Federal Resources Minister Matt Canavan has described Adani as a “little Aussie battler” and praised the newly scaled-down project’s purported regional economic benefits.
The scaling down of the project has been extensive. Adani Mining chief executive Lucas Dow said the mine will cost A$2 billion and initially produce up to 15 million tonnes of thermal coal per year, with plans to ramp production up to 27.5 million tonnes per year.
That is far more modest than the A$16.5 billion investment in digging up 60 million tonnes of coal a year which the company first announced in 2010. The original plan was to transport the coal along a new 388km rail line to a specially built terminal at Adani’s Abbot Point coal port, for export to India. Under the scaled-down version of the project, Adani will need to secure access to existing rail infrastructure.
The economics barely stack up either. A recent IEEFA report indicated that coal is facing a terminal decline as Asian markets make the transition to cheaper and more efficient renewable alternatives. Existing thermal coal power in India costs US$60-80 per megawatt-hour, roughly double the cost of new renewable generation. The Mundra coal plant, where much of the Adani coal was destined, is already operating under capacity and has been closed for significant periods.
Adani has decided not to proceed with its initially planned 388km rail link, and will instead aim to use the existing Aurizon rail infrastructure. However, there is a 200km gap in this link which will cost a significant amount to bridge – albeit almost certainly much less than the A$2.3 billion cost of the originally planned railway. Aurizon Network is legally obliged to consider Adani’s access application, but has not yet assessed and approved it.
Environmental and Indigenous issues
Then there are the existing and significant concerns regarding Adani’s environmental management of issues such as water contamination in the Caley Valley Wetlands near the Abbot Point terminal. These will not disappear just because the project has been revised.
Gaining the consent of Traditional Owners will also be crucial, yet the 12-member native title representation group is split down the middle. Adani’s existing Indigenous Land Use Agreement has been appealed in the High Court by the Wangan and Jagalingou people, on the basis that the group has not genuinely consented to the agreement, and that overriding native title to make way for a coalmine is socially and culturally regressive. If the court does not uphold the agreement, this would create profound difficulties for the project as they may not be able to proceed with the development of the coal mine to the extent that it interferes with Indigenous landholdings.
So, while the decision of Adani to self-fund a scaled-down coalmine in Queensland might indicate determination, it also suggests a resistance to, and misunderstanding of, a rapidly changing energy sector and the broader social and environmental responsibilities that this change necessitates.
Opposition Leader Bill Shorten announced last week that a federal Labor government would create a Just Transition Authority to overseee Australia’s transition from fossil fuels to renewable energy. This echoes community calls for a “fast and fair” energy transition to avoid the worst impacts of climate change.
Based purely on the technical lifetime of existing power stations, the Australian market operator predicts that 70% of coal-fired generation capacity will be retired in New South Wales, South Australia and Victoria by 2040. If renewables continue to fall in price, it could be much sooner.
We must now urgently decide what a “just” and “fair” transition looks like. There are many Australians currently working in the energy sector – particularly in coal mining – who risk being left behind by the clean energy revolution.
Coal communities face real challenges
The history of coal and industrial transitions shows that abrupt change brings a heavy price for workers and communities. Typically, responses only occur after major retrenchments, when it is already too late for regional economies and labour markets to cope.
Coal communities often have little economic diversity and the flow-on effects to local economies and businesses are substantial. It is easy to find past cases where as many as one third of workers do not find alternative employment.
We often hear about power stations, but there are almost 10 times as many workers in coal mining, where there is a much higher concentration of low and semi-skilled workers. The 2016 Census found almost half of coal workers are machinery operators and drivers.
The demographics of coal mining workers in Australia suggest natural attrition through early retirements will not be sufficient: 60% are younger than 45.
Mining jobs are well paid and jobs in other sectors are very unlikely to provide a similar income, so even under the best scenarios many will take a large pay cut.
Another factor is the long tradition of coal mining that shapes the local culture and identity for these communities. Communities are particularly opposed to change when they experience it as a loss of history and character without a vision for the future.
