November 4th 2017


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Articles from this issue:

COVER STORY National Energy Guarantee: lots of smoke, but no coal-fired power

EDITORIAL Popular revolt against the ideology of globalism

CANBERRA OBSERVED Paris still rules in the party room

ENERGY Renewables and gas conspire to push up prices

ENVIRONMENT Climate change did not cause California fires

ELECTRICITY Consumers will wake up only when there are blackouts: economists

ECONOMICS Something new under the sun from China

NATIONAL AFFAIRS Abbott gets brickbats for exposing house of straw

NATIONAL AFFAIRS Australia is far from fulfilling its potential

TECHNOLOGY Aussie scientists 'write' with adult stem cells

75TH ANNIVERSARY NCC: new challenges, kind of new adversaries

MUSIC All around the beat: the essential drummer

CINEMA Happy Death Day: Deja vu with a sharp edge

BOOK REVIEW Traditions under threat fight back

BOOK REVIEW Journey to freedom

LETTERS

ENERGY Coal-fired power needed to restore economic growth

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ENERGY
Coal-fired power needed to restore economic growth


by Chris McCormack

News Weekly, November 4, 2017

The scaremongering and mistruths of the purveyors of anthropogenic climate change are threatening to destroy the economies of nations including Australia. One of the ways it is doing that is by engineering an ideologically driven loathing of coal.

The push to consign coal to history comes at a time when global coal reserves are estimated to last 153 years at current levels of consumption, triple the reserves-to-production ratio (r/p ratio) of oil (50.6 years) and gas (52.5 years).[1] The r/p ratio of coal was 147 years in 2006,[2] meaning coal reserves have increased rather than decreased over the past decade.

In Australia, the r/p ratio of coal is 294 years, nearly twice the global ratio, and up from 210 years in 2006.[3] Australia holds the fourth largest reserves of coal in the world, trailing only Russia, China and the United States.

These abundant coal reserves and coal’s role as a low-cost form of energy have been ignored where governments have been infiltrated by climate-change ideology and have adopted policies on the basis of combatting a problem seen only in computer modelling.

According to the BP Statistical Review of World Energy 2017, Australia’s carbon-dioxide emissions accounted for 1.2 per cent of the world’s carbon-dioxide emissions in 2016. In contrast, China’s carbon-dioxide emissions made up 27.3 per cent of the world’s emissions and the U.S. 16 per cent.[4] Despite this, Australia has succumbed to climate-change hysteria by channelling taxpayer-funded subsidies to renewable energy to the tune of $3 billion in the 2015–16 financial year alone.[5] This has had the effect of making coal-fired power generation uneconomical, as energy retailers are required to purchase renewable energy first.

While the Federal Government’s announced National Energy Guarantee will end renewable energy subsidies and ensure a certain level of base-load power, it also mandates that electricity retailers must purchase a portion of “clean” energy in order to reduce Australia’s carbon-dioxide emissions by 26 to 28 per cent by 2030. How these two competing policies will affect the viability of our lowest-cost form of energy (coal-fired power stations), and manage to reduce power prices, is one the Government has not satisfactorily explained.

While Australian coal production has increased markedly since 1996, growing from 133.9 million tonnes of oil equivalent (mtoe) to 299.3 mtoe in 2016,[6] our coal consumption has not followed suit. Domestic coal consumption grew from 42.8 mtoe in 1996 to a peak of 54.9 mtoe in 2008 but has fallen away since to arrive back around 1996 levels at 43.8 mtoe in 2016.[7]

Virtue signalling

Domestic consumption of coking or metallurgical coal (coal used in the manufacture of steel) has remained static since 2008.[8] So, despite 294 years’ worth of coal in the ground (that we know of) and strong demand for our export coal, Australian governments have seen fit to reduce our coal-burning energy production in pursuit of virtue signalling over a non-existent problem. As a result, domestic coal consumption has fallen from 1.7 per cent of total global coal consumption to 1.2 per cent of global coal consumption in the last decade.[9] By comparison, China’s coal consumption is 50.6 per cent of the global total, the U.S.’s 9.6 per cent, India’s 11 per cent, Japan’s 3.2 per cent and South Korea’s 2.2 per cent.[10]

