Yallourn Coal Power Station
Image Credit: Jeremy Buckingham

Federal Minister for Resources and North Australia Matt Canavan will announce today that the Northern Australia Infrastructure Facility (NAIF) will be opened to consider proposals for the construction of new “clean coal” power stations.

“What I’ll be saying today is that the NAIF is certainly open for [applications from coal projects]. We’ve established this $5 billion fund to build infrastructure in the north. Energy infrastructure is a key part of what we need to build northern Australia” Minister Canavan told ABC AM.

The NAIF was established by the Coalition Government to provide up to $5 billion in concessional loans to infrastructure projects built in northern Australia.

The “mandatory eligibility criteria” for projects receiving loans under the NAIF states that projects must be “unlikely to proceed, or only at a much later date, without NAIF financial assistance.”

According to experts and industry representatives, this is a requirement that “clean coal” projects are likely to satisfy, with such projects unlikely to be commercially viable. Yet, it is also likely to see the initiative falter.

Too expensive to build

Writing in The Conversation, Director of the Centre for Economics and Policy at the Australian National University, Professor Frank Jotzo, argued that even without consideration to the environmental impact of coal-fired power stations, the economics of new coal generation did not stack up.

“The subsidy required would be potentially billions of dollars for each plant. That’s billions of dollars from the taxpayer or electricity user, in order to supply power with high carbon emissions that are then locked in for half a century. It should not happen in a country that prides itself on rational economic policy.” Professor Jotzo said.

Chief Executive of the Australian Energy Council Matthew Warren, questioned the level of interest within the sector to see new power stations built, with little appetite for projects with such high emissions profiles and operating lives.

“Over the past decade major generators have shelved plans to develop new coal fired generation, as the 50 year life of the assets and their relatively high emissions profile made them uninvestable,” Mr Warren said.

“While lower emissions coal-fired power stations could be considered theoretically, in practice there is no current investment appetite to develop new coal-fired power in Australia.”

In 2014, prior to becoming the resources minister, Senator Matt Canavan lamented the financial support to renewables, saying at the time that the Government should not be subsidising one form of energy over another when describing renewable energy policies.

“Discriminating in favour of one form of reducing the carbon emissions pushes up the cost for everyone. The renewable energy target pushes up electricity prices, makes living costs higher and costs jobs in energy intensive sectors,” Senator Canavan said.

History Repeats

The move is a throwback to history, when significant portions of Australia’s existing coal power stations were built with the assistance of government subsidy.

In the Post-World War II period, most State Governments in Australia used publicly owned “State Electricity Commissions” to build the bulk of Australia’s existing coal generation capacity.

In Victoria, the state-owned State Electricity Commission of Victoria drove the development of brown coal power stations located in the Latrobe Valley. The original incarnations of each of the Hazelwood, Loy Yang and Yallourn Power stations were built by the government owned enterprise.

In New South Wales, several coal-fired power stations were also previously commissioned and owned by the State Government around mines located in the Hunter Valley. These included the 2,640 Megawatt Bayswater power station, the 2,000 Megawatt Liddell power station, and Australia’s largest power station, the 2,880 Megawatt Eraring Power station. All three use black coal as their primary fuel source.

In Queensland, where the North Australia Infrastructure Fund is likely to focus its investments, the three largest black coal power stations were all also state owned developments. Power Stations in Gladstone (1,680 Megawatts), Stanwell (1,445 Megawatts) and Tarong (1,400 Megawatts) were all built and owned by corporations established by the Queensland Government.

While the involvement of state owned enterprises was crucial in the establishment of Australia’s early electricity infrastructure, the private sector has driven most investment of late.

Most Australia’s recent additions of generation capacity have come in the form of renewable energy projects, including those powered by wind and solar.

Queensland Minister for Energy Mark Bailey said that Queensland already has sufficient clean power station capacity under development in the form of renewables.

“Given the existing and ample supply of electricity generators, the falling cost of renewables and huge taxpayer cost to construct and run a new coal fired power station – it’s clear that maintaining the State’s existing coal-generation fleet while adding more renewable energy options to the mix is the right way to take the State’s regional economy forward.” Minister Bailey said.

“There is simply no need for new coal fired baseload generation in North Queensland.”

Uncertain coal market

The Government’s reasoning for building new coal fired power stations would have the state of the export market for coal in mind.

Coal mine developments under construction in Queensland have long been focused on the international market for coal. Major consumers, such as India and China, were potential customers for Australian coal. However, the market has very much changed and Australia’s coal producers will need to start looking for new users for the coal.

The Indian Government lead by Narendra Modi has an explicit aim to stop the importation of coal within the next few years and has been ramping up its own domestic supply.

China has also shown signs of slowing its dramatic increases in coal consumption, recently cancelling the construction of more than a hundred new coal power stations to tackle smog and consolidate its existing generation portfolio.

Speaking to ABC AM, Minister Canavan made it clear that local use may be crucial to the viability of new coal mines being established in Queensland.

“We should be smart enough to be using this resource for our own purposes. It’s a value-add to create even higher paying jobs.” Minister Canavan said.

“Our mining sector’s great and I’m a big supporter of it but, you know, why should we just ship the resource to Japan so they can produce steel and refined products? There’s no reason why we can’t in this country.”

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