That’s the headline for a recent article I wrote for The Conversation. I meant to post it earlier, but didn’t get to it. Now that Trump is gone, there’s near-unanimous international support for border adjustments. But our government thinks it can bluster its way past the problem, as it does on domestic issues. And if Labor has any ideas on the issue, I haven’t heard about them.
In my article arguing that electricity from solar PV (and wind) could soon be too cheap to meter, I didn’t mention transmission networks. That was for space reasons.
The case for public investment is actually stronger for transmission than for generation. Electricity transmission lines have the same cost structure as renewables (low operational cost and long lives), if anything more so, meaning that the cost of transmission depends primarily on the need to secure a return to the capital invested.
More than this, the electricity grid as a whole is a complex network in which valuing the services of any individual component is just about impossible. That in turn means that relying on markets to make optimal investment decisions is untenable.
For these reasons, the electricity transmission network should never have been privatised. I’ve been arguing for renationalisation for years.
Amazingly, in the new low interest environment, this idea seems to be gaining traction, at least as regards new investment. Labor has proposed a $20 billion public investment. The government hasn’t gone that far, but is seeking to use its own borrowing capacity to provide low cost finance for transmission investment ( a half-baked compromise, but better than nothing).
That’s the headline for my latest piece in Inside Story, looking at the implications of zero interest rates for renewable energy sources like solar and wind. Key para
Once a solar module has been installed, a zero rate of interest means that the electricity it generates is virtually free. Spread over the lifetime of the module, the cost is around 2c/kWh (assuming $1/watt cost, 2000 operating hours per year and a twenty-five-year lifetime). That cost would be indexed to the rate of inflation, but would probably never exceed 3c/kWh.
The prospect of electricity this cheap might seem counterintuitive to anyone whose model of investment analysis is based on concepts like “present value” and payback periods. But in the world of zero real interest rates that now appears to be upon us, such concepts are no longer relevant. Governments can, and should, invest in projects whenever the total benefits exceed the costs, regardless of how those benefits are spread over time.
It’s now clear that we have the technology we need to run a completely decarbonized electricity generation system. South Australia is the world leader generating more than 50 per cent of its energy from renewable sources, and aiming for 100 per cent renewables by 2030.
The unit cost of renewables is now well below that of carbon-based generation (and nuclear). The remaining big question regarding the economics of the transition is the cost of storage, taking account of the variable nature of solar PV and wind.
As I’ve pointed out before, any reversible process that uses energy is a potential storage technology – that’s true of batteries, pumped hydro, flywheels, stored heat and many more. But hydrogen is a particularly appealing storage technology, because it offers the potential to decarbonize major industrial processes.Read More »
That’s the headline for a piece I just wrote for Independent Australia, looking at a new report from Greenpeace about the harm done by air pollution from coal-fired power, in addition to the climate-destroying effects of CO2 emissions. The report estimates 800 deaths per year, and is, from what I can see, consistent with other studies.
As a possible recovery from the COVID-19 pandemic comes into sight, it’s time to place human health above the desire to maintain the economic status quo. Australia can and should get off coal by 2030, without harming workers employed in the industry. In doing so, we will be saving both lives and money.
One of the consequences of the pandemic has been the realization that reliance on the ready availability of imported goods may be a problem in a crisis. This isn’t new, particularly in relation to oil, which plays an outsized role in geopolitics. The supposed need to protect sea lanes, and particularly oil supplies against disruption has been a major part of the rationale for naval defence spending. And we have repeatedly been criticised for failing to maintain stocks of refined petrol.
Read More »
I’ve been underwhelmed by some of these arguments, but it seems as if it’s time to take them seriously, particularly in relation to oil. If we are to decarbonize the economy, we need to reduce our consumption of oil, ultimately to zero. The obvious place to start is by reducing imports of oil, with a medium-term goal of self-sufficiency.
Michael Shellenberger’s “apology essay” is the last gasp of “ecomodernism”
Although ecomodernists make a lot of claims, the only one that is distinctive is that nuclear power is the zero-carbon “baseload” energy source needed to replace coal, and that mainstream environmentalists have wrongly opposed it.
Historically, there is something to this. It would have been better to keep on building nuclear plants in the 1980s and 1990s than to switch from oil to coal, and it was silly for Germany to shut down nuclear power before coal
. But none of that is relevant anymore, at least in the developed world. Solar PV and wind, backed up storage are far cheaper than either nuclear or coal. As a result, there have been very few new coal or nuclear plants constructed in developed countries in recent years.
Several countries (Belgium, Austria, Sweden) are already coal-free and most developed countries will be by 2030. So, ecomodernism is obsolete.
At this point, Shellenberger is faced with the choice between admitting that the mainstream environmentalists were right or explicitly going over to the other side. He has chosen the latter.
(From Twitter using Spooler)
… , we can exit coal by 2030. Here’s how to do it.
That’s the title of my recent article in The Conversation. It’s a summary of a report, titled Getting Off Coal: Orderly, Early Transition to Minimise Impact for Australian Economy which was published recently by The Australia Institute.
Amid the coronavirus pandemic, the climate crisis rolls on, slowed a bit by the economic impact of travel restrictions. The campaign to stop carbon dioxide emissions, including those from the Adani Carmichael project, has to continue as well.
It’s now almost a year since Adani Mining gained the final environmental approvals for the construction of the Carmichael mine and rail project. At the time, the company promised to ramp up construction in a matter of weeks, with at least 1500 jobs in prospect during the construction phase. What has happened in the subsequent year. Three points stand out
First, the project is proceeding, but it can still be stopped. Work on the site continues and contracts said to total $1 billion have been announced. Nevertheless, the progress so far has been much less than might be expected if, as announced, the mine is to be exporting coal by next year.
