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Victory in sight on Adani, but Aurizon still a threat

December 4th, 2017 21 comments

After years of campaigning, it finally looks as if the Adani mine-rail-port proposal in the Galilee Basin has been defeated. A week after the Palaszczuk government was re-elected on a promise to veto funding from the Northern Australia Infrastructure Facility, the two biggest Chinese banks have announced that they will not be lending to the project either.

The election outcome is particularly striking. Premier Palaszczuk executed a rather inelegant backflip on this question after it became apparent that her weak pro-Adani position was politically untenable (I hope my column on the subject may have had some small influence there). My expectation (widely shared, I think) was that this would cost the government seats in Townsville and Rockhampton, where the local governments had committed millions of dollars to be nominated as FIFO hubs. In fact Labor held all these seats, with the possible exception of Townsville, still in doubt. Meanwhile, the LNP proposal for a coal-fired power station gained them nothing in North Queensland and cost votes in the South-East. With the election over, Adani’s political leverage in Queensland is now non-existent.

The Chinese banking decision also welcome. Although China is rapidly moving away from coal in its domestic economy, the Chinese export finance machine is still pushing coal projects around the world, as long as they use Chinese equipment and expertise. Perhaps this announcement is part of a broader change, or perhaps the Carmichael mine project is too much of a dog even for pro-coal lenders.
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Categories: Environment Tags:

Renewables, coal and culture war

November 22nd, 2017 11 comments

In the final week of the Queensland election campaign, I’ve been busy trying to do what I can to influence the result. I’ve put out a couple of opinion pieces about the choice between coal and renewable energy. This one, in The Guardian, focuses on the central role of the culture war in motivating rightwing opposition to renewable energy. In The Conversation, I look at the economics and business aspects and debunk the idea that ‘ultrasupercritical’ technology makes coal-fired power a high efficiency, low emissions technology

Also, in New Matilda, I’m collaborating with Morgan Brigg and Kristen Lyons of the Global Change Institute to produce a five-part series on Adani and the resistance to the project by the Wangan and Jagalingou people.

Categories: Environment, Oz Politics Tags:

The end of fossil fuels: some data and quick calculations

October 29th, 2017 44 comments

The International Energy Agency recently released data showing that world coal production fell sharply in 2016, mainly because of big cuts in China. Looking at the graph, it appears that the peak in production was around 2013. The price of coal has experienced a “dead cat bounce” over the last year or so, essentially because China has been closing coal mines faster than it’s been closing or cancelling coal-fired power stations, but the picture tells the story for the future.

Global coal production (source IEA)

Until relatively recently, the decline of coal was the result of competition with gas, while new renewables weren’t even enough to cover the growth in demand. But a quick calculation shows that renewables will soon be taking out a bigger bite. Global electricity generation is currently about 20000 terawatt-hours (TWh) a year, growing at around 1.5 per cent, or 300TWh a year. Installations of solar PV and wind (I haven’t checked on hydro and other renewables) for 2017 look set to come in around 150 gigawatts (GW). Assuming 2000 hours of operation per year, that’s just enough to offset demand growth. So, any future growth in renewables must come directly at the expense of existing fossil fuel generation which in practice will almost always mean coal.

Turning to transport, regular commenter James Wimberley has an analysis of the prospects for peak gasoline (petrol) used in internal combustion engines. Summarising drastically, his best estimate for peak gasoline is 2032. Decarbonization requires an end to petrol-driven vehicle sales by around 2035. On this front, the good news is that quite a few countries, including the UK, France and India are pushing for an end by 2030.

Of course, all of this assumes that the attempts of Trump and Turnbull (along with likeminded culture warriors in Turkey, Poland and elsewhere) to bail out the dying coal industry come to nothing and also that Trump doesn’t manage to destroy the planet through nuclear war.

Categories: Environment Tags:

Nuclear starts stop

October 23rd, 2017 40 comments

A steady stream of negative evidence hasn’t shaken the faith of believers in nuclear energy. Many of them are under the impression that the failure of nuclear energy is specific to the developed world, where some combination of environmentalism and NIMBYism prevents the adoption of an obviously sensible solution. It is widely imagined that China, India and other countries are forging ahead. This idea was plausible until fairly recently, but the latest evidence suggests that nuclear power is in terminal decline. Globally, only four nuclear plants commenced construction between 1 January 2016 and 30 JUne 2017. China hasn’t started any new plants this year and is sure to miss the 58GW target set for 2020.

The problem, simply, is that while China’s problems with delays and cost overruns have been less severe than those in the developed world, the same patterns are evident. New nuclear plants simply can’t compete with renewables.

