Big Oil changes sides in the War on Coal

As the time left to save the planet from uncontrolled climate change gets shorter and shorter, the previously glacial pace of movement on the issues has speeded up. One of the most important, and surprising, developments has been a string of increasingly sharp attacks on coal, coming from representatives of major oil and gas companies. As this (rather excitable) piece explains, the reason is simple. The policy debate has crystallised around the idea of a carbon budget – the remaining amount of CO2 that can be emitted while keeping atmospheric concentrations at levels consistent with 2 degrees of warming or less.

Obviously, if such a budget is imposed and adhered to, a lot of fossil fuel resources, currently sitting on corporate account books, will have to be left in the ground. Unsurprisingly, fossil fuel companies have done their best to prevent such an outcome, promoting science denial, and encouraging national governments to shirk their share of the burden with the argument that others should do more. Such a strategy implies a united front among fossil fuel owners, since the longer the imposition of a budget can be delayed, the better off they all are.

The recent break in the fossil fuel coalition therefore marks a new stage. Rather than try to expand the budget for all fossil fuels, the oil and gas companies have decided to get as much as possible for themselves, which means shutting down coal as fast as possible. The facts that have made such a strategic switch sensible are many and varied but the most important are

(a) the increasing recognition of the health effects of burning coal which gives national governments like that of China a strong incentive, independent of climate change, to reduce coal use
(b) the fact that the most immediately promising alternatives to fossil fuels are renewable sources of electricity which compete directly with coal, and are, to a significant extent complementary with gas (as a dispatchable source, gas-fired electricity tends to offset problems associated with the variability/intermittency of renewables.

What’s the appropriate response here? In the end, it will be necessary to phase out fossil fuel use altogether. But the logic of tackling coal first is inescapable. If that logic drives a wedge in the fossil fuel coalition, so much the better for all of us.

44 thoughts on “Big Oil changes sides in the War on Coal

  1. The gas producers have got it right – gas is the fuel of tomorrow, and we should be thankful for it. Of course it is not the fuel of the day after tomorrow but that’s another story.

    Gas can only DELAY our need for renewables, not remove it. But even that is really worthwhile because moving from coal to gas is the quickest, cheapest and far the most politically feasible fix while the world gets it shit together. Thank Gaia for fracking.

  2. Derrida, we can certainly make more use of existing gas generating capacity and decrease the amount of coal that is burned and reduce emissions that way. This is what Australia’s carbon price, when we had it, did. But it makes no sense to build new gas generating capacity because new renewable generating capacity is much cheaper. This is the case in Australia and I understand that it is the case in the United States as well. Maybe there are places in the US where this is not yet the case, but not yet the case means that it is the case, because it is not enough for new gas capacity to make money this year, it has to make money for years to come to pay for itself and it is in the nature of wind and solar power to cause wholesale electricity prices to drop.

  3. RB I agree and disagree. We need open cycle gas (jet engine but no steam boiler) to fill in wind lulls but it is expensive and nearly as CO2 intensive as supercritical coal at ~750 grams per kwh. AEMO in their Statement of Opportunities (see website) suggest we could close some baseload plant but build more peaking plant.

    It is in the nature of hamburgers to squash molten cheese. Wind electricity sellers can bid low on the NEM knowing a) they have guaranteed market share backed by penalties b) the final seller will get about 5.2c per kwh LGC subsidy in the retail price. The lower wholesale price is handing back just some of the subsidy. Occasionally wholesale prices go negative to keep the wheels turning be they fossil powered or clean. Under normal circumstances households never see negative prices since the LGC, GST, transmission charges, retail margin, daily connection fees etc get added.

    Here’s an opinion that coal will be with us for a long time
    http://theenergycollective.com/roman-kilisek/2238681/world-s-leading-global-private-banks-and-coal-related-investments-pecunia-non-
    In Australia you’d have to think it will be our major power source for another 20 years. The power station closures like Anglesea and Northern are not the behemoths that power the east coast capitals.

  4. Hermit, we already have open cycle gas turbines. And combined cycle ones. And kerosene turbines. And power stations that are giant diesel generators. And coal power plants. We don’t need to build anymore fossil fuel capacity. We have enough. We even have a considerable amount of hydroelectric capacity and two pumped storage facilities. And interestingly, open cycle gas turbines are now obsolete for providing ancillary services. Thanks to decreases in the cost of battery storage, and in Australia soaring natural gas prices (which you are fond of updating us on), they are no longer cost effective. In Australia, thanks to the low and decreasing cost of rooftop solar electricity combined with minimal solar feed-in tariffs and high retail electricity prices, we will probably end up with a large amount of energy storage in homes and businesses that will provide ancillary services. But even if Parliament passes the Australian Patriot Act which bans home and business energy storage and creates the Department of Coalland Security to enforce it, energy storage will simply be located on grid where it will provide both ancillary services and arbitage, storing electricity when its price is low thanks to good winds and/or sunny weather, and selling it when the price is high.