Lastly, the local environmental impacts of coal mining can’t be neglected. The pollution of land, water and air due to mining operations and mining waste have created brownfields and degraded land that needs remediation.
However, using the concept of energy justice, there are three main aspects which have to be considered for workers, communities and disadvantaged groups:
distributing benefits and costs equally,
a participatory process that engages all stakeholders in the decision making, and
recognising multiple perspectives rooted in social, cultural, ethical and gender differences.
A framework developed at the Institute for Sustainable Futures maps these dimensions.
A just transition requires a holistic approach that encompasses economic diversification, support for workers to transition to new jobs, environmental remediation and inclusive processes that also address equity impacts for marginalised groups.
The politics of mining regions
If there is not significant investment in transition plans ahead of coal closures, there will be wider ramifications for energy transition and Australian politics.
In Australia, electricity prices have been at the centre of the “climate wars” over the past decade. Even with the steep price rises in recent years, the average household still only pays around A$35 a week. But with the closure of coal power plants at Hazelwood and Liddell, Australia is really only just getting to the sharp end of the energy transition where workers lose jobs.
There are some grounds for optimism. In the La Trobe Valley, an industry wide worker redeployment scheme, investment in community projects and economic incentives appears to be paying dividends with a new electric vehicle facility setting up.
AGL is taking a proactive approach to the closure of Liddelland networks are forming to diversify the local economy. But a wider transition plan and investment coordinated by different levels of government will be needed.
The federal government has announced a raft of new measures ostensibly designed to secure energy pricing, boost investment in new “reliable” energy generation, and improve competitiveness in the retail energy market.
One of the main reasons new coal projects do not proceed is because of the “unquantifiable” financial risk of carbon. Former Clean Energy Finance Corporation chief executive Oliver Yates has argued that coal-fired power generation would not be financially backable without the government providing indemnity against future carbon taxes.
He may have meant it as a reason not to proceed with coal at all, but federal energy minister Angus Taylor has signalled that he is seriously considering such a move.
The federal government says its new proposals are based on recommendations made in a July report by the Australian Competition and Consumer Commission (ACCC), aimed at ensuring affordable electricity. But there are some key differences between the report’s recommendations and the government’s plans.
The crucial one, at least as far as coal’s fortunes are concerned, is the proposal for the government to enter into contracts called “energy offtake agreements”. Under this approach, the government would agree to buy future electricity at a set price, from new generation projects that could include coal-fired electricity from either new coal plants or refitted coal plants. This, the government argues, would keep power prices in line while also providing greater investment certainty and make energy projects easier to finance.
The ACCC report did indeed recommend underwriting new power generation investments, but not with the obvious goal of propping up coal. Rather, it recommended that this support be directed to “appropriate new generation projects which meet certain criteria”, so as to reduce prices by boosting market competition.
It is hard to see how the government’s desire to artificially sustain the life of coal-fired electricity – in the face of ever-worsening economic prospects – is consistent with either the ACCC’s rationale of supporting sustainable, new generation energy projects in order to improve competition in the energy market.
Federal shadow climate change minister Mark Butler has indicated he would not support the inclusion of coal in any such agreements, and that the plan could cost taxpayers billions.
Is coal ‘new generation’ or not?
Taylor has argued that the backing and guarantees for new electricity generation could well include coal, because “it may well be that the best options we have available to us are expansions of existing coal facilities”.
But the reality, given our climate targets, is that coal can only be an option where it is supported by clean technology. And even the cleanest of “clean coal” is not on a par with renewable energy.
The latest generation of high-efficiency “ultra-supercritical” coal-fired plants are very expensive to build and run, particularly if they include carbon capture and storage – which they would certainly need to. If all of Australia’s existing coal plants were replaced with ultra-supercritical ones that did not include expensive carbon capture and storage technology, emissions would fall by between 26 million and 40 million tonnes by 2030. But Australia’s climate target calls for a reduction of 160 million tonnes by that deadline.
