Closing down coal

Frank Jotzo recently pointed out that if we are to meet our Paris commitments of keeping global temperature rise below 2C we will need to close about one coal-fired power station every year. I believe we have 24.

He was giving evidence to a Senate inquiry into the Retirement of coal fired power stations set up by the Greens and Labor, chaired by Larissa Waters and due to report on 29 March 2017. If you follow the links there is already an Interim Report and 133 submissions available for our perusal.

James Paterson, a Liberal senator, asked:

    “Is another option other than just closing these power plants, replacing them with other more efficient coal-fired power plants?”

Jotzo responded:

    “In the short-term, as a thought experiment, if you replaced the La Trobe generators with ultra supercritical [efficient coal power stations], you’d make something like a saving of 50% in emissions in rough terms. But of course you’re locking in that investment for a long time and that’s fundamentally incompatible even with the existing Australian national 2030 emissions target.

    He continued: “Stepping back from environmental policy objectives, the current levelised cost of electricity – in terms of new build – of renewables and coal, are just about on par … The capital costs of coal power stations are essentially not changing over time whereas the renewables cost is falling.”

    “I would judge it highly unlikely you would see commercial investment in coal-fired power in Australia.” (Emphasis added)

The LNP government has this fixation that there is a future in fossil fuel power. The Finkel review, and the CSIRO together with the networks are telling us that the future is with renewables, decentralised energy production and a smart grid. Furthermore, against the political spiel being put about, they assure us that a penetration of over 90% of renewables in the energy mix is possible.

There is an argument put forward by conservative politicians, fossil fuel interests and Chris Uhlmann at the ABC that coal and gas provide ‘synchronous power’, and that grid stability will be affected if too much is sourced from wind and solar. GE, the world’s biggest industrial group and the largest supplier of energy machinery, says the world no longer needs to rely on so-called “synchronous” generation provided by coal and gas plants to ensure the stability and reliability of electricity grids:

    “The days of relying solely on synchronous generation for everything are over,” says Nick Miller, senior technical director for GE Energy Consulting, adding that alternatives such as inverter-linked solar can perform many of the same functions, and much more efficiently.

They know because they are doing it.

There is a new scare out on the cost of renewables. Investment bank CLSA with help from Frontier Economics are suggesting that solar plus storage are so expensive that only rich people and fools would buy them.

Yet energy expert Bruce Mountain “has estimated that the combination of solar and storage is now one quarter cheaper than the best grid-only retail offer in South Australia. CLSA and Frontier suggest that solar and storage is double the price.”

The whole thing would be laughable if it hadn’t been taken at face value by Fairfax, including the Financial Review.

Last year Frank Jotzo and Salim Mazouz published a paper Brown coal exit: a market mechanism for regulated closure of highly emissions intensive power stations. From the abstract:

    Plants bid competitively over the payment they require for closure, the regulator chooses the most cost-effective bid, and payment for closure is made by the remaining power stations in proportion to their carbon dioxide emissions. This could overcome adverse incentive effects for plants to stay in operation in anticipation of payment for closure and solve the political difficulties and problems of information asymmetry that plague government payments for closure and direct regulation for exit.

They explore the issues theoretically and provide illustrations. They suggest that closure of a brown coal-fired power station in Australia could yield emissions savings at costs that are lower than the social benefits.

We can either effect such closures in a planned way, or it will happen chaotically. Their suggestion saves the government from arbitrarily picking winners (losers), but makes sure it happens in an orderly way.

There are other concerns, of course, for example related to the redundancy of workers and community impact. The Interim report of the Senate Inquiry calls for the Government to set out a comprehensive transition plan, for consultation with stakeholders and the establishment of a transition authority.

Jotzo and Mazouz in their piece at The Conversation point out that power stations mostly don’t work at full capacity. Here’s the capacity factor for 2007 and 2014, from the left, with brown coal, black coal and gas:

When one drops out the immediate effect will be to drive the others a bit harder to make up the slack, and earn more revenue.

Here, from the senate inquiry interim report, is the enrgy mix within the NEM:

There is work to do, even before 2020. And much of it is outside the electricity sector:

Early in November 17 prominent Australians, spearheaded by the Australian Conservation Foundation, presented the energy minister, Josh Frydenberg, with a “clean energy blueprint”.

    The former governor general Quentin Bryce is part of a high-powered group of academics, business leaders, financiers and energy providers urging the Turnbull government to extend and expand the national renewable energy target and create a market mechanism to govern an orderly phase out of coal-fired power in Australia.

    Representatives of the group came to Canberra on Monday to meet the energy minister, Josh Frydenberg, armed with an eight-point plan to drive a sequenced decarbonisation of the national energy market.

They are not alone, and no doubt they will be back. Frydenberg and Turnbull, however, seem determined to be part of the detritus of history.

2 thoughts on “Closing down coal”

  1. We will face a number of problems if we stand back and allow the magic market to decide which fossil power stations shut down when during the transition to 100% renewable power. Ditto for the mix and location of renewables and energy storage during this period.
    In the case of fossil power issues include:
    1. Different forms of fossil power take different amounts of time to respond to changes in demand.
    2. Major maintenance is expensive and needs to be justified by some confidence that demand will continue for a year or more after the major maintenance is done.
    3. Fuel supply may be an issue:
    – Many coal fired stations depend on a single mine. Having a mine and its workforce on standby is going to be expensive.
    -Coal is difficult to store for any length of time. It oxidizes and sometimes catches on fire. (Coal fired power stations should have large blocks of running time from time to time.
    -Standby gas supply may be hard to get at a reasonable price.
    4. It is desirable to minimize the amount of power that has to be transported over the grid. Roof top solar and intelligent decisions re what is built and shut down when and where will make sense .
    This all suggests that it may actually make more sense to do the transition quickly to minimize problems like the ones listed above.
    It also suggests that it will make sense to use competitive tendering to set up standby contracts.

  2. John, we really need a plan, with bipartisan support, and yes, it would probably be better all around if we did it quickly.

    Labor is too attached to the coal industry also, through concern for jobs and communities.

    We are actually not very good at planning anything of note in this country.

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