  5. The pumped hydro projects Wivenhoe Qld, Shoalhaven and Talbingo NSW currently store about 5 Gwh per day I understand. We’ll need many times that amount to replace thermal peaking plant. Australia uses 249,075/365 = 682 Gwh of electricity a day. The base model Powerwall stores 0.000 007 Gwh. Except perhaps for affluent neighbourhoods it’s hard to see batteries making enough difference.

  6. @Hermit

    Australia’s topography is not well suited to hydro power in the main. We do not have many good sites for dams and hydro projects. We also have very little snow pack and very little runoff compared to many other countries as we are so arid.

    Given the above, bulk energy storage will have to take another form. Most likely for Australia and to complement solar power this will take the form of thermal energy storage in molten salt tanks.

    “The Andasol power plant in Spain is the first commercial solar thermal power plant using molten salt for heat storage and nighttime generation. It came on line March 2009.[57] On July 4, 2011, a company in Spain celebrated an historic moment for the solar industry: Torresol’s 19.9 MW concentrating solar power plant became the first ever to generate uninterrupted electricity for 24 hours straight, using a molten salt heat storage.” – Wikipedia.

    With all technologies which replace fossil fuel power, the issues will be cost and safety. The systems which prove to be economically viable and safe to operate will compete successfully in the long run, so time will tell. I now expect renewable energy with various storage methods to triumph completely over fossil fuels and nuclear power. This is just my bet. Will it happen quickly enough to prevent dangerous global warming? I don’t know. I hope so but I have some serious doubts.

  7. Hermit, we don’t need to replace our thermal peaking plants. Our current thermal peaking plants still, for the most part, work, and are generally capable of continuing to function for a considerable amount of time.

  8. “it’s hard to see”

    This is your only argument, Hermit. Wasn’t it hard, 10 years ago, to see a million Australian homes with solar PV?

    The leaps by which you get from “I can’t see this happening” to “This won’t happen” to “So, going nuclear is the practical alternative” baffle me every time. Perhaps, rather than restating “I can’t see this” you should have your vision checked.

  9. Our Shire is very fortunate as the Victorian government has chosen one of our smaller towns, Newstead, to be one of the 100% Renewable Energy towns. This is very exciting. We already have a higher than average amount of solar panels here, and NGOs and the Council set up a bulk buy program, MASH, so residents have access to lower cost solar panels.

    “The Victorian Labor Party has sought to underline its renewable energy credentials by vowing to help the town of Newstead, near Bendigo, to become 100 per cent renewable energy by 2017, and become the state’s first “solar town”.

    The commitment comes a few days after party led by Daniel Andrews said that a Labor Government would reverse the wind farm restrictions imposed by the Coalition state government, and seek to unlock billions of dollars in stalled investment.

    Newstead is not the only town seeking to go 100 per cent renewable. Yackandandah is also seeking to go entirely renewable by 2022, and its Totally Renewable Yackandandah campaign will be officially launched next week.

    The Newstead initiative is led by Renewable Newstead, which wants it to become a town where “people talk and thing about energy and where understanding of our usage and our energy options become widespread in the community.”

    “Newstead will be a leading example of what can be achieved when locals and government work together,” D’Ambrosio said in a statement. “Not only will the residents in Newstead reduce their reliance on coal fired power and cut their carbon footprint, they will be driving down household costs through cheaper energy bills.”

    Environment Victoria said the initiate would create a valuable template that can be rolled-out across the state, and welcomed Labor’s commitment to ensure fair access, and fair prices, for rooftop solar”

    http://reneweconomy.com.au/2014/victoria-labor-plans-100-renewable-energy-town-near-bendigo-86213

  10. Pr Q I don’t need reading glasses to comprehend official statistics. They say that in 2013 we got 1.5% of our electricity from solar 2.9% from wind and 87% from burning fossil fuels. It’s on the cards the next set of figures will be even more carbon heavy. Some 40% of our primary energy demand was for transport with that energy almost entirely coming from oil. What am I not seeing?

    Most of our rooftop PV and hws was installed 2010-2012 and has since slowed drastically. Official statistics again per Clean Energy Regulator. Sure other parts of the world are installing quickly from a low base. Niches may fill quickly then level out. I don’t remember goji berries or chia breakfast cereal a decade ago so I bet their growth has been spectacular. I doubt however they will be a major part of our diet.

