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Meanwhile, in the real world

May 23rd, 2017

Advocates of an expansion of Australian coal mining are constantly claiming that India is desperate for imported coal to supply urgently needed electricity. Leaving aside the Indian government’s stated determination to end coal imports in the next few years (at least for the large public sector), what’s happening to actual demand for coal-fired electricity. Undoubtedly, it was growing very rapidly until quite recently. The Indian government had grandiose plans for a fleet of “Ultra Mega” power plants UMPP, a couple of which actually got built. And state governments were tendering out large contracts to supply electricity, designed with coal-fired power stations in mind.

In the last few weeks, there have been two big developments. Following a string of other cancellations, the government of Gujarat has cancelled a proposed UMPP Key quote

The new decision is believed to be also in line with the Centre’s push to bring down coal import. However, the state government is willing to provide land for a UMPP if the central government wishes to initiate one, says Sapariya. Adding: “Our focus is now on renewable energy. The government will encourage solar power.”

Meanwhile, the government of Uttar Pradesh has cancelled bids conducted in 2016 to procure 3,800 MW of power from independent power producers. Adani was among the suppliers shortlisted to share in the supply contract. This isn’t an isolated event

The UP government’s move, analysts said, is symptomatic of the deeper malaise: On the one hand, hardly any power purchase agreements (PPAs) are being signed and now, the bids for new contracts are being cancelled; on the other, plans to set up large thermal power plants are either being put in abeyance or abandoned. The Gujarat government, for instance, recently dropped the plan to set up a 4,000 MW imported coal-based ultra mega power project at Gir Somnath district, apparently because it thinks that upcoming renewable energy units could meet the the power requirement.

About 33,000 MW of thermal power plants, with an approximate investment of about Rs 2 lakh crore, are left stranded across the country due to the lack of PPAs.

That’s nearly 8 GW gone in the space of a few weeks. By my calculation (a check would be much appreciated) a 1 GW thermal coal station operating at 70 per cent capacity uses about 3 million tonnes of coal a year. Multiply that by 8 and you get 24 million tonnes, the entire projected output of Adani’s first stage project.

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  1. Newtownian
    May 23rd, 2017 at 16:02 | #1

    If you want a further good laugh John have a look at

    Australian Energy Projections to 2049-50, BREE, Canberra, November.
    © Commonwealth of Australia 2014.

    I think this is the link to the PDF:

    https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwiYqKi7qIXUAhWBQpQKHYQ_AvIQFggiMAA&url=https%3A%2F%2Findustry.gov.au%2FOffice-of-the-Chief-Economist%2FPublications%2FDocuments%2Faep%2Faep-2014-v2.pdf&usg=AFQjCNEP_16L90XlCo-lUe4_IYpfSu3y1Q&sig2=poTrKhuYQZJTOuRkmX1VaQ&cad=rja

    Here is the forward

    I orginally tried to find the NSW equivalent which said all govt revenues by 2050 would be from coal more or less.

    No offense but only an economists could produce such laughable extrapolation.

    The foreword says it all below. Incidentally this isnt just about exports. Apparently domestic brown coal will even be increasing by 20% over this period. Oh and the word ‘climate’ is nowhere to be found. All this is based on their magic (spreadsheet?) model E4cast.

    Foreword
    The Australian Energy Projections to 2050 provides long-term projections of Australian energy consumption, production and trade. This report assists in providing the basis for informed decision making for the Australian energy sector by government, industry and the community.
    This report aims to encapsulate the recent developments such as the repeal of carbon pricing and changes in electricity generation technology costs in providing long-term projections of Australian energy consumption, production and trade.
    Coal and oil are projected to continue to supply the bulk of Australia’s energy needs, although their share in the energy mix is projected to decline. Electricity generation is projected to grow at the rate of 0.8 per cent a year from 2014-15 to 2049-50, and black coal is projected to remain Australia’s dominant energy export, while the liquid natural gas exports are also projected to increase significantly.
    Wayne Calder
    Deputy Executive Director
    Bureau of Resources and Energy Economics
    November 2014

    [Is Calder a mate of yours?………………just kidding]

    ps here is the model method E4cast overview
    The energy sector projections presented in this report are derived using the E4cast model. E4cast is a dynamic partial equilibrium model of the Australian energy sector. It is used to project energy consumption by fuel type, by industry and by state or territory, on an annual basis. Trends in economic growth and industry production, fuel prices and energy efficiency improvements are some of the parameters used to approximate the principal interdependencies between energy production, conversion and consumption.
    E4cast modelling framework incorporates domestic as well as international trade in energy sources. It provides a complete treatment of the Australian energy sector, representing energy production, trade and consumption at a detailed level. As a result, the model can be used to produce a full range of results, including Australian energy balance tables.
    E4cast modelling framework employs an integrated analysis of the electricity generation and gas sectors within an Australian domestic energy use model. The model represents two sets of conditions: quantity and competitive price constraints. The competitive equilibrium is achieved when all the constraints are satisfied.

