Turnbull referred to Australia’s position as a coal exporter. But a revolution is under way in energy technologies. While coal will continue to be used in existing plants, the times of growing coal use are over. Already more than 70% of the world’s annual power sector investment goes to renewables.
Australia is lucky in that there are no limits to the amount of renewable energy that could be produced. New industries can be built around it. We should invest in the industries of the future, not sink more money into the technologies of last century.
In a speech to the National Press Club yesterday, Prime Minister Malcolm Turnbull declared that the key requirements for Australia’s electricity system are that it should be affordable, reliable, and able to help meet national emissions-reduction targets. He also stressed that efforts to pursue these goals should be “technology agnostic” – that is, the best solutions should be chosen on merit, regardless of whether they are based on fossil fuels, renewable energy or other technologies.
As it happens, modern wind, solar photovoltaics (PV) and off-river pumped hydro energy storage (PHES) can meet these requirements without heroic assumptions, at a cost that is competitive with fossil fuel power stations.
Turnbull and his government have also correctly identified energy storage as key to supporting high system reliability. Wind and solar are intermittent sources of generation, and while we are getting better at forecasting wind and sunshine on time scales from seconds to weeks, storage is nevertheless necessary to deliver the right balance between supply and demand for high penetration of wind and PV.
Storage becomes important once the variable renewable energy component of electricity production rises above 50%. Australia currently sources about 18% of its electricity from renewables – hydroelectricity in the Snowy Mountains and Tasmania, wind energy and the ever-growing number of rooftop PV installations.
Meanwhile, in South Australia renewable energy is already at around 50% – mostly wind and PV – and so this state now has a potential economic opportunity to add energy storage to the grid.
To help realise this potential, in South Australia and elsewhere, the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) will spend A$20 million of public funds on helping flexible capacity and large-scale energy storage projects become commercially viable, including pumped hydro and batteries.
PHES constitutes 97% of worldwide electricity storage. The retail market for household storage batteries such as Tesla’s Powerwall is growing, but large-scale storage batteries are still much more expensive than PHES. “Off-river” pumped hydro has a bright future in Australia and many other countries, because there are very many suitable sites.
Wind and PV are the overwhelming winners in terms of new low-emissions electricity generation because they cost less than the alternatives. Indeed, PV and wind constituted half of the world’s new generation capacity installed in 2015 and nearly all new generation capacity installed in Australia.
Recently, we modelled the National Electricity Market (NEM) for a 100% renewable energy scenario. In this scenario wind and PV provide 90% of annual electricity, with existing hydro and bioenergy providing the balance. In our modelling, we avoid heroic assumptions about future technology development, by only including technology that has already been deployed in quantities greater than 100 gigawatts – namely wind, PV and PHES.
Reliable, up-to-date pricing is available for these technologies, and our cost estimates are more robust than for models that utilise technology deployment and cost reduction projections that are far different from today’s reality.
In our modelling, we use historical data for wind, sun and demand for every hour of the years 2006-10. Very wide distribution of PV and wind across the network reduces supply shortfalls by taking advantage of different weather systems. Energy balance between supply and demand is maintained by adding sufficient PHES, high-voltage transmission capacity and excess wind and PV capacity.
Not an expensive job
The key outcome of our work is that the extra cost of balancing renewable energy supply with demand on an hourly, rather than annual, basis is modest: A$25-30 per megawatt-hour (MWh). Importantly, this cost is an upper bound, because we have not factored in the use of demand management or batteries to smooth out supply and demand even more.
What’s more, a large fraction of this estimated cost relates to periods of several successive days of overcast and windless weather, which occur only once every few years. We could make substantial further reductions through contractual load shedding, the occasional use of legacy coal and gas generators to charge PHES reservoirs, and managing the charging times of batteries in electric cars.
Using 2016 prices prevailing in Australia, we estimate that the levelised cost of energy in a 100% renewable energy future, including the cost of hourly balancing, is A$93 per MWh. The cost of wind and PV continues to fall rapidly, and so after 2020 this price is likely to be around AU$75 per MWh.
Crucially, this is comparable with the corresponding estimated figure for a new supercritical black coal power station in Australia, which has been put at A$80 per MWh.
Meanwhile, a system developed around wind, PV and PHES and existing hydro can deliver the same reliability as today’s network. PHES can also deliver many of the services that enable a reliable energy system today: excellent inertial energy, spinning reserve, rapid start, black start capability, voltage regulation and frequency control.
Australia’s fossil fuel fleet is ageing. A good example is the pending closure of the 49-year-old Hazelwood brown coal power station in Victoria’s Latrobe Valley. An ACIL Allen report to the Australian Government lists the technical lifetime of each power station, and shows that two-thirds of Australia’s fossil fuel generation capacity will reach the end of its technical lifetime over the next two decades.
The practical choices for replacing these plants are fossil fuels (coal and gas) or existing large-scale renewables (wind and PV). Renewables are already economically competitive, and will be clearly cheaper by 2030.
Energy-related greenhouse gas emissions constitute about 84% of Australia’s total. Electricity generation, land transport, and heating in urban areas comprise 55% of total emissions. Conversion of these three energy functions to renewable energy is easier than for other components of the energy system.
Transport and urban heating can be electrified by deploying electric vehicles and heat pumps, respectively. Electric heat pumps are already providing strong competition for natural gas in the space and water heating markets. Importantly, these devices have large-scale storage in the form of batteries in vehicles, and thermal inertia in water and buildings. Well-integrated adoption of these technology changes will help reduce electricity prices further.
So wind, PV and PHES together yield reliability and affordability to match the current electricity system. In addition, they facilitate deep cuts to emissions at low cost that can go far beyond Australia’s existing climate target.
Andrew Blakers, Professor of Engineering, Australian National University; Bin Lu, PhD Candidate, Australian National University, and Matthew Stocks, Research Fellow, ANU College of Engineering and Computer Science, Australian National University