Ever belligerent, it would appear that the NSW Government are determined to build new coal power stations in spite of everything we know about climate change.
The department of planning this week released documents outlining plans for a new coal or gas plant at Mt Piper (near the Blue Mountains) and Bayswater in the Hunter valley.
The option of either coal or gas is still open, however given the cost of gas, and likely future increases in gas prices, it is unlikely that large scale, baseload gas power stations will be built. And the CPRS isn’t going to make enough difference to tip the balance.
Al Gore has been encouraging people to engage in civil disobedience to stop new coal power stations being built. NASA’s James Hansen has supported this view. I reckon a lot of people in this country are feeling the same way too.
With an election in early 2011, the NSW Government might be biting off more than they bargained for.
10 Comments
Don’t be silly, no bank in the world will fund a new coal station in Australia (or probably in any developed country likely to have any form of Carbon pricing). The pay off time is soo long that the sovereign risk is too high, plus the 30-40 year lifetime extends way past 2030 by which point carbon prices could well be over $100. Note that any new coal station is not eligible for compensation/hand-outs. Regardless the new baseload in NSW isn’t going to be built for another could of years and the odds of it being supplied by NSW coal seam gas are good.
The banks are already worried what to do when the brown coal operators in Vic default on their loans (not cashflow but LVR).
The reason they keep coal listed as a potential option is to keep the mining unions happy.
I’m glad you are optimistic. I am less so. There is a new coal plant currently being built in WA. And another one that is going through the EIS process.
I was speaking with a senior executive at one of the major banks a while back and asked if the CPRS would stop investment in new coal plants. Their answer was a very clear no – at least not in the short to medium term.
There are various analyses floating around the energy industry that suggest that coal generators will do well even with a high carbon price under the CPRS. Some of the dirtier plants may be forced to close (and rightly so) but the less dirty coal plants will pick up the extra load and will be able to pass costs on to consumers.
But I’d be interested in any evidence or analysis you have on why new coal plants won’t be built. I want to believe that they won’t, but I can’t see new gas baseload being cost effective (particularly not if the east coast build a gas export hub – which is likely to drive up domestic prices) and the support policies for renewables just aren’t in place.
Hey John, there’s also this interesting analysis that I’ve been meaning to blog on that says the CPRS will actually encourage ongoing investment in existing coal fired power stations:
http://www.theage.com.au/business/coal-in-the-firing-line-on-permits-20090929-gb5r.html
Unbelievable that anyone could contemplate new coal right now. Unbelievable and yet so utterly predictable…
If this is even half true, you can write QED under ‘why the CPRS is a hopeless joke’.
As extreme weather affects more of the western developed economies the re-insurance industry will continue to ramp up the compulsory costs of insurance for any industry sector not seen to be mitigating climate change. At some point whole sectors or even countries’ balance sheet will be pushed off their insurance profile for just being hostile to long term financial health.
Australia is surely rushing into that scenario and Malcolm Turnbull for one would be smart enough after HIH to know how disruptive that would be for big business behind the Liberal Party or Lablibs for that matter. Neither can afford that to happen in their career span.
So it’s not just the Sarkozy threat of carbon tariffs on foreign (to EU buyer) products and services originating beyond their credible climate mitigation programme (ccmp), but also the global re-insurance industry setting those sectors legally adrift so that they can’t get OH&S or public liability or fire or any insurance whatsover. In otherwords send them into the liability wilderness just like the HIH fiasco did to numerous small business, builders etc.
Sure China or India etc may buy ‘black’ coal outside a ccmp, even more so if they buy up the production here, but who will provide the insurance to operate such a plant? My guess even say China or India buy the local resource with FIRB approval, unless the Australian Govt abdicates sovereignty of select economic geographical zones and thus application of domestic labour and safety laws, not even a foreign owner will be able to operate without insurance.
Indeed nothing happens in business without insurance, not even King coal power stations. Just ask Esso.
John, I guess the decision to invest in coal or not depends on the discount rate you assume. Pick a high enough rate and only the first 5-10 years matter in which case coal can look ok. The trouble is that at some point, well before the end of lifetime you are stranded with an asset that is practically worthless.
WA is a different case to the eastern states in that they already have constrained gas supply and massively growing demand for baseload power. That baseload demand growth doesn’t exist so much in NSW.
You are right to be concerned however. Because if a new coal plant is built, it will run flat out (and it will dissuade any new entry for a few years). The cost structure for coal is about 10% variable and about 90% fixed. Most of the cost occurs whether or not it generates and most of that is the upfront build cost. Gas is more like 60% fuel, 40% fixed. I tend not to be too interested in powerstation construction until they reach financial closure and with some projects you don’t know if they are going ahead or not until they start pouring concrete.
One thing that may make a difference is the Qld government policy on LNG and whether they insist on a domestic supply quota for CSG fields. If a decent gas supply is available at low(ish) cost locally then it changes the dynamics.
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Hello everyone – I’m new and clueless on the technical issues of power stations, but I would like to let you know that a wood-burning power station is on the drawing board for the far south coast of NSW. I get it that the govt can’t get a grip on the urgent need to act now for the security of the future. But surely this is one giant leap backwards.
there are reports that the power generation potental of hot water deposits adjacent to the exisiting power grid in Victoria exceed 10,000 mW, with a potential life in the decades to centuries Yet the clowns down here are still talking about building more brown coal power stations, just after the closure (due to lack of funding) of the company that was going to build the much announced “biggest solar power station in the world” near Mildura.
Why do I get the impression that nothing will be done about making our power generation sustainable until those with money have worked out how to make more money out of it than they are currently making from the existing power generators?
If you don’t like coal, then ask for a Nuke. They are the two options for baseload power in this country.