Coal generation has been described as
Coal generation has been described as "uninvestable" by business groups. Image Credit: Tom Blackwell

The proposal to open the Clean Energy Finance Corporation to providing finance to new coal-fired power stations, by redefining coal as a “clean energy” source, is as much about political point scoring as it is propping up a coal sector that is in clear terminal decline.

More fundamentally, the Coalition’s push towards providing public finance for new coal-fired generation misunderstands the shift that is underway in the energy sector. The emergence of new technologies means that the transformation underway is so much deeper than a simple ‘wind verses coal’ debate.

The empowerment of consumers

As highlighted the preliminary report from the Independent Review into the Future Security of the National Electricity Market, led by Australia’s Chief Scientist Dr Alan Finkel, the increasing adoption of distributed energy systems will reshape the energy system, changing the paradigm by which we generate, share and trade energy.

By integrating cleaner energy sources with energy storage, demand management and owned be individuals, businesses or communities, distributed systems are changing the way we interact with the energy market.

This means the push for new coal generation is flawed on two counts. Coal as a fuel source as questionable value on both environmental and economic terms. The additional prospect of it being used in new large-scale generation systems.

As stated in the preliminary report:

 “There is little certainty as to precisely what the future electricity sector will look like. However, we do know that it will be heavily influenced by new technologies that, amongst other things, reduce emissions, and enable consumers to exercise ever-increasing choice and control over how they source, use and manage their electricity. Existing markets and regulatory frameworks will need to adapt to these changes”

Major players are exiting the coal market

Investments in large-scale generation capacity, such as coal-fired generators that supply the majority of our electricity today, are characteristic of an increasingly outdated way of supplying energy.

There have been almost unanimous calls from the industry stressing that new coal-fired generation capacity is “uninvestible”. There are many players, such as Hazelwood Power Station owner ENGIE, who are actively seeking to exit the existing coal generation sector altogether.

The idea of committing to the operation and maintenance of a new coal fired generator across its 40 plus year operational life is unthinkable. This is clear from the commitments made to date from Australia’s major energy companies.

AGL has committed to closing all of its coal-fired generators no later than 2050. AGL’s fleet includes the brown-coal fired Yallourn Power Station in Victoria and the black-coal fired Baywater Power Station in New South Wales.

Origin Energy has committed to the decommissioning of its Eraring coal fired power station, Australia’s largest, before 2030.

With companies actively planning their exit from the business of generating electricity from coal generation, it may prove unworkable for a Government to invest public funds into any new projects.

Political games

Such investments would require changes to the legislation establishing the Clean Energy Finance Corporation to be passed by Parliament.

Potentially, losing this battle on the floor of the Senate is part of the Government’s strategy. All moves to date suggest that the Coalition Government is keen to extract as much political capital as possible from the energy debate.

The Coalition won the 2013 election on the back of a relentless campaign against the Gillard Government’s Carbon Pricing Mechanism. By promising to repeal the carbon tax, the Abbott lead Coalition played on the ‘hip-pocket’ concerns of voters.

By setting up a potential parliamentary clash with Labor over changes to the Clean Energy Finance Corporation’s investment mandate, the Government could open up a new front by which to challenge them on energy prices.

The Clean Energy Council, recognising the political nature of the ongoing debate around energy called on both parties to take the politics out of the energy conversation.

“If Australia is to ensure a stable, secure and affordable energy supply in the future, we will need a suite of sensible and long-term policies to ensure the transition to clean energy is well managed.” Clean Energy Council Chief Executive Kane Thornton said.

“The impending closure of these old coal power plants is a reality, irrespective of our need to reduce emissions and meet our international commitments under the Paris climate agreement. The biggest threat to our energy security is if we can’t deliver new investment in energy generation,”.

“Any approach which favours coal or gas over renewable energy will lock in higher overall costs for consumers for decades to come. To support the transition and modernisation of our energy system we need policies that both support a sensible phase-out of coal and bring in new renewable energy generation at the lowest possible cost,” he added.

The Government will sell the changes as necessary action to address growing concerns around energy reliability, irrespective of the lack of any serious evidence pointing to new coal generation as the answer to these concerns.

Labor has already expressed its intention to vote against the proposal, and the Government will no doubt use this as evidence that the opposition party isn’t serious about tackling the cost or reliability of electricity.

As such, the push for CEFC funds to be used for coal is at best a way to create new opportunities for political point scoring. At worst, it will redirect much needed investment in emerging technologies to be thrown away into projects that the market is doing its best to prevent from being built.

1 COMMENT

  1. Thanks for your article. Just to note – the photo caption says:
    Coal generation has been described as “investable” by business groups

    Obviously, that should read “uninvestable” as it says at the start of the article.

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