IEEFA update: New coal-fired power could be back on the table for Australia (Podcast)
The Australian government is spending $6m on feasibility studies to determine whether or not a new coal-fired power plant is a good idea.
It’s reignited the political debate, and with it the argument that Australia wouldn’t be the only one in the world investing in new coal.
China got sick of having shocking air quality and decided to change things
China, for instance, is currently in the process of completing the construction of dozens of half-built new coal power plants. At the same time however, it has become a renewable energy powerhouse, and its national coal fleet of 1,100 gigawatts is running at less than half the time on average, leaving more than half the coal power industry loss-making.
Tim Buckley, director of energy finance studies with IEEFA says about seven years ago, China got sick of having shocking air quality and decided to change things.
“In 2013, an ongoing pivot to renewables and hydroelectricity became the centre of Chinese electricity policy,” says Buckley.
“THE WAR ON POLLUTION IS CHINA’S SECOND MOST IMPORTANT PRIORITY. But number one is to maintain strong economic growth.”
Buckley says information out of China shows there has been a step-up in the construction of new coal-fired power plants in the last 18 months.
This isn’t about a thirst for coal
“That data point in isolation is certainly worrying,” says Buckley. “But it’s not clear-cut that China is going back to coal. That is certainly not the conclusion I reach.”
Buckley says the construction boom in new power generation is aimed at driving much needed economic growth as a short-term economic stimulus.
“That many of the newly built power stations are left unused, or running at less than 50% capacity, is a good indication that this isn’t about a thirst for coal,” says Buckley.
“The Chinese government needs to provide lots of energy for its population, but the economic stimulus that flows from building all those new power plants doesn’t hurt either.”
CHINA IS BUILDING BOTH RENEWABLE AND COAL POWER AT AN ASTONISHING RATE.
China’s also accelerating its construction of renewables
“What it’s doing in other areas of energy generation is going to progressively crowd out the use of coal-fired power plants, particularly as there are cheaper, more viable alternatives that China is pursuing,” says Buckley.
“One of the most exciting developments I saw in 2019 was that China announced the biggest renewable energy tender in world history: 22.8 gigawatts of renewables in one tender, and it was subsidy-free.”
“So even though China in the last two years is completing a worrying number of coal power plants, it’s also accelerating its construction of renewables. As that growth continues, more and more of the coal assets will be abandoned as renewables become even cheaper.”
China’s continued investment in coal has sometimes been used as a rationale by various parties in Australia for continuing to invest in coal.
“I do not believe it is in Australia’s interest to keep investing in a product that is now technologically and economically challenged,” says Buckley.
“COAL IS UNBANKABLE ABSENT MULTI-DECADE GOVERNMENT SUBSIDIES and is increasingly technologically obsolete.
“We’ve seen the price of thermal coal drop 40% in the last two years, so everything is far from rosy and positive from the thermal coal industry’s perspective in Australia.”
Click this link to hear Tim Buckley in conversation with the ABC.
Related links:
Energy transition presents high risks and big opportunities for Australia
Why renewables are the solution for Australia
Key thermal coal off-takers continue to abandon coal-fired power projects
China’s “clean” coal technology dream describes a problem, not a solution