On the other hand, with carbon capture and storage, the emissions reductions would be much greater, but the electricity could cost up to three times the current wholesale price. This would mean the government would be effectively subsidising the production of electricity that is more expensive and more environmentally damaging than renewables.
This raises the ultimate question of why – given Australia’s emissions targets and its responsibilities under the Paris Agreement – the government is prepared to subsidise coal-fired electricity at all.
There is no doubt that climate change is an important public concern. The attempt to characterise Taylor as “minister for getting power prices down” belies the fact that energy policy is not just about price and reliability, but about broader social and environmental welfare too. Electricity absolutely must be sustainable as well as affordable.
This is what energy security means today. Carbon-intensive energy production is neither environmentally sustainable nor financially viable. It is that simple. That is precisely why the financial risks of carbon are so high.
One of the key questions any industry must consider is: what is left behind when it is finished. For coal seam gas (CSG), this question is crucial, considering the thousands of CSG wells that have already been drilled, not to mention the many more that could potentially be drilled in the future.
While most CSG wells will not be decommissioned until the later stages of a project, some wells are decommissioned earlier as they are no longer used for activities such as exploration, monitoring or production. This provides an opportunity to ask the key question: what does successful decommissioning of CSG wells look like?
Australia has around 6,000 CSG wells in active production, mostly in Queensland, and a growing number of decommissioned wells. Our new research looks at perspectives on decommissioning at different stages of the life cycle, including places where the industry is winding down (Camden, New South Wales), where it is continuing (Chinchilla, Queensland), and where future CSG development has been proposed but not yet approved (Narrabri, NSW).
We held a workshop in each of these places, bringing together between 8 and 16 people from state agencies, industry and local community in each location.
Workshop participants agreed strongly on several key principles: that decommissioned wells should never leak; that they should not impinge on future land uses; and that they should be barely noticeable.
Across all workshops, the majority of government and industry representatives expressed strong confidence in the code of practice for each state. When decommissioned correctly, they argued, old CSG wells would not cause legacy problems and would not require further action.
In contrast, a majority of local community participants tended to lack confidence in these codes of practice, and said that clear information about well decommissioning was hard to access or understand. As a result, they had markedly less confidence in the decommissioning process.
Our results suggest that clear, easily accessible information about CSG well decommissioning would help reduce this divergence of views. Publication of factsheets by government, outlining the regulatory processes, who is responsible, ownership questions and what would happen if there were a long-term problem, would help to improve confidence in the decommissioning process.
Another way to improve trust would be for industry to provide plain language summaries of well completion and decommissioning reports, with local stakeholders given details on when, how and where to access them.
The ultimate authority to decide whether decommissioning and rehabilitation have been properly completed lies with the state regulator. Both Queensland and NSW have similar regulations for decommissioning of CSG wells, drawing on international experiences and lessons from past practice.
Decommissioning involves rehabilitating the surface around the well pad, and plugging and abandoning the well. Abandonment involves preventing the flow of gas or fluid with cement plugs placed throughout the well.
Consultation with landholders is required in both jurisdictions. Landholders declare whether they are satisfied with rehabilitation works, and can also negotiate to retain infrastructure such as fences or concrete slabs, if that suits their future objectives.
Regulators in both states require companies to make a deposit that covers the full costs of decommissioning, as a way of protecting against companies defaulting on their obligations.
Monitoring was another important issue raised through the workshops. Because the confidence held by government and industry representatives in the codes of practice was so strong and informed by lessons from decades of practice overseas, monitoring has not been seen to be required so far for decommissioned wells, after all steps in the code of practice were completed.
But local community members disagreed, arguing that ongoing monitoring of decommissioned wells is crucial to detecting and addressing any potential future problems. Instigating a program to monitor decommissioned CSG wells, with publicly accessible results, would go a long way towards addressing the concerns raised by residents and increasing confidence in the industry more broadly.