    Hee hee. This guy obviously has never heard of Box’s caveat “All models are wrong, but some are useful” to which might be added “except those produced by these clowns.”

  2. Newtownian
    May 23rd, 2017 at 16:26 | #2

    ps I just noted this in the E4cast blurb “E4cast is a dynamic partial equilibrium model ” The DSGE model strikes again!? I wonder if these guys lost any superannuation money in 2008 or have read these 3 easy pieces:

    Blanchard, O. (2016). Do DSGE Models Have a Future? Policy Brief – Peterson Institute for International Economics . http://www.piie.com pp4. and
    Blanchard, O. (2014). Where danger lurks. Finance & Development, 51(3), 28-31. or maybe this scathing piece
    from the former IMF chief economist at the IMF https://en.wikipedia.org/wiki/Olivier_Blanchard

    Romer, P. (2016). The trouble with macroeconomics. September, forthcoming in The American Economist.
    current chief economist at the World Bank https://en.wikipedia.org/wiki/Paul_Romer

    mmmmmmm World Bank, IMF………neo (Steve) Keensians! who would have thought.

    This farce just keeps getting better.

    (ps I have no problem with Bayesian modelling, using it myself in non economics contexts as I do. But the potential for GIGO https://en.wikipedia.org/wiki/Garbage_in,_garbage_out arising from arrogance self-delusion or political pressure to rationalise policy is all too evident)

  3. Ikonoclast
    May 23rd, 2017 at 16:47 | #3

    I’ll go out on a limb. Coal burning in 2050 will be negligible to zero. “Negligible” will be an amount providing less then 1% of all the world’s energy needs. If I live to age 96 and am still compos mentis I might see and comprehend that year. My chances of doing that are not great but I would say are they are better than 1%.

  4. Ronald B
    May 23rd, 2017 at 16:50 | #4

    John, Carmichael coal apparently has 20.7 megajoules per kilogram. There are 3.6 megajoules in a kilowatt-hour, so at 100% efficiency it could produce 5.75 kilowatt-hours. A reasonable for a coal power station is 33%. So it could produce 1.917 kilowatt-hours of electricity. One tonne would produce 1,917 kilowatt-hours of electricity.

    A one gigawatt power station operating at 70% of capacity would produce an average of 700,000 kilowatt-hours in an hour and 6,136,200,000 kilowatt-hours in a year. Dividing that by the number of kilowatt-hours of electricity that can be produced from one tonne of Carmichael coal gives 3.2 million tonnes per year.

    So it looks good to me.

  5. John Quiggin
    May 23rd, 2017 at 17:22 | #5

    @1 BREE was a disaster area, and its successor,the Office of the Chief Economist is only marginally better.

    I remember that they were touting not just nuclear power, but small modular reactors as a low cost option for Australian electricity in 2020. The proponents (Nuscale) are hoping to deploy the first prototype in the early 2020s.

    @2 I agree 100 per cent as regards electricity, and 90 per cent for other users

    @3 Thanks. That’s the calculation I used

  6. Salient Green
    May 23rd, 2017 at 18:44 | #6

    Hazelwood ran at 85% capacity and used 17.2 million tonnes as a 1.6 GW nameplate facility.
    The numbers equate to 10.75 million tonnes/GW nameplate. Roughly triple the coal consumption using lignite compared to bituminous coal.

  7. Ronald B
    May 23rd, 2017 at 19:04 | #7

    In October last year Indian coal power was apparently operating at around 64% capacity. That’s lower than I would have expected.

    This article from June last year says India won’t need new generating capacity for 3 years:

    http://economictimes.indiatimes.com/industry/energy/power/india-wont-need-extra-power-plants-for-next-three-years-says-government-report/articleshow/52545715.cms

    Solar is already beating coal on price in India. In two years new coal will be deader than a dodo at the annual convention of dodo hating maniacs.

  8. Newtownian
    May 24th, 2017 at 00:08 | #8

    John regarding the dodgy BREE economics is anyone apart from a few lone voices such as yours highlighting this nonsense in the Academic arena?