I don’t expect that this will have the slightest impact on the Australian and US right, who have long since ceased to regard evidence as relevant to anything. But, for anyone who is still open to evidence, this debate ought to be over.

Categories: Economics - General, Environment Tags:

Pumped hydro

October 21st, 2017 34 comments

In my Conversation article on the Turnbull government’s plan to keep coal-fired electricity alive, I said that most of the opportunities for hydro-electric power had already been exploited. I was thinking of primary power generation, and in this respect, I maintain my view. However, I neglected the option of pumped storage, where water is pumped uphill when excess electricity is available, then run downhill through turbines to (re)generate the electricity when it is most needed.

My old university friend, Andrew Blakers, now with the Research School of Engineering at ANU emailed me to point out this study, looking at the large number of sites potentially available in Australia, more than enough to backup all the renewable energy we will be generating in the foreseeable future.

This isn’t just a theoretical proposition. The Kidston hydro storage project in the advanced stages of planning, will offer 2000MwH of storage combined with a co-located 270MW solar PV project. The same report mentions some big wind + storage projects.

Still, if Labor is silly enough to endorse Turnbull’s NEG idea, it’s hard to see any more progress being made.

Categories: Environment Tags:

Breaking ground in Adani’s Utopia

October 14th, 2017 12 comments

Having argued for some time that Adani’s Carmichael mine-rail-port project is unlikely to go ahead, I was initially surprised to read the announcement that Adani says it will break ground on Carmichael rail link ‘within days’. My mental image was of heavy earthmoving equipment excavating the route along which the line is to be laid. This seemed surprising to me, since there had been no evidence that the project was anywhere near that stage.

But a closer reading suggests that the “ground breaking” is of the kind seen in a typical episode of Utopia, in which lots of dignitaries are presented with shovels and turn over a piece of dirt, to “mark the official start” of the project. That is, presumably, a different “official start” from the one that was marked by another ceremony back in June. Obviously, this ups the pressure on governments to lend public money to the project since a failure to do so would mean abandoning a project that is “officially” under way.

Categories: Environment Tags:

Who will pay for Adani’s infrastructure? We will

October 7th, 2017 19 comments

A couple of days ago, it was announced that the Fly In Fly Out workforce for Adani’s putative Carmichael mine would be split between Townsville and Rockhampton. Since I’ve long argued that the mine is highly unlikely to go ahead, I didn’t read the news stories closely. So, I missed the fact, buried in the middle of this ABC news report, that the deal requires Townsville and Rockhampton councils to build Adani an airstrip at a cost of $20 million. It turns out that not everyone in Townsville is happy about having their money spent on a project far away from the city.

This outcome is consistent with what I and others have been arguing for some time. Adani has to keep the project alive to avoid recognising the loss of the money its spent so far, and admitting that coal volumes at its Abbot Point port will be far lower than planned. On the other hand, there’s no point throwing good money after bad. So the strategy is to move slowly on the development, building a railway with money from the Commonwealth government and, now, an airstrip paid for by the people of Townsville. When, with much regret, the mine is deferred indefinitely, the Australian public will be the proud owners of a railway to nowhere, with the option of a flight back.

Categories: Economic policy, Environment Tags:

How to replace the National Electricity Market

September 12th, 2017 42 comments

There are quite a few proposals around to intervene in, or repair, the National Electricity Market. In my view, it’s much too late for that. We need to scrap the NEM and start on a new path towards a zero-carbon electricity and energy system. I’ve written down some preliminary thoughts. I’d appreciate comments and also suggestions as to how I might push this idea along a bit.

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Categories: Economic policy, Environment Tags:

The Minerals Council of Australia pushing zombie ideas

September 4th, 2017 28 comments

Fighting zombies is a tiresome business. Even when you think you’ve finally killed them, they bounce back as often as not. But it has to be done, and there are some benefits. When you see a supposedly serious person or organization pushing zombie ideas, it’s an indication that nothing they put out should be presumed to be serious.

There can be few zombies more thoroughly undead than nuclear power in general, except for the idea that nuclear power is a sensible option for Australia. The strongly pro-nuclear SA Royal Commission demolished this zombie so thoroughly that it should have taken a decade at least to regenerate.