Different stakeholders in the CSG industry will not necessarily see eye-to-eye on all aspects of how the industry is managed. That’s why understanding their different perspectives is an important step towards providing reassurance about the legacy left by coal seam gas wells.
These steps could include monitoring abandoned CSG wells and improved mechanisms to deal with public enquiries, questions and complaints.
The Integrated System Plan is a comprehensive, systems-engineering assessment. Its goal is to identify the lowest-cost combination of investments and decisions over the next 20 years, to support Australia’s energy transition to a low-emissions future.
The assessment uses an economic model of the system that includes maintaining reliability, reducing greenhouse gas emissions, closing existing plants when they reach the end of their technical life, and adopting lowest-cost replacement technologies.
AEMO considers two emissions reduction scenarios: the first is based on Australia’s current target under the Paris Agreement (a 26-28% reduction below 2005 level by 2030). The second adopts a target closer to that recommended by the Climate Change Authority and assessed by CSIRO as a fast change scenario (a 52% reduction by 2030).
In both scenarios existing coal-fired power stations close, either on their planned closure date (for those where such a date has been announced), or once they are 50 years old. Around 14 gigawatts (GW) of a total 23GW of coal-fired generation capacity will retire by 2040. As these plants close, a mixture of gas-fired generation, renewable energy, and storage (particularly pumped hydro) is projected to be the lowest-cost way to replace them.
The ISP is not technology-prescriptive, but it doesn’t include new coal-fired generators.
It is hardly surprising that the ISP supports maintaining the existing coal-fired generation facilities up to the end of their technical lives, to minimise costs. Coal-fired power stations represent big up-front capital investments that then produce relatively cheap electricity. But, like all such plants, they become increasingly expensive to operate and unreliable as they age. Keeping them operating beyond their technical life will become more expensive than replacing them with new generation. The ISP is closely aligned with the reliability requirements of the Finkel Blueprint and the National Guarantee to ensure closure is carefully planned.
Unfortunately for new coal investment, what will be more valuable in the future is much greater flexibility to deal with changes in supply and demand. Coal-fired power stations, existing or new, make their best contribution when they operate at very high levels – that is, 80-90% of the time. Upgrading transmission lines between states, can raise the occupancy level and lower the cost of existing power stations.
The NEM needs to transform to support widely distributed renewable generation. Historically, electricity has been generated by centralised, large power stations. New generation is likely to involve a mix of small and large renewable assets over much larger areas. This mix of generation technologies will require investment in the transmission network.
The central recommendation of the ISP is a three-stage development of the transmission network to support the new world of distributed energy and storage. The immediate stage is focused on transmission upgrades to address bottlenecks and connect regional renewable energy plants.
The second phase (2020-30) continues this approach and extends to connecting strategic storage initiatives – Snowy Hydro 2.0 and the Tasmanian Battery of the Nation.
The third stage (2030-40) further augments interstate transmission and included intrastate connections for renewable energy zones (REZ) located in regional Australia.
The ISP provides a hard-nosed engineering and cost assessment of what our energy system needs. It applies neither an accelerator nor a brake to the closure of existing coal-fired power stations. We need more of this approach and less ideology if we really want to see a lowest-cost, reliable and low-emissions future for Australia.
As the federal government aims to ink a deal with the states on the National Energy Guarantee in August, it appears still to be negotiating within its own ranks. Federal energy minister Josh Frydenberg has reportedly told his partyroom colleagues that he would welcome a new coal-fired power plant, while his former colleague (and now Queensland Resources Council chief executive) Ian Macfarlane urged the government to consider offering industry incentives for so-called “clean coal”.
Solar PV and wind are now cheaper than new-build coal power plants, even without carbon capture and storage. Unsubsidised contracts for wind projects in Australia have recently been signed for less than A$55 per MWh, and PV electricity is being produced from very large-scale plants at A$30-50 per MWh around the world.
As the graph below shows, medium to large (at least 100 kilowatts) renewable energy projects have been growing strongly in Australia since 2017. Before that, there was a slowdown due to the policy uncertainty around the Renewable Energy Target, but wind and large scale solar are now being installed at record rates and are expected to grow further.