Our largest and third largest export markets for thermal coal (coal burned in power stations), Japan and China,[11] are not so concerned about carbon-dioxide emissions (a harmless fertiliser) as to hold their populations hostage to “climate change” ideology and in so doing increase power prices and unreliability, destroying jobs and wealth. China and Japan are building and planning to build numerous new coal-fired power stations. At present, coal fuels 41 per cent of global electricity generation.[12]

Coal is king in China, Japan

The International Energy Agency’s World Energy Outlook 2015 Special Report says: “China is, and is projected to remain, the world’s largest consumer and producer of coal through to 2030.” China shows “no notable sign of decline by 2030” with “345 gigawatts of net new coal-fired capacity installed by that year – more than six times Australia’s existing total capacity for all energy types”.[13]

Japan is building 45 new coal-fired power stations after trialling renewables, the report says, in the wake of the Fukushima nuclear disaster. It abandoned renewables after finding they increased electricity prices by an average of 28.1 per cent.[14]

South Korea, our second largest export market for thermal coal,[15] has become a manufacturing powerhouse with the help of low-cost energy via nuclear and coal-fired power generation. But it seems the government is now willing to jeopardise its manufacturing advantage. President Moon Jae-in, elected in May 2017, has stated that he wants to increase renewable energy from 5 per cent to 20 per cent of electricity generation and gas from 19 per cent to 27 per cent by 2030. The gas would be imported via a proposed pipeline from Russia through North Korea.[16]

He plans to close 10 coal-fired power stations and will build no new ones as he moves to end the county’s reliance on coal. Additionally, he will not extend the life of any nuclear plants as he takes the country away from nuclear energy, nuclear energy having supplied a third of the country’s electricity in 2016.

South Korea had earlier planned to add 20.17 gigawatts of new coal-fired electricity generation from 2017–22, with $1 billion from the private sector already invested in the construction of new power plants. Fifty-nine coal-fired power plants currently generate around 40 per cent of the country’s electricity. The 10 planned closures will remove about 10.6 per cent of the total coal-fired power generation. President Moon also plans to close all coal-fired power plants aged 30 years or more within five years and spend $12.2 billion pursuing a cut to carbon-dioxide emissions of 37 per cent by 2030.[17]

President Moon was quoted in powermag.com saying: “So far South Korea’s energy policy pursued cheap prices and efficiency. Cheap production [costs] were considered the priority while the public’s life and safety took a back seat. But it’s time for a change. We will abolish our nuclear-centred energy policy and move towards a nuclear-free era.”[18]

While concerns over the safety of nuclear reactors in a seismic zone such as South Korea may have merit, the move away from coal-fired power generation seems to be purely ideological. The new Government seems to be prepared for higher prices and inefficiency in the system due to the unreliability of renewables and higher costs associated with gas power generation. The question is, how long will the public put up with it once higher power prices hit consumers and industry and threaten the manufacturing base and jobs.

Industry switch-off

Australia’s unbridled pursuit of free trade has decimated local manufacturing, the most recent example being the loss of our car industry, which, according to Holden, will mean 45,000 direct jobs lost and between135,000 and 270,000 indirect jobs lost.[19] The loss of manufacturing over recent decades is now masking the effect high power prices (as a result of turning away from low-cost coal-fired power generation) are having on industry as most of our manufacturing has been shipped offshore to countries with lower costs of production. Nonetheless, the effect of high electricity prices is real and apparent.

Glencore’s senior Australia-based executive, Peter Freyberg, told an audience in Sydney: “Electricity prices have got to a level where many industries, both large and medium, are either suffering or are becoming uneconomic because of high energy prices. Either we intervene now to protect those businesses or we let them go — that’s a government decision.” Glencore’s annual electricity bill from its coalmining and copper production in Australia is around $40 million.[20]

An unprecedented power outage to Portland’s Alcoa aluminium smelter[21] in December 2016 cost the company over $1 million a day after the outage damaged production lines.[22]

Some of South Australia’s largest employers, BHP Billiton, Arrium and Adelaide Brighton Cement have voiced serious concerns about the cost of doing business in SA after the Australian Industry Group estimated the cost of power price spikes over a three-week period in July last year to be more than $150 million.[23]