But here’s the Minerals Council of Australia, which has taken a break from promoting coal to push the idea that Australia needs a nuclear power industry and that the biggest obstacle is a legal prohibition imposed in 1998. The supporting “analysis” is riddled with absurdities, some of which have already been pointed out. I’ll give my own (incomplete) list over the fold

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Categories: Boneheaded stupidity, Environment Tags:

Alternatives to Adani

August 9th, 2017 10 comments

It’s obvious to anyone who cares to look that the Adani rail-mine-port project is an environmental and economic disaster area, and that claims that it will generate thousands of jobs and billions of dollars in revenue are nonsense. But that’s little comfort to people in the region, facing high unemployment following the end of the mining boom and the general slowdown in the economy. What’s needed is a positive alternative, and a development strategy that’s adapted to the future rather than the post. Adani’s application for a $900 million concessional loan from the Northern Australia Infrastructure Facility to finance the rail component of the project raises the obvious question: if this money is available, what more productive ends could it be used for?

Farmers for Climate Action commissioned me to do a report on this, focusing on alternative investments in the agricultural sector. It was release at the weekend, and got some coverage, including in The Guardian. The report is here, along with a summary

Categories: Environment Tags:

Can we get to 350 ppm? Yes, we can

July 18th, 2017 27 comments

In a recent post, I made the optimistic argument that, despite all the obstacles thrown up by rightwing denialism, the world is on track to reduce CO2 emissions to zero by 2050, on a trajectory that would hold atmospheric concentrations of greenhouse gases below 450 ppm. On current models, that gives us a 67 per cent chance of holding the long term increase in global temperatures below 2 degrees. Warming of 2 degrees would not be cataclysmic for humanity as a whole but it would be a disaster for many people and also for vulnerable ecosystems such as coral reefs. That’s why 350.org wants to reduce concentrations to 350 ppm from current levels above 400 ppm.

Is that even possible?
And, what would it mean for global warming?

In this post, I’ll argue that the answer to the first question is definitely yes. I’m going to start with the assumption (based on this post) that we can reduce emissions from fossil fuels to zero by 2050, and keep concentrations below 450 ppm at that point. What are the options to reduce concentrations over the following fifty years? In the absence of some new technological fix (not implausible, but there’s nothing in sight as of 2017), there are three main possibilities

* Reducing methane emissions and concentrations. Methane emissions arise mainly from agriculture (paddy rice and ruminants), with some possible addition from fracking. It appears feasible, though not trivial, to greatly reduce these sources at fairly low cost. And because methane has a short residence time, a reduction in emissions will lead fairly rapidly to a reduction in concentrations. The conversions are very tricky, but the radiative forcing associated with methane is currently about 0.5 watts, compared to 1.94 for CO2. So, if methane concentrations were reduced by 40 per cent, that would be equivalent to a 10 per cent reduction in CO2, or about 40 ppm.

* Natural absorption. Only around 50 per cent of the CO2 we emit (the so-called atmospheric fraction) ends up as increase in atmospheric concentrations, with the rest being absorbed by oceans. After that initial addition to sink, CO2 stays in the atmosphere for a long time. However, there is still some additional absorption by sinks. Yale Climate Connections suggests that around 50 per cent is absorbed in 50 years, and around 70 per cent in 100 years. So, by 2100, an additional 20 per cent or so of the CO2 emitted around now will have been absorbed by sinks. A rough estimate would be 0.2*(450-280) or 35 ppm, where 450 is the peak concentration and 280 the stable pre-industrial level. Of course,this is far from an ideal solution, since CO2 contributes to acidification of oceans and therefore to coral reef decline.

* Reforestation and other land use changes. Land use change is currently a big net contributor to global warming, but a systematic program of reforestation could turn this around. The potential has been estimated at 85 ppm.

Against these possibilities, there is currently a net cooling effect, equivalent to around 50 ppm, from aerosols associated with air pollution. Hopefully, pollution will be reduced over the coming century, but that makes the task of stabilizing the climate a bit more difficult.

A question I haven’t yet been able to find a good answer on is: how much warming would a trajectory peaking at 450 ppm and declining to 350 ppm ultimately produce? If anyone can point me to a good source, that would be great.

Finally, at least some of the pollutants we’ve emitted over the past century will, on our current understanding, stay there for hundreds or thousands of years, leading to long term problems of sea level rise. But if we can get to 2100 without destroying the planet through climate change or nuclear warfare, I’m sure our great-grandchildren will work out some way of cleaning up what’s left of our mess.

Categories: Environment Tags:

Sense and senselessness in transport policy

July 18th, 2017 31 comments

I’ve been doing various pieces of work on transport. Here’s a quick update:

* I’ll be speaking at a one-day seminar organised by the Institute for Sensible Transport in Sydney on 8 August. It should be a good event for those with a professional interest in road pricing and related topics.

* For those with a general interest, I have a section over the fold from my book-in-progress, Economics in Two Lessons. Comments and criticism much appreciated.