    To me this stuff approaches the genetic nonsense of Lysenko https://en.wikipedia.org/wiki/Trofim_Lysenko in the magnitude of its distortion. Or the promotion of quack cures for AIDs.

    Politicians sort of have a license to indulge in such lies – provided it gets them reelected. But what accounts for this defenning silence from professional economists? Are so many really that far removed still from reality?

    (and having perhaps too much of a go at Economist

  9. Newtownian
    May 24th, 2017 at 00:09 | #9

    sorry about the bad edit – I was meaning to apologize for potentially being personal

  10. May 24th, 2017 at 02:18 | #10

    Indian coal plants don’t get 70% CFs. IIRC the current number is around 60% and heading lower.
    Are the cancellations included in the freeze on new coal plant projects already announced by Delhi, or additional ones, previously included in the “already started” 70 GW pipeline?

  11. John Quiggin
    May 24th, 2017 at 07:47 | #11

    @Newtownian

    The problem is that most academic economists these days aren’t engaged in policy, and wouldn’t even engage with a body like BREE.

    @James Wimberley

    You’re right about the CF. I chose 70 per cent as the minimum CF you would expect if you didn’t have an oversupply. I’m not sure about the scope of the freeze, but the UMPP plans have been on the books for quite few years and the Uttar Pradesh case is a cancellation of demand contracts, rather than of a particular station.

  12. Ikonoclast
    May 24th, 2017 at 08:51 | #12

    @Newtownian

    The problem is that there are “Academic Economists” and there are “Business Economists”. At the risk of over-simplification, academic economists probably understand economics at broader and deeper levels and also have a commitment to the empirical data (where it is obtainable and quantifiable). “Business economists” are hired guns. Their first commitment is to the ideology of “business” which is really the ideology of capitalism, or if you prefer, of neoliberalism, so-called these days.

    The public discourse is controlled by politicians (bought and suborned by business via party donations), by the mass media (controlled by capitalist billionaires) and by the “business economists” acting as ventriloquist dummies for business and monied interests. Hence the complete tripe and anti-people ideas and policies that business economists purvey.

  13. BilB
    May 24th, 2017 at 10:35 | #13

    I recall from years ago a Pakistani talking of the huge coal reserves of his country. Here is a perspective:

    http://voices.nationalgeographic.com/2013/05/02/pakistan-coal/

    The whole coal availability issue is about who is the most easily/willingly exploited population.

    Pakistan is a train ride from India for coal, it would be a total abuse of fossil fuel to train/ship/train coal from Australia to satisfy a momentary need of one family to make profits.

  14. Ronald B
    May 24th, 2017 at 11:40 | #14

    Islamabad, or as I prefer to think of it, Islamagood, is sunnier than Sydney and there is no shortage of wind or solar resources, so coal generation in Pakistan is headed for trouble.

    This is particularly true, given the huge amount of existing hydroelectric capacity in the country. (Around 29% of current generation.)

    Work on 7 gigawatts of coal power plants may have been abandoned:

    https://tribune.com.pk/story/1211361/coal-based-projects-work-7000mw-power-plants-likely-abandoned/

    I haven’t heard any firm commitment from Islamagood to give up on further exploitation of their puny 184 billion tonnes of coal, but delay is not on coal power’s side.

  15. BilB
    May 24th, 2017 at 12:30 | #15

    The is a curious comment there, RonaldB.

    First up, yes Solar is Better. However, my comment was about India and its need for coal in the short to medium term to balance its energy needs.

    My comment was about fossil fuel availability options and why would one country ship coal via an 18 day 6,400 nautical voyage in preference to a 4 day rail journey from a neighbouring country, not that I am suggesting that Pakistan should give up its resource particularly if it means displacing populations to do it. What I am saying is that Australia needs to exploit its reserves to advance the wealth interests of a handful of people further least of all, particularly when there are other better options.

    As to the “puniness” of Pakistan’s coal reserves, Australia’s recent total annual exports to power China amounted to 375 million tonnes of coal. At that exploitation rate Pakistan’s puny reserves solving its neighbour’s need for energy would hold up for 490 years.

    Considering that we need Globally to decarbonise our energy consumption fully within the next 40 years, Adani’s plan to mine 60 million tonnes per year for a maximum life of 40 years would take about 1.3% of Pakistan’s total reserves. Reserves not so puny I think.

    Only the most delusional of people would imagine that we can stop using fossil fuels immediately. What we do need immediately is a committed plan to a fully decarbonised economy, a plan that cannot be derailed by fossil fuel vested interests.

  16. Ronald B
    May 24th, 2017 at 13:01 | #16

    Yes, you’re right. It was a curious comment. Pakistan’s hydroelectricity amounts to around 29% of its generating capacity, not generation as I wrote.

    So. Horribly. Embarrassed.

  17. Glen G
    May 24th, 2017 at 14:28 | #17

    India has also announced that “by 2030, not a single petrol or diesel car should be sold in the country,” according to Power Minister Piyush Goya recently. What effect this will have on India’s electricity generating capability remains to be seen, but it could mean that they will need more coal-fired power, or else it may mean they will commit to more renewable power, or possibly they will need to do both.

    A summary is at this link :- https://www.juancole.com/2017/05/indias-electric-plans.html with further links from there to original sources.

  18. derrida derider
    May 24th, 2017 at 14:31 | #18

    @Newtownian
    Err, Newtonian, e4cast may or may not be crap, but it uses almost the opposite modelling approach to a DSGE. It is determinate, not stochastic (the “S” in DSGE) and it’s partial, not general (the “G”). Not even the biggest fan of DSGE would think it useful for this particular task.

    A dynamic determinate partial equilibrium model would be the right class for this task – though of course that says nothing about whether this particular model is a good one or not.

  19. Robert Morison
    May 25th, 2017 at 19:38 | #19

    Could I please subscribe to new John Quiggan posts and follow up comments. Thank you, Robert Morison

  20. rog
    May 26th, 2017 at 05:43 | #20

    I may be repeating news but this from the Independent indicates India is moving away from all coal

    http://www.independent.co.uk/environment/india-solar-power-electricity-cancels-coal-fired-power-stations-record-low-a7751916.html

  21. Ikonoclast
    May 26th, 2017 at 06:25 | #21

    That article announced cancelling of plans for new generating capacity equal to Britain’s current capacity. This is good if it’s true. However, there could be at least a few ways in which “cancelling plans” claims are dubious. What is the metric for “cancelling plans”? How serious must a plan be before cancelling it counts as “cancelling plans”?

    I could announce I am cancelling plans to climb Mt Everest and ski to the South Pole. People would immediately question: “Pffft, how serious were his plans in the first place?

  22. totaram
    May 26th, 2017 at 21:32 | #22

    @Ronald B

    Islamagood may sound good (pun intended) in English, but is a bit awkward otherwise. The “abad” in names of cities on the subcontinent (Ahmedabad, Allahabad, Hyderabad, etc.) indicates “populated by” or perhaps “settlement”. Nothing to do with “bad”. On the whole not a good joke. How would you like it if someone took a name in your language and translated it into their language and then twisted it? We already have enough problems with names like Munich, Turin, and Copenhagen, which should be Muenchen, Torino, and Koebenhavn. Why complicate things even further?

  23. totaram
    May 26th, 2017 at 21:38 | #23

    @Ikonoclast

    In this case the plans are “previously announced plans” and since India has long had a “partially planned” economy, these plans are a little more significant than your hitherto unknown plans to climb Mt Everest and ski to the South Pole. However, point well-taken.

  24. Ronald B
    May 26th, 2017 at 22:52 | #24

    Totaram, it is not possible for someone to take a name in my language and translate it into another language and twist it. This is because I don’t have a language. I am entirely only able to communicate using languages I’ve borrowed from other people.

  25. Ikonoclast
    May 27th, 2017 at 06:39 | #25

    @Ronald B

    I once used the perfectly good word “darg” in a conversation. (The Free Dictionary tells me “dialect Scot and Northern English : a day’s work : formed by syncope from day-work”.)

    The other person in the conversation wanted the meaning and then complained it was “a made-up” word. I simply replied, “All words are made up.”

    The good thing about all language is that it is a cooperative creation by humans. The capitalists have not been able to steal it. Misuse it yes, copyright little pieces yes, but they have not been able to steal it overall. Thank goodness for one of our last key community possessions in common, language itself.

  26. Brett
    May 30th, 2017 at 22:16 | #26

    John, spot on, I believe Adani is a huge risk, there to s also information on Indias govt pursuing Nuclear with 10 plants approved by cabinet. This could all be a storm in a teacup as any normal company would not support the FID given these developments but has Adani got something to gain? Is there really royalty payments to shareholders pre tax? And what do you understand about the Adani tax concessions and tariff deals based on what Adani call expensive Indonesian coal, from what I read they are getting subsidized both sides of the Indian Ocean! How can we be risking our tax dollars on this?

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