The rising cost of electricity is affecting the food and grocery sector as well. The ABC reported that research by Deloitte and the Australian Food and Grocery Council (AFGC) showed that 14,500 jobs in manufacturing could be lost due to the high price of gas. “I think absolutely there’s the potential for thousands of job losses in food and grocery manufacturing, and also a loss of investment, which is a loss of capability to be able to grow into export markets,” said AFGC chief executive Tanya Barden.[24]

Meat Industry Council general manager Patrick Hutchinson cited a lamb processor whose energy bill had increased by $600,000 in just one year. “In Victoria we’re seeing a number of sheep plants that are closing. We’ve seen major domestic beef processing go in Ipswich with 500 jobs,” he said.[25]

The reliance on higher-priced gas for essential base-load power is a direct consequence of the lack of investment in coal-fired power generation, which is itself a result of taxpayer-funded subsidies and schemes designed to replace coal with intermittent renewables. Wind and solar need base-load power to come to the rescue when the weather is unfavourable and the renewables can produce no power.

The irrational loathing of coal has led state and national governments, both here and abroad, to imperil their citizens with mass unemployment and high costs of living and the commensurate increase in mental health issues and crime rates that accompany an economy in decline.

If the Federal Government is to have any chance of re-election, it must adopt an energy policy that prioritises affordable and reliable energy without qualification. And it must show how power prices will be significantly reduced. The National Energy Guarantee does neither. If it miraculously manages to reduce electricity prices in three years’ time, the reduction will be so minuscule as not even to register with voters.

Reducing coal-powered electricity in an effort to reduce carbon-dioxide emissions is destroying our economy and livelihoods. Conversely, keeping coal as the low-cost and reliable basis for powering our economy could prevent more industry offshoring or shutting down.

 

References

[1] BP Statistical Review of World Energy June 2017, p36.

[2] BP Statistical Review of World Energy June 2007, p32.

[3] BP Statistical Review of World Energy June 2017, p36, BP Statistical Review of World Energy June 2007, p32.

[4] op.cit. [1], p47.

[5] Simon Benson, “Bill to prop up green power hits $3 billion a year”, The Australian, February 6, 2017.

[6] BP Statistical Review of World Energy June 2007, p34, BP Statistical Review of World Energy June 2017, p38.

[7] BP Statistical Review of World Energy June 2007, p35, BP Statistical Review of World Energy June 2017, p39.

[8] Ibid.

[9]  BP Statistical Review of World Energy June 2017, p39.

[10] “Resources: Australia’s major export commodities: Coal”, Australian Government-Department of Industry, Innovation and Science, p1.

[11] Coal Hard Facts, 2nd edition, Minerals Council of Australia, August 30, 2015.

[12] Ibid, p33.

[13] Ibid, p33.

[14] “Japanese firms struggle with electricity rates”, World Nuclear News, February 16, 2015.

[15] op. cit. [10], p1.

[16] Rod Adams, “Moon Jae-in Making Friends By Importing More Gas”, Forbes, July 12, 2017.

[17] Darrell Proctor, “South Korean President Details Phase-out of Coal, Nuclear Power”, Powermag.com, August 8, 2017.

[18] Ibid.

[19] Jason Dowling, “Who killed the car industry?”, The Sydney Morning Herald, November 13, 2015.

[20] Matt Chambers and Paul Garvey, “Cut power prices or business will go bust, says Glencore boss”, The Australian, August 3, 2017.

[21] Bridget Judd, “Alcoa curtails production at Portland smelter after power failure”, ABC News, December 2, 2016.

[22] Royce Millar and Ben Schneiders, “Alcoa workers urged to take leave to save damaged Portland smelter”, The Age, December 10, 2016.

[23] Luke Griffiths and Jade Gailberger, “Explaining why South Australia has very high electricity costs”, The Advertiser, July 23, 2016.

[24] Lucy Barbour and Brett Worthington, “Food and grocery jobs will head offshore amid rising energy prices, peak body fears”, ABC News, October 16, 2017.

[25] Ibid.




























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