* While I was a Member of the Climate Change Authority, I put a lot of work into a report the Authority did on vehicle fuel efficiency standards. With the rejection of just about every other policy measure to reduce CO2 emissions in Australia, this was the government’s last chance to do something useful. Naturally, Turnbull and Frydenberg went to water the moment the denialists who dominate the LNP raised an objection. Perhaps, now that the laws of mathematics have been subordinated to Australian law, Turnbull can solve our problems by simply decreeing a change of sign, so that an increase in emissions becomes a decrease.

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Technology to the Rescue ?

July 12th, 2017 38 comments

There’s been a fair bit of buzz about an article in New York Magazine with an apocalyptic picture of climate change over the next century. I’ll for a more complete response later. But as it happens, I was already thinking about a much more optimistic post.

From the Climate Change Authority, of which I was a Member until recently, here’s a set of emissions trajectories consistent with a 67 per cent probability of limiting warming to 2 degrees.

There’s a pretty good case to be made that we are on the blue trajectory, and that, with decent political outcomes, we will be able to go below it and hold warming to the Paris aspirational target of 1.5 degrees. That would still have plenty of negative effects, for example on coral reefs, but it would not be an existential threat to humanity.

The points that are critical in the blue trajectory are a peak in emissions, right about now and a drop to zero net emissions by 2050. The first looks to have been achieved. As for the second, we are already seeing commitments to this goal from developed countries and jurisdictions, and there’s every reason to think it can be achieved at low cost.

As an economist, this is about the outcome I would have expected given a global commitment to an emissions trading scheme with a carbon price on a rising trajectory to $US100/tonne or so. In fact, we’ve seen nothing of the kind. There has been no real global co-ordination, and where carbon prices have been imposed, they have been low and limited in scope.

Instead, we’ve had a series of favorable technological surprises of which the most striking have been the plummeting cost of solar photovoltaics, and advances in battery technology allowing both low-cost electricity storage and affordable electric vehicles. There’s no reason to think these advances have run out, or that any of the remaining problem areas (air transport, cement manufacture and so on) will prove insuperable.

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Categories: Economics - General, Environment Tags:

Adani: trouble on all fronts

June 30th, 2017 11 comments

My latest report: The Economic (non)viability of the Adani Galilee Basin Project

and, news that Adani is blending more domestic coal in the fuel for its Indian power plants to cut costs. That makes high-ash Carmichael coal even less appealing.

Categories: Environment Tags:

Murray-Darling Plan Doomed to Fail

June 26th, 2017 28 comments

That’s the conclusion of a recent depressing report from the Wentworth Group. There is, of course, an “unless”, but having spent decades of my professional life on this issue, I can’t say I’m hopeful. Certainly, there’ll be no progress under the current government, as this issue is now part of the culture wars. Whether Labor will do any better, I don’t know. Here’s the comment I provided to the Australian Science Media Centre.

The depressing outcomes reported by the Wentworth Group are the inevitable result of the policy decision to abandon buybacks, that is, the voluntary purchase of water entitlements from irrigators who are willing to sell those entitlements. Buybacks are by far the most cost-effective method of securing additional water for the environment as well as providing a direct benefit to farmers, who can use the proceeds to reinvest in dryland agriculture or to assist a transition out of agriculture. The abandonment of buybacks, combine with a failure to address the needs of irrigation-focused communities in the Basin represents the worst of all policy worlds.

Categories: Environment Tags:

Finkel

June 16th, 2017 11 comments

I’ve been flat out for the last couple of weeks, and haven’t had time to post. But I’ve finally found enough time to read the Finkel Review into the Future Security of the National Electricity Market (NEM). There are four inter-related points that come out of the report

1. The NEM has failed in its own terms, that is, with respect to the objective of providing reliable and affordable electricity. The Review recommends a variety of tweaks to the market rules, but the core measure is a shift to central planning by a new Energy Security Board, which effectively overrides the multiple existing market bodies. Not surprisingly, given the political environment the Review ignored my submission calling for renationalization of the Grid, but the logic is the same.

2. We need a carbon price, in one form or another, if we are to reduce emissions in line with our commitments. Given that all economy-wide options have been ruled out, we may as well start with an electricity specific policy. Within electricity, the existing Renewable Energy Target is a crude kind of price mechanism, with only two prices, one for renewables and the other for non-renewables. But, if we tweak that a bit, we can replace the largely irrelevant notion of “renewability” with emissions-intensity, and we have something like a carbon price. I pointed this out a couple of years ago. The Clean Energy Target Finkel Review doesn’t quite get there, but it goes most of the way.