Second, in global terms, the news for thermal coal has been remorselessly bad. Demand for coal-fired power has crashed in many countries, closures and cancellations have been announced regularly and major corporations and financial institutions have divested their assets
Finally, there is still no sign of the promised jobs bonanza.
What is happening on the site?
A number of recent announcements suggest substantial progress. The most notable are
* A $350 million contract with BMD for the construction of the rail line, including rail camps and other works, for a total of more than $1 billion in contracts.
* The completion of an airstrip permitting Fly In Fly Out (FIFO) operations
* Completion of the first of three camps for workers to construct the railway
However, throughout the long and troubled history of the project, Adani has made announcements of progress that turn out to be overstated. For example, the claim that more than $1 billion in contracts have been issued repeats an earlier claim. Many previously announced contracts with Downer EDI, Kepco and other large companies have come to nothing.
The airstrip (pictured here) was macadamized in March, and is nothing like the $35 million airport Adani initially proposed to build, to be financed by Townsville and Rockhampton city councils. It’s unclear whether it would be suitable for the large planes that would be needed for a FIFO operation with 1500 workers as claimed.
The contract for the construction of rail camps was announced in November 2019. The construction of one camp in the subsequent seven months is much less progress than might be expected for a rail line that is supposed to be operational next year. Satellite imagery suggests modest progress at best beyond this development, though even this is sufficient to cause substantial damage to the local environment.
Meanwhile the coronavirus is said to have cost Gautam Adani $1.5 billion of his $9.2 billion fortune, which raises the question of whether he can afford to sink $2 billion into a project that seems unlikely to generate any significant cash flow at current coal prices (see below)
Much of the loss has come from a decline in the share price of Adani Power, the presumed customer for Carmichael coal. The Adani group has proposed to delist the company, repurchasing all its shares, a transaction that has been highly controversial in India
Overall, it is clear that the project is moving forward slowly. But, it still appears possible that Adani can be stopped by a combination of the global decline in thermal coal and continued pressure on every aspect of the production chain, from insurance and finance, through the construction of the mine and rail line, the financing of the Abbot Point coal port and the cronyism surrounding Adani Power’s dealings in India and Bangladesh.
An important example emerged recently with the exposure of a number of insurance companies that have outstanding contracts with Adani, negotiated through broker Marsh (a disgusted Marsh employee leaked the info). Most of these contracts are nearly expired, and Adani will need either to renew them (some of the companies have said this won’t happen) or look elsewhere, such as to US company AIG, which still has no serious climate policy. You can take action here https://www.marketforces.org.au/liberty-mutual-hdi-talanx-and-aspen-revealed-as-adanis-insurers/ and here https://www.marketforces.org.au/adani-could-be-doing-an-insurance-deal-with-lloyds-canopius-and-axis-capital/
The global decline of thermal coal
In the year since Adani got its approval, the global outlook for thermal coal has worsened, steadily at first, and then rapidly in the wake of the coronavirus pandemic. In most of Europe and the Americas, coal-fired power is disappearing fast. Sweden and Austria closed their last coal-fired power plants earlier this year, and most EU countries have committed to a phase-out by 2030 (in many cases, by 2025). In the US, renewables now generate more electricity than thermal coal, which is likely to account for no more than 10 per cent of generation by 2030, while Canada has promised a complete phase-out.
Although China has continued to develop and finance coal projects, other Asian countries, most notably Korea, have gone the other way. In India, it is already clear that solar PV, even with firming is cheaper than new coal. Most Indian electricity generators, including Adani, are moving in this direction, even as Adani pushes ahead with projects that rely on political connections to secure an above-market prices.
The rise of renewable energy has been reflected in a sharp decline in the market price of thermal coal, which has fallen 40 per cent since the revised version of the Adani project was announced in November 2018
The central claim made in support of the Carmichael project is that it will generate large numbers of jobs. All sorts of numbers have been bandied about, but the current claim is that the construction phase of the project will generate 1500 direct jobs and many more indirect jobs. A year after the final approvals, and halfway to the announced date for shipping the first coal, there is no sign of these jobs.
Adani’s own jobs portal is currently advertising only a handful of jobs with the company. The “Carmichael jobs” website which includes ads from contractors such as Martinus rail, as well as Adani itself, has advertised less than 30 jobs in the last month. Adani is currently claiming that there are 500 workers on the project, a number that is almost certainly overstated.
How to follow what I’m doing (if you want to!)
Signup for this list is here. I also have a general mailing list, to which you can sign up here
Some readers have had trouble signing up using their phones. If that happens, use a computer or get in touch with me.
My johnquiggin.com blog
Facebook Public Page:
Economics in Two Lessons Facebook Page:
Twitter feed @johnquiggin
Comments, bouquets and constructive criticism always welcome at email@example.com
The government has released a report on energy policy it commissioned from former Origin Energy boss Grant King. I prepared a brief response for the Australian media science centre
The government’s thinking remains five to ten years behind the times. Although the idea of new coal-fired power stations seems finally to have been abandoned, the report focuses heavily on technology options that seemed promising in the past but have now been abandoned everywhere in the developed world, such as nuclear power and carbon capture and sequestration. More important is the failure to recognise that gas-fired electricity generation is increasingly being supplanted by the combination of renewables and battery storage. The policy remains fixated on extractible resources such as coal and gas, ignoring our massive endowment of solar and wind resources.
The more fundamental problem is that the approach to climate policy that underlies all of this is the same as the denialist approach to the pandemic, exemplified by Trump – since dealing with impending disaster will be inconvenient, let’s just keep ignoring it. After all, it might never happen.