    Here’s a similar conclusion from the IEA.

  11. Despite the alleged lack of enthusiasm from financial markets for all things Carboniferous, the new $5B coal loader (ie the 4th coal loader) at Newcastle is to press ahead.

    As Krugman recently said

    Seriously bad ideas, I’d argue, have a life of their own. And they rule our world.

  12. ZM, good luck with the Solar Towns initiative, although I would have to say that the Victorian government giving support to solar towns is like the government of the region that contains the world’s most CO2 intensive power station supporting a project that looks green but contributes very little towards shutting down said horrible drowning power station. In fact, it is amazing how much it is like that. That said, it is far better than the state government being anti-renewable energy and the removal of excessive restrictions on the building of wind farms in Vic will save lives. But who knows, the PR effect from Solar Towns might have large benefits, although I suspect it might result in comments being left here in a few years time complaining about the cost per town and how solar only supplies 15% of the country’s electricity and so we need to immediately start relying on nuclear power.

    Even ignoring the cost of greenhouse gas emissions from burning coal and just looking at the health costs alone, since these mostly occur in Victoria it is very likely to be enough to justify a massive buildout of wind and rooftop solar capacity and the funding of efficiency improvements. Emergency shutdowns of the coal power stations that are most damaging to human life could also be justified on the basis of health costs, as the years of healthy living gained could far outweigh a short term increase in electricity prices resulting from a temporary increase in natural gas use.

    Unfortunately health externalities are likely to continue to be mostly ignored. I just hope that wind and solar capacity rapidly expands in Victoria and in other states, and makes Victoria’s coal plants unprofitable, just as South Australia’s single operating coal power station is no longer cost effective to run, even in the absence of a carbon price, and will be shut down within 9 months to 3 years. While Victoria’s brown coal plants have shown a willingness to continue to operate even when receiving an average of under 2 cents a kilowatt-hour for electricity, they are not quite as hard to beat economically as that makes them seem, as many coal power stations, or individual units, are only one major failure or major overhaul away from becoming unprofitable to operate.

  13. @Hermit

    This simply means we need a rapid implementation of a punitively high CO2 emissions price. That would be a game changer. The fault lies not with renewable energy’s inherent capacities but with late stage capitalism’s inherent nature. Fossil fuel industries, still being the most powerful energy capitalists around have bought off the politicians and they control the agenda. The people do not control the agenda, the oligarchs do.

    How will this change? Not easily. It will probably take a salutary disaster of some kind which hurts a lot of rich Westerners and is clearly attributable to climate change.

  14. @Hermit

    Most of our rooftop PV and hws was installed 2010-2012 and has since slowed drastically.

    This is misleading. The way you go on about it, you’d think PV installation had fallen off a cliff. The reality is that PV installation in Australia has been increasing in a more-or-less linear fashion since 2010, at around 1GW per annum in installed capacity terms.

    There were large spikes in the rate of installation in 2011 and 2012, which were caused by buyers rushing to install ahead of the phaseout of the very generous Queensland and NSW feed-in tariffs. The rates of installation across 2013 and 2014 were roughly the same, and higher than the rate in 2010. Although fewer systems were installed in 2013 and 2014 than in 2011 and 2012, the average size of the systems was larger, so the rate of installation in terms of capacity remained about the same as the earlier years.

    So the real story seems to be one of more-or-less steady growth, despite the volatile policy environment. As to whether or not the rate of installation sustained through 2013 and 2014 will continue through 2015, it’s too early to tell.

  15. Despite massive cuts in feed-in tariffs in the time period – in Queensland from 44 cents a kilowatt-hour to 8 cents and then maybe 6 cents to nothing – the total amount of point of use PV installed in Australia has been surprisingly constant over the past 4+ years. Now there is nearly no room to reduce feed-in tariffs, further decreases in system costs will make rooftop solar a more attractive investment for households and businesses. As the cost of PV comes down, households have an incentive to install larger systems to increase their self-consumption. If there is no political interference from people who would rather have people die, mostly members of the world’s poorer nations but also Australians, than change our current fossil fuel use, then I expect the installation of rooftop solar to increase. One estimate has the cost of PV modules decreasing by 25% in the next three years and that does not seem unreasonable.

  16. @Ronald Brak

    the total amount of point of use PV installed in Australia has been surprisingly constant over the past 4+ years

    You mean the growth in point of use PV installation in Australia has been surprisingly constant over the past 4+ years. The total amount has been steadily increasing.

  17. D’oh! – The total amount of point of use PV installed in Australia *annually* has been surprisingly constant over the past 4+ years.

    Thansk for the correction.

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