3. The only way to get lower wholesale electricity prices is to expand renewables and let the owners of coal-fired power station take a corresponding hit to their profits.

4. Policy uncertainty has been at least as big a problem as bad policy. This was most obviously true of the Abbott government’s attacks on the RET, which stalled investment in renewables, while doing nothing for coal. Abbott is correctly blamed for many of our current problems. The implication is that a bipartisan compromise is better than holding out for the right policy, only to see it reversed after the next change of government. Whether that judgement stands up remains to be seen. If Turnbull does indeed face down Abbott, Abetz and the rest, and can reach an agreement with Labor, the arguments of the Review will be vindicated. And, with the denialists sidelined, it will become obvious that we need and can easily achieve more ambitious targets.

Categories: Economic policy, Environment Tags:

What is Adani thinking?

June 8th, 2017 31 comments

A couple of days ago, Gautam Adani made the long awaited announcement that the Adani board had decided to proceed with the Carmichael mine-rail project in the Galilee Basin. As usual there was an asterisk. Construction work won’t start until Adani can get financial backing. This was previously supposed to in June 2017 (that is, within weeks) but has now been deferred until 2018. Still, Adani has opened a head office in Townsville, promises to hire up to 250 staff and is also saying it will begin pre-construction works like land clearing in the September quarter.

But on the same day, unnoticed by almost the entire Australian press, with the exception of Peter Hannam at the SMH, the board of Adani Power, the putative buyer of Carmichael Coal, made a much more consequential decision. They are spinning off the 4GW Ultra Mega Power Plant* at Mundra, along with a huge load of debt, into a subsidiary, provisionally called Adani Power (Mundra). The plan it seems is to sell majority ownership, hopefully to the government of Gujarat, and thereby leave the slimmed down Adani Power with a manageable debt load, while it shifts further away from coal and into renewables.

But without Mundra, Adani Power won’t have nearly enough coal-fired plant to take up the output of even the first stage of Carmichael. And this “mine to plug” model was crucial to the viability of the project. Even if the modest recovery in thermal coal prices over the past year were sustained, Carmichael couldn’t cover its costs by selling on the world market.

So what is Adani up to? I’ve thought about a bunch of hypotheses and now I have one that I think makes sense. Adani doesn’t want to write off the $2 billion or so it’s already put into acquiring the mine site, but it also doesn’t want to throw good money after bad. Suppose that, Adani gets $1 billion in loans from the Turnbull-Canavan Northern Australia slush fund to build the rail line, which is owned by a separate Adani company in the Cayman Islands. They could use that money to get started on the rail line, while discovering yet more reasons not to start spending their own money on the mine.

That would buy them perhaps a couple of years during which something might turn up. The price of coal might go up a lot. abd the Hancock-GVK Alpha project might somehow be revived. If so, the rail line could be viable even without Carmichael.

And, if nothing did turn up, Adani would have bought a couple of years breathing space before writing off the losses that have already been incurred, without spending a significant amount of its own money. Adani (Caymans) would slide gracefully into bankruptcy and the Australian public would be left with a half-built rail line to nowhere and a billion dollar hole in our collective pockets.

Of all the explanations I’ve tried out, this is the one that makes most sense to me right now. Comments appreciated.

* I love this grandiose name, redolent of the great days of Soviet-inspired central planning. The UMPP program was started with great fanfare a decade or so ago, but has now collapsed almost completely.

Categories: Economic policy, Environment Tags:

Clean coal

May 31st, 2017 37 comments

The Energy Minister Josh Frydenberg has announced legislation to allow the Clean Energy Finance Corporation to fund coal-fired power stations using Carbon Capture and Storage (CCS), often called “clean coal”. Although there has been plenty of criticism, this is actually a Good Thing.

If it worked at low cost, CCS would solve a lot of problems, particularly for Australia. We could burn coal, and store the resulting carbon dioxide underground, fixing much of the climate change problem without changing anything else. The ease of this (hypothetical) solution is why CCS plays a big role in lots of climate change scenarios.

Unfortunately, cost-effective CCS doesn’t exist, and isn’t likely to. So, barring some great new discovery, the change in CEFC rules is purely symbolic.

What makes the announcement a Good Thing is that avoids the “bait and switch” used by Frydenberg and others in the past, where clean coal is described in terms of CCS, then shifted to included “High Efficiency, Low Emissions” (HELE) coal plants. This term refers to the fact that plants constructed today are indeed more efficient, and therefore have lower emissions per unit of electricity, than those built thirty years ago. But they are still far worse than gas-fired plants let alone renewables or (if it could be made to work) CCS.