As the graph also shows, this has been accompanied by a rapid increase in employment in the renewables sector, with roughly 4,000 people employed constructing and operating wind and solar farms in 2016-17. In contrast, employment in biomass (largely sugar cane bagasse and ethanol) and hydro generation have been relatively static.
Although employment figures are higher during project construction than operation, high employment numbers will continue as long as the growth of renewable projects continues. As the chart below shows, a total of 6,400MW of new wind and solar projects are set to be completed by 2020.
The Queensland question
Australia’s newest coal-fired power plant was opened at Kogan Creek, Queensland in 2007. Many of the political voices calling for new coal have suggested that this investment should be made in Queensland. But what’s the real picture of energy development in that state?
There has been no new coal for more than a decade, but developers are queuing up to build renewable energy projects. Powerlink, which owns and maintains Queensland’s electricity network, reported in May that it has received 150 applications and enquiries to connect to the grid, totalling 30,000MW of prospective new generation – almost all of it for renewables. Its statement added:
A total of more than A$4.2 billion worth of projects are currently either under construction or financially committed, offering a combined employment injection of more than 3,500 construction jobs across regional Queensland and more than 2,000MW of power.
As the map below shows, 80% of these projects are in areas outside South East Queensland, meaning that the growth in renewable energy is set to offer a significant boost to regional employment.
Tropical North Queensland, in particular, has plenty of sunshine and relatively little seasonal variation in its climate. While not as windy as South Australia, it has the advantage that it is generally windier at night than during the day, meaning that wind and solar energy would complement one another well.
Renewable energy projects that incorporate both solar and wind in the same precinct operate for a greater fraction of the time, thus reducing the relative transmission costs. This is improved still further by adding storage in the form of pumped hydro or batteries – as at the new renewables projects at Kidston and Kennedy.
Remember also that Queensland is linked to the other eastern states via the National Electricity Market (NEM). It makes sense to build wind farms across a range of climate zones from far north Queensland to South Australia because – to put it simply – the wider the coverage, the more likely it is that it will be windy somewhere on the grid at any given time.
This principle is reflected in our work on 100% renewable electricity for Australia. We used five years of climate data to determine the optimal location for wind and solar plants, so as to reliably meet the NEM’s total electricity demand. We found that the most cost-effective solution required building about 10 gigawatts (GW) of new wind and PV in far north Queensland, connected to the south with a high-voltage cable.
Jobs and growth
This kind of investment in northern Queensland has the potential to create thousands of jobs in the coming decades. An SKM report commissioned by the Clean Energy Council estimated that each 100MW of new renewable energy would create 96 direct local jobs, 285 state jobs, and 475 national jobs during the construction phase. During operation those figures would be 9 local jobs, 14 state jobs and 32 national jobs per 100MW of generation.
Spreading 10GW of construction over 20 years at 500MW per year would therefore deliver 480 ongoing local construction jobs and 900 ongoing local operation jobs once all are built, and total national direct employment of 2,400 and 3,200 in construction and operations, respectively.
But the job opportunities would not stop there. New grid infrastructure will also be needed, for transmission line upgrades and investments in storage such as batteries or pumped hydro. The new electricity infrastructure could also tempt energy-hungry industries to head north in search of cheaper operating costs.
One political party with a strong regional focus, Katter’s Australia Party, understands this. Bob Katter’s seat of Kennedy contains two large renewable energy projects. In late 2017, he and the federal shadow infrastructure minister Anthony Albanese took a tour of renewables projects across far north Queensland’s “triangle of power”.
Katter, never one to hold back, asked “how could any government conceive of the stupidity like another baseload coal-fired power station in North Queensland?” Judging by the numbers, it’s a very good question.
Energy giant AGL this week unveiled plans to produce hydrogen power at its Loy Yang A coal station. But how do we transform coal, which is often thought of as simply made of carbon, into hydrogen – a completely different element?
