New coal plants wouldn't be clean, and would cost billions in taxpayer subsidies

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.