Categories: Economic policy, Environment Tags:

Queensland government backing away from Adani?

May 29th, 2017 21 comments

Looking at news coverage and the emails I’m getting from climate action groups, it looks as if I may have misinterpreted the Queensland government’s move on royalties (or maybe I posted before the decision process was complete). The latest news is that the state government will take no part in processing any loan to Adani from the Northern Australia Infrastructure Fund. I’ll try to post again when I get a clearer picture on this.

What remains clear is that Adani is having a lot of trouble finding bank loans or equity investors to invest in the Carmichael mine project. Given the poor economics of the project, any money lent by Australian governments is likely to be lost, leaving the publci with a stranded and useless asset.

Update 31/5/17 The Guardian reports that https://www.theguardian.com/business/2017/may/30/adani-reaches-mine-royalty-agreement-with-queensland-government to defer nearly all of its royalty obligations for the first five years of production under the new deal, with interest charged on anything owed to the state above that. Almost certainly the interest rate would be well below what a commercial lender would charge, given the risk of default.

More noteworthy, I think, is the following

That would be the trigger for what the company has flagged would be $100m to $400m of preliminary works. But the deadline for financial close, the securing of bank backing to build the mine and rail to haul coal to the coast, is early 2018

As has been true for the past several years, the date when the project actually starts still seems to be at least a year away.

We’ll see at least some money on the table if the “preliminary works” start on the supposed schedule. But my guess is that the scale of the work will be less than meets the eye. I wonder, for example, whether the expenditure figure includes work done before Adani mothballed the project back in 2015.

Categories: Economic policy, Environment Tags:

More Adani asterisks

May 26th, 2017 9 comments

The Palaszczuk government has, unsurprisingly, capitulated to the Adani corporation’s demands for a tax holiday. To avoid accusations of bias, they have offered the same deal to other new coal projects. If these projects go ahead, the implications for the planet are disastrous. But, at least in Adani’s case, there are plenty of reasons to doubt that this will happen.

It’s now clear that any “investment decision” by Adani will involve spending modest sums on land clearing and surveying. That’s enough to keep the option open and avoid writing off the money already spent on the project. But the real decision, which requires bank finance, appears to have been deferred from June 2017 to some time in 2018. The first shipments of coal aren’t expected until 2020.

My guess is that, before anything of substance happens in the Galilee Basin, Adani will be back with more demands (maybe a Danzig corridor). Sooner or later, they’ll make an offer that can be refused, at which point they’ll pull up stumps and send in the lawyers asking for compensation.

(Sorry for the absence of links, I’ve been reading different bits and pieces).

Categories: Environment Tags:

Meanwhile, in the real world

May 23rd, 2017 26 comments

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.

Categories: Environment Tags:

There are better things to spend $1 billion on than the Adani coal mine

May 20th, 2017 10 comments

That’s the self-explanatory headline for my latest piece in the Brisbane Times (reproduced in the other Fairfax papers, I think). Text is over the fold.

And, on the same theme, Richard Denniss.

Read more…

Categories: Economic policy, Environment Tags:

My submission to the government’s Climate Change Review

May 2nd, 2017 25 comments

Submission’s to the government’s review of climate change policy close on Friday (so there’s still time to send one to [email protected], even if it’s just “Stop Adani”). It’s obvious to everyone now, including the government, that energy and climate policy are in a complete mess. So, there must be some chance of a radical change, possibly even one for the better. And there are plenty of options on the table.
I just put in a very short submission, which is below.

Submission
The terms of reference for this review refer to the government’s commitment to addressing climate change and to ensuring the adoption of effective policies.  However, these supposed commitments are contradicted by the government’s failure to respond, as legally required, to the Special Review of Australia’s Climate Goals and Policies, undertaken at the current government’s request by the Climate Change Authority.  
The final report of this Review was delivered to the government on 31 August 2016. Under the relevant legislation, the Minister was required to table the government’s response to the recommendations of the Review within six months, that is, by 28 February 2017. This requirement has been ignored.
I was a Member of the Authority until March 2017. I resigned when it became apparent that the government had no intention of responding to, or otherwise taking account of, the comprehensive Special Review in which I had taken part.
The absence of any response reflects the inability of the government to offer a coherent alternative to the policy toolkit recommended by the CCA. The current review should adopt the recommendations of the CCA Special Review, particularly including the introduction of an emissions intensity scheme for the electricity sector.