In fact, coal is not just made of carbon. It also contains other elements, one of which is hydrogen. But to get a lot of hydrogen, the coal needs to be “gasified” rather than burned, creating compounds that can then be reacted with water to make hydrogen. This is where the majority of hydrogen comes from in this case – not from the coal itself.
In simple terms, coal is a mixture of two components: carbon-based matter (the decayed remains of prehistoric vegetation) and mineral matter (which comes from the ground from which the coal is dug). The carbon-based matter is composed of five main elements: carbon, hydrogen, oxygen, nitrogen and sulfur.
You can think of coal’s formation process as a progression from biomass (newly dead plant matter) to charcoal (almost pure carbon). Over time, the oxygen and some hydrogen are gradually removed, leaving more and more carbon behind.
Brown coal thus contains slightly more hydrogen than black coal, although the biggest difference between the two is in their carbon and oxygen contents.
We can understand gasification by first understanding combustion. Combustion, or burning, is the complete oxidation of a fuel such as coal, a process that produces heat and carbon dioxide. Carbon dioxide itself cannot be further oxidised, and thus is the non-combustible end product of the burning process.
In gasification, however, the coal is not completely oxidised. Instead, the coal is reacted with a compound called a gasification agent. Gasification is endothermic, which means it doesn’t produce heat. Quite the opposite, in fact – it needs heat input to progress. Because the resulting gas is not fully oxidised, that means it can itself be burned as a fuel.
So how do we make hydrogen?
Now we know the key concepts, let’s start again at the start. To produce hydrogen from coal, the process begins with partial oxidation, which means some air is added to the coal, which generates carbon dioxide gas through traditional combustion. Not enough is added, though, to completely burn the coal – only enough to make some heat for the gasification reaction. The partial oxidation also makes its own gasification agent, carbon dioxide.
Carbon dioxide reacts with the rest of the carbon in the coal to form carbon monoxide (this is the endothermic gasification reaction, which needs heat input). No hydrogen yet.
Carbon monoxide in the gas stream is now further reacted with steam, generating hydrogen and carbon dioxide. Now we are making some hydrogen. The hydrogen can then be run through an on-site fuel cell to generate high-efficiency electricity, although the plan at Loy Yang A is to pressurise the hydrogen and ship it off to Japan for their Olympic showcase.
Brown coals are generally preferred for gasification over black coals for several reasons, which makes the brown coal of Victoria’s Latrobe Valley a good prospect for this process.
The main reason is that, because of the high oxygen content of this type of coal, it is less chemically stable and therefore easier to break apart during the gasification reaction. Plus there is a small boost from the hydrogen that is already present in the coal.
Hydrogen produced in this way is not a zero-emission fuel. Carbon dioxide is emitted through the combustion and thermal decomposition reactions, and is also a product of the reaction between carbon monoxide and water to make hydrogen and carbon dioxide.
So why bother making hydrogen?
When hydrogen is used as a fuel, it releases only water as a byproduct. This makes it a zero-emission clean fuel, at least at the point of use.
Producing hydrogen from coal in a large, central facility means pollution control can be put in place. Particulates, and potentially carbon dioxide, can be removed from the gas stream very efficiently.
Gasification processes that use hydrogen fuel cells on site can substantially increase their efficiency compared with traditional coal-fired power. However, depending on the end-use of the hydrogen, and subsequent transport processes, you might be better off in terms of energy output, or efficiency (and therefore carbon emissions), just straight-up burning the coal to make electricity.
But by using gasification of coal to make hydrogen, we can start building much-needed infrastructure and developing consumer markets (that is, hydrogen fuel cell vehicles) for a truly clean future fuel.
I predict that hydrogen power will be zero-emission one day. It can be made in a variety of ways through pure water splitting (including electrolysis, or through solar thermochemical and photoelectrochemical technologies, to name a few). It’s not there yet in terms of price or practicality, but it is certainly on its way. Boosting development of the hydrogen economy through production from coal in the meantime is, in my book, not a terrible idea overall.