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King Coal's troubled future « Previous | |Next »
July 7, 2013

The fossil fuel industry has a troubled future. It is constrained by political decisions to limit emissions, declining demand and by the lack of, or the high cost, of finance.

In a carbon constrained world-, where the commonwealth has acted to reduce the emissions from the power stations through carbon pricing, state governments in Australia (Queensland, WA and NSW ) are finding it increasingly uneconomic to protect their existing fossil fuel assets, such as their coal-fired power stations through various kinds of subsidies to the coal-based generators.

For instance, in NSW the coal-fired power stations were unable to compete with other power sources unless their coal was supplied at around one quarter of the cost of export coal. So the state Labor government started to build a new coal mine--- the Cobbora coal mine near Dubbo ----and ship the subsidised commodity to the state’s black coal generators so they could have cheap black coal. The new Liberal NSW government has decided to cut its losses and dump Cobbora.

WA invested $250 million into a failed attempt to upgrade the ageing and dirty Muja power station, and the plan is now abandoned and the money lost. Successive Victorian governments entered into controversial deals to extend and protect the life of the ageing brown coal generators in the Latrobe Valley.

The economic reality facing the fossil fuel industry is that electricity from unsubsidised renewable energy will soon be cheaper than electricity from new-build coal and gas-fired power stations in Australia.The assumption that fossil fuels are cheap and renewables are expensive is looking to be out of date. The energy future is that the Australian economy is likely to be increasingly powered by renewable energy and that investment in new fossil-fuel power generation may be limited because they will be too expensive.

| Posted by Gary Sauer-Thompson at 12:47 PM | | Comments (3)
Comments

Comments

Our coal-fired plants are old and inefficient. Most of the coal fleet was built between the mid-1960s and the mid-1980s and are stuck with old technology.

Even though the average coal-fired power plant has long since recovered its initial capital costs, in order to remain in service and competitive, most coal-fired plants will require expensive refits. This is proving to be uneconomic for some.

It looks as if the fossil fuel plants in the future will have to operate for fewer hours and at much lower levels of average capacity. But coal plants are not well suited to act as peaking plants backing up wind and solar generation. Gas-fired plants are more effective.

"Gas-fired plants are more effective.

The explosion in coal seam gas CSG production that will see wholesale gas prices double or triple over the next few years.

Matt Grudnoff says that this is because the soon to be completed:

LNG facilities near Gladstone will allow gas producers to choose to sell to domestic consumers or liquefy and ship their gas to international buyers. The eastern Australian gas market will be linked to the world market and the world price. Any expansion in gas production will see an expansion in export facilities, not a fall in price.

CSG in Australia is not designed to benefit Australian gas consumers but rather the foreign owners of the gas companies exporting their liquefied gas.

I'm so glad to see the fossil subsidy issue being raised. The "coal cheap, renewables expensive" chant is hardly ever interrupted by anybody asking if "coal cheap" is a subsidised price - which it is.

Crikey did a couple of good reports on this in 2011, but for some reason when I put the links in a comment here my link falls over.