John Quiggin
Professor of Economics, University of Queensland
Former Member, Climate Change Authority
This submission is made in a private capacity and should not be assumed to represent the views of the University of Queensland or the Climate Change Authority

Categories: Economics - General, Environment Tags:

Alternatives to Adani

April 29th, 2017 14 comments

Westpac’s announcement of a new policy that appears to exclude funding for the development of mines in the Galilee Basin appears likely to sound the death knell for Adani’s proposed Carmichael Mine and rail line. Westpac was the last of the four big Australian banks to announce such a policy. It joins at least 17 global banks, notably including Standard Chartered, which had previously been a major source of finance for Adani

In these circumstances, the proposed $900 million loan from the government’s Northern Australia Infrastructure Facility would involve a high risk of loss, and would therefore be an improper use of public funds. The same is true, admittedly to a lesser extent, of the rival proposal for a rail line put forward by Aurizon (the privatised business formerly known as Queensland Rail).

But if the NAIF doesn’t fund coal railways, how should its resources be allocated? And, what about the jobs promised by the Adani project that will not now be created? Obviously, these two problems are inter-related.

On the evidence of Adani’s own experts, the Carmichael project would create around 1000 jobs (despite this, the discredited figure of 10 000 jobs continues to be touted). So, the proposed NAIF loan would involve an investment of nearly $1 million of public money for every new job created. It shouldn’t be too hard to match that.

But what’s really needed is an alternative to the outdated developmentalism that has characterized not only the Adani proposal but the whole idea of a Northern Australia policy. What are the real economic and social needs of the people of the region, including indigenous people, who are directly affected by the Adani proposal? I’m planning more work on this soon.

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Categories: Economic policy, Environment Tags:

Too cheap to meter

April 26th, 2017 26 comments

Reading about the UK National Grid recently, I came across the interesting concept of demand turn up. Unlike the usual form of demand side management, where users are paid to cut usage in periods of excess demand, demand turn up involves making small payments to users willing to increase demand when the supply from renewables exceeds demand.

This looks strange at first sight, but it simply reflects the fact that, once the capacity is installed, the marginal cost of renewable electricity is zero. In the short run, taking account of the costs of shutdown and startup, the marginal cost of electricity from an operating renewable generation source is negative*.

So, demand turn up is just an application of marginal cost pricing, the same as off-peak pricing for coal-fired power.

The broader point is that claims that the electricity supply system must have a large component of coal-fired to meet “baseload demand” reflects the assumption that the system must meet the demands generated by a pricing system set up for coal (or nuclear which is broadly similar).

Categories: Economics - General, Environment Tags:

Burden of proof

April 10th, 2017 81 comments


Ted Trainer, with whom I’ve had a number of debates in the past, has sent me an interesting piece claiming that “no empirical or historical evidence that demonstrates that [100 per cent renewables” systems are in fact feasible”. The authors, at least those of whom I’m aware, are “pro-nuclear environmentalists” (Ben Heard, Barry Brook, Tom Wigley and CJ Bradshaw) The central premise is that, given that renewables won’t work, and reductions in energy demand are unrealistic, we need to get cracking on nuclear (and also carbon capture and sequestration).

It’s paywalled, but the abstract is sufficient to get the main point. In fact, the whole piece is summarized by its title “Burden of Proof”. To give the shorter version: Unless every possible detail of a 100 per cent renewable system can be proved to be workable decades in advance, we must go nuclear.

The longer version is in these paras from the abstract

Strong empirical evidence of feasibility must be demonstrated for any study that attempts to construct or model a low-carbon energy future based on any combination of low-carbon technology.

The criteria are: (1) consistency with mainstream energy-demand forecasts; (2) simulating supply to meet demand reliably at hourly, half-hourly, and five-minute timescales, with resilience to extreme climate events; (3) identifying necessary transmission and distribution requirements; and (4) maintaining the provision of essential ancillary services.

This list is mostly notable for what’s not in it: adequate year-round power supplies, at an economically feasible cost. That’s because it’s now obvious that solar PV and wind, combined with one of a number of storage technologies (solar thermal, batteries, pumped hydro) and a bit of smart pricing, can deliver these goals. So, instead we get demands for the precise details in the list above. To lift the burden of proof a bit more, it’s not good enough to address them separately, they all have to be done at once in a single study. Unsurprisingly, no one has yet produced a study that meets all of these demands at once.*

And this is where the burden of proof works so brilliantly. Renewable technologies are well established, with annual installations of 100 GW a year a more, and a record of steadily falling costs. But, according to our authors, they haven’t met the burden of proof, so we have to put tens of billions of dollars into technologies that are either purely conceptual (Gen IV nuclear) or hopelessly uneconomic on the basis of current experience (CCS and generation II/III nuclear).

To be fair, this use of the burden of proof, while more blatant than usual, is very common. One any policy issue, most of us would like to compare an idealised model of our preferred solution with the worst case scenario (or, at best, the messy and unsatisfactory reality) for the alternatives. But it’s important to avoid this temptation as much as possible. On any realistic assessment, renewables + storage (with the path to 100 per cent smoothed by gas) offer a far more plausible way of decarbonizing electricity generation than nuclear or CCS>

Clarification: In comments, Ben Heard points out that the authors counted two publications from closely related studies together.

Categories: Environment Tags:

Turning the corner

March 25th, 2017 59 comments

Obviously, climate policy in Australia is not going well. In the US, the Trump Administration is keen to reverse the progress made under Obama. Yet for the planet as a whole, the news hasn’t been better for a long time. And there is every reason to hope that Trump and Turnbull will fail on this, and on much else.

Two big pieces of good news this week

* For the third year in a row, global carbon dioxide emissions from the energy sector have remained nearly stable, despite continued economic growth.
* Large-scale cancellations in China and elsewhere have greatly reduced the number of proposed coal-fired power plants

A lot more needs to happen, but with the cost of renewables steadily falling and awareness of the health and climate costs spreading, there’s every reason to hope that the decarbonization of electricity supply will happen more rapidly than anyone expected. After that, the big challenge is to electrify transport. The technology is there, so this is mostly a matter of renewed political will.

Read more…

Categories: Environment, Oz Politics Tags:

My resignation from the Climate Change Authority

March 23rd, 2017 45 comments

Earlier today, I wrote to Josh Frydenberg, the Minister for Energy and Environment, resigning as a Member of the Climate Change Authority. Mine is the third recent resignation: Clive Hamilton resigned in February, and Danny Price a couple of days ago. There’s a story in the Guardian here. My resignation statement is over the fold.

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Categories: Environment, Oz Politics Tags:

Hope springs eternal …

March 20th, 2017 7 comments

… for the nuclear power faithful. Over the last couple of months, it’s become apparent that the Westinghouse AP1000, by far the most promising hope for a modern Generation III+ design, is dead in the water. Toshiba, which bought Westinghouse a while ago, is writing off billions of dollars, and seems unlikely to stay in the nuclear business after the remaining projects (all overdue and overtime) are completed. The other developed country candidates, including EPR and Candu are in an even worse state.

But wait! It seems there is a project that is on time, and possibly even on budget. It’s being built in the United Emirates by Korean company KEPCO, and consists of four plants using KEPCO’s APR-1400 design. That’s been the basis for some new optimism.

A quick look at Wikipedia’s APR-1400 article suggests this optimism may be misplaced. Among the problems

(i) This is a Gen III design, dating back to the 1990s. It hasn’t yet been certified as safe in the US, and it may not be
(ii) While the UAE project appears to have gone well, projects in South Korea have been subject to delays and cost overruns
(iii) The UAE deal was signed in 2009. There hasn’t been another export deal since then.
(iv) Although there were plans to build more plants in South Korea, they appear to have been shelved. There hasn’t been a new APR-1400 plant started there since 2013.

Categories: Environment Tags:

Faith-based energy policy: the case of nuclear power

March 16th, 2017 23 comments

If you want to explain the success of Trump and Trumpism, despite Trump’s blatant reliance on falsehood, it’s crucial to understand that the mainstream political right has been rendering itself more and more impervious to reality for at least two decades. A striking example is the belief that nuclear power is the answer to our needs, and that the only obstacle is Green Nimbyism. This claim has recently been restated by a number of LNP Parliamentarians, by no means all of whom are on the hardline right.

Rather than rehearse the arguments I’ve put many times, I’ll quote the conclusion of the SA Royal Commission into the Nuclear Fuel Cycle:

a. on the present estimate of costs and under current market arrangements, nuclear power would not be
commercially viable to supply baseload electricity to the South Australian subregion of the NEM from 2030 (being the earliest date for its possible introduction)

b. it would not be viable
i. on a range of predicted wholesale electricity prices incorporating a range of possible carbon prices
ii. for both large and potentially new small plant designs
iii. under current and potentially substantially expanded interconnection capacity to Victoria and NSW
iv. on a range of predictions of demand in 2030, including with significant uptake of electric vehicles

c. nuclear would be marginal in the event of a lower cost of capital that was typical for the financing of public projects and under strong climate action policies.

That closes off just about every loophole a pro-nuclear advocate might want to use. And the Royal Commission was anything but anti-nuclear. It pushed hard for the idea of a nuclear waste dump (not really credible, but not as obviously infeasible as nuclear electricity generation).

Read more…

Categories: Economic policy, Environment Tags: