Late last month VCAT approved HRL’s plan to build a 600MWe project under its subsidiary Dual Gas — in May 2011 the Victorian Environmental Protection Agency had ruled that HRL was only allowed to build a 300MWe power plant — but stated that HRL could only proceed with construction when the federal government has entered contracts for the closure of other power plants under its Contracts for Closure program.

“VCAT in granting approval for a new 600 MWe project, has also imposed a new condition that effectively puts the future of the project in the hands of the Australian government and takes the commencement date out of the company’s control,”  said Paul Welfare, the general manager of Dual Gas, in a statement announcing a freeze on the project.

The VCAT ruling stated:

“Construction of the works approved by this works approval must not commence until such time as the Australian government has entered into contracts under its ‘Contracts for Closure’ program (or through any similar program or commercial agreement) which provide for the closure by 2020 of at least 600 MWe of coal-fired electricity generation in Victoria.”

As the summary of the VCAT ruling explains, HRL made its objections known before the condition was placed:

“Although such a condition was opposed by Dual Gas, the imposition of such a condition on the works approval will more transparently demonstrate a nett [sic] reduction in overall greenhouse gas emissions from electricity generation in Victoria, and more clearly facilitate the transition to a lower emissions energy sector.”

But Welfare claims the decision could have wider implications. “This condition is a major concern for this project, and it is unclear what it means for the future of Victoria’s Latrobe Valley,” he said.

HRL also owns Energy Brix, which runs a power plant in the Latrobe Valley that is currently one of the five generators under negotiations with the government to close under the Contract for Closure program. The government expects to officially conclude negotiations by June 30 this year.

June 30 is the same day that the federal government funding for the HRL power plant is due to expire. It is this “considerable uncertainty” about the project that has resulted in it being placed on hold, said Welfare.

The federal government promised $100 million funding for the HRL project under the Low Emissions Technology Demonstration Fund. However the application for that funding closed back in 2006 and HRL has had its funding deadline extended several times in recent years.

Federal Resources and Energy Minister Martin Ferguson warned earlier this year that this would be the final extension for the funding. Victoria also promised $50 million in state funding, but $30 million of that is contingent on federal funding.

Dual Gas did not respond to calls for comment before deadline, but we will update if this becomes available.

Meanwhile, the NSW-government owned Macquare Generation announced that it had cut its asset values by a third yesterday — from $1.8 billion to $1.1 billion — in preparation for the implementation of the carbon price.

Macquarie Generation is the largest power generator in the country, and our biggest emitter, and expects its carbon tax bill to be around $460 million annually based on the carbon price of $23 per tonne. Last year it produced 20 million tonnes of carbon dioxide.

“If similarly sized writeoffs are taken at the other two NSW government-owned generators, Delta Electricity and Eraring Energy, this would wipe another $1 billion off the value of government-owned assets due to the federal government’s new tax,” reports Brian Robbins in The Sydney Morning Herald.

Crikey will soon be launching a series examining how businesses and industry are responding to the implementation of the carbon tax. Stay tuned.

Baillieu came to power with an anti-spin campaign, promising “no hidden agenda, no spin, no secrecy”. And yet, as Tom Arup reports in The Age:

“As part of the draft submission, it is proposed $120,000 will be spent on general communications material, local information sessions, industry engagement and promotion and marketing for the coal communications plan.

The document outlines a number of ”key messages” to be delivered to the community, such as ”Victoria’s abundant and easily accessible brown coal resource has helped keep electricity prices down and provided the Victorian economy a strong competitive advantage”.

Another message would be that ”the government is supportive of the export of high-value treated brown coal products so long as these comply with relevant federal, state and local legislation and regulation”.

On opposition from environment groups, the draft submission says ”an aggressive and pro-active communications campaign is required that demonstrates the continued relevance of brown coal in a carbon-constrained environment”

… It proposes media releases, briefings, fact sheets and brochures, websites, call centres and presentations as tools that could be used in the communications plan.”

The Latrobe Valley holds one of the world’s biggest reserves of brown coal and currently 92% of electricity generated in Victoria comes from brown coal. Brown coal isn’t currently exported, but the Baillieu government — and many mining companies waiting in the wings — hope that new technology to help convert brown coal to a black coal equivalent would make foreign exports — to markets such as China, India and Japan — viable.

Both Exergen and Australian Energy Company Limited have signalled their intention to bid for up to one billion tones of brown coal for export.

They aren’t the only excited businesses. “Environmental Clean Technologies welcomes these moves by the Victorian Government, especially as they recognise the need to dovetail these allocations with technology to increase value and mitigate environmental impacts,” rattled one press release. Environmental Clean Technologies Limited is the creators of Coldry technology, apparently the first economic method of dewatering brown coal and turning it into a black coal equivalent, meaning there is less carbon emissions and it’s easily transportable.

There’s been a lot of debate in the last few years on how “clean” brown coal can be. Last year on Rooted we ran an article by Paul Connor, an activist with Stop HRL, that discussed how Exergen’s claim of using coal-drying technology will reduce greenhouse emissions from burning brown coal by up to 40% — a technique called Continuous Hydrothermal De-watering and developed by another company — didn’t hold up to its environmental claims. As Connor wrote:

“First, this figure fails to take into account the emissions involved in the coal-drying process, which itself involves substantial energy use. So while there may technically be less emissions in China when the coal is burnt, there will be more here when it is dried. Second, it compares the emissions of burning Exergen’s dried coal in a hypothetical brand new state-of-the-art coal plant against the emissions from current coal plants in the La Trobe Valley. Yet virtually anything will seem clean in comparison with the decrepit dinosaurs currently choking the ‘smelly valley’.

And finally (and perhaps most importantly), there is no indication anywhere that Exergen’s figure has ever been scientifically tested or independently verified.”

Back in 2009 Environment Victoria released a 2007 government report written by consultants Firecone for the Department of Primary Industries on the brown coal industry. The report states:

“The government should not allocate all available coal now, as has been suggested. Private companies already have coal allocations well above their medium term requirements. The existing mines supplying the power stations in the Latrobe Valley have sufficient resource for around 40 years supply … A further allocation of coal should only be considered if there is evidence of credible, well resourced new investors who face difficulty in agreeing reasonable terms to access the coal resource that has already been allocated.”

Brown coal isn’t the super-cheap option many believe it to be, writes Dan Cass at ABC’s The Drum:

“The core issue that the Premier has to understand is that brown coal is cheap if you just calculate the value of the coal, but you can’t chill the beer or boil a cup of tea with a lump of coal.

Brown coal has to be dried, burned and used to boil water that becomes steam. Energy is lost at every step. Then the steam drives a turbine that generates electricity, losing more energy in the process. This is then stepped up to a high voltage and sent down the transmission network, for hundreds of kilometres, which wastes even more power. At this point the electricity is still useless to the consumer.

Before you can get anything of value done with the brown coal power, you then have to step down the electricity and pump it through a distribution grid, to the households and businesses that buy the power. All those steps waste more power and cost tens of billions of dollars in Australia, which all ends up on your power bill.”

The Baillieu government hopes new brown coal allocations will help create a mini resources boom here in Victoria. As Resources Minister Michael O’Brien said yesterday: “The Victorian government believes that brown coal can, and should, play a key role in our energy future. The allocation process will deliver this.

”Encouraging new investors and the right technologies could deliver a new generation of industry in the Latrobe Valley, boosting the local economy and creating new jobs.”

The Latrobe Valley has certaintly suffered economically in recent years, particularly with talk that the Hazelwood power station may be closed down. But as one Labor source who was involved in the 2002 allocation of brown coal and in 2005 when companies pushed for more allocations told The Age: ”The brown coal export push is led by a group of fairly anonymous businessmen with no track record of success in project delivery or job creation. They spent most of the last decade pestering Bracks and Brumby and now they see a new target in Baillieu.”

The Labor Party has borrowed from American Democrats the strategy of giving out money to win over consumers, powerful industries, and unions. The Liberal Party has borrowed from American Republicans the strategy of attacking climate scientists and mobilising a populist backlash.

Of course, the great difference is that while Democrats did not get their cap and trade law, it now seems that the Australian Labor-Green coalition will get its carbon tax. But Australia’s populist backlash against the legislation will, at minimum, slow its implementation and, at most, result in a change of government and its ultimate repeal.

Not that its rapid implementation would have any effect on emissions. The carbon tax will be far too small to make clean energy cost-competitive with coal. And the government has announced it will give back to consumers more than it collects through redistributive tax policies. As in Europe, Australia can meet its emissions targets only by purchasing dubious carbon offsets.

While the Liberal Party has, like the Republican Party, behaved badly and rejected good science in reaction to bad policy, the real blame for the inevitable policy failure lies with the green movement. In Europe, the US and Australia, environmental NGOs and the center-left generally has grossly oversold the impact of pricing carbon, the readiness of renewable energy, and the political sustainability of their schemes.

Though some greens try to fudge the numbers, no climate or energy analyst today can credibly claim that renewables are cheap enough to compete broadly with fossil fuels. Solar is three to five times more expensive than coal, and that’s not counting the high cost of storage and transmission. No nation — not Australia, not Germany, not China — will raise carbon prices significantly enough to make solar and wind competitive with coal, much less natural gas.

For this reason, every framework to mandate emissions reductions — whether Europe’s Emissions Trading Scheme (ETS), cap and trade, or Labor’s carbon tax — contains numerous loopholes designed to rebate or otherwise blunt higher energy costs to industry and consumers, greatly lowering the effective carbon price.

The right-wing everywhere blusters that efforts to price carbon will destroy the economy. This is nonsense. Everywhere the carbon prices have been too low to have any discernible impact. Australia’s carbon price would cost households less than $5 per week more in groceries. Many households will get back in assistance more than the carbon tax costs. If the plan applied to petrol, it would raise the cost per litre by a few cents. In any case, in recent years the price of most fossil fuels has already increased by much more than any proposed carbon tax, and we still see economic growth coupled with increasing use of those fuels.

Climate analyst Roger Pielke, Jr. calls this “the iron law of climate policy.” Governments might impose a carbon tax, but never high enough to actually send the “market signals” the Labor-Green alliance has come to believe it will. That would be political suicide.

Europe has convinced Labor and the Greens that it has reduced its emissions, but it can only make this claim because it arranged for Kyoto to count reductions beginning in 1990, not in 2000, when the treaty was implemented. This allowed Britain to count as part of its reductions its move to natural gas and Germany to count the closure of inefficient Eastern Bloc coal plants — both of which happened for reasons that had nothing to do with global warming.

To avoid the economic pinch, the carbon tax legislation will allow half of emissions reductions to come from offsets. But it is hard, after more than three years of investigative reporting and reports by independent auditors, to conclude that carbon offsetting is little more than an elaborate scam — some companies and landowners get paid for doing what they would have done anyway, and others game the system.

Advocates for the carbon tax defensively insist that, though Australia’s contribution to global emissions is, for all practical purposes, nil, it is important to join up with the international community.

But the international community is more divided than ever, with China, the world’s largest emitter and energy user, insisting that only rich countries should be required to reduce its emissions, so it supports extending the Kyoto protocol, which exempts China from making any reductions. Europe mostly sides with China on extending Kyoto, but Japan and Canada side with the United States on the need for any agreement to include China.

These differences will not be resolved in Durban, later this year. The idea that the United Nations will oversee shared economic sacrifice through higher energy prices — the idea that captivated greens in the developed world over the last decade — is dead.

While the carbon tax allows the Labor-Green coalition to show Australia’s cosmopolitan face to the world, the loopholes and carve-outs reveal the reality of Australia’s mining economy. Australia exports more emissions every year in the form of coal sent to Japan, China and elsewhere than it generates domestically. Given the importance of coal to the Australian economy, it’s little wonder that Labor will allow coal exports to double over the next 10 years.

But Labor need not worry that Europe will make note of its hypocrisy. The German environment minister famously boasted that the great thing about carbon offsets is that they allowed Germany to keep building coal plants. Over the last decade Germany has brought 11 gigawatts of coal-fired generation online, about six times the electricity it gets from its much-vaunted solar panels. Today, having shut down its nuclear plants in a reaction to Fukushima, Germany’s dependence on fossil fuels will only deepen.

There is a better way. Instead of trying to make fossil energy more expensive, Australia should work to make clean energy cheap. This can be done through a concerted R&D and innovation push funded by the government. A much smaller fee levied on coal production could generate $10 to $20 billion a year for Australia to spend on research labs, prizes, and procurement contracts with private firms, all aimed at getting the technological breakthroughs needed for renewables to be in a position where they can compete with fossil fuels. Such a strategy might also help Australia reduce its dependence on mining and start to engage in more advanced technology manufacturing and innovation.

The climate war between greens and skeptics will rage on, but there is no reason a reasonable bloc of centrist thinkers inside and outside of the Labor and Liberal parties cannot put forward a new, more pragmatic approach. Perhaps Australia can be the first to move the international focus away from unrealistic dreams and economic sacrifice and toward technological innovation and economic opportunity.

Shellenberger and Nordhaus are co-founders of the Breakthrough Institute, a leading environmental think tank in the United States. They are authors of Break Through: From the Death of Environmentalism to the Politics of Possibility, and will be appearing at the Adelaide Festival of Ideas, which runs Oct 7 – 9. Check out the full festival program here, most sessions are free.

After reading the projections for the likely impact of the carbon price between now and 2050, I began to wonder if Dr Seuss actually might work at Treasury. While there aren’t any ten-footed lions, Elephant-Cats or Tufted Mazurkas, there are certainly plenty of heroic assumptions, interspersed with ludicrous notions.

According to Treasury, Carbon Capture and Storage (CCS) will somehow become commercially viable around 2030, triggering a large-scale investment in coal with CCS and gas with CCS. It is a bit like predicting in 1990 how many betamax video machines will be sold in 2011 (except that betamax videos actually worked). They might as well have assumed that someone will invent a free energy machine. Seriously, it is becoming increasingly clear that even the coal industry have given up on CCS. The dream of ‘clean coal’ is slowly but surely collapsing under the weight of its own hubris as people actually start to think through what is required to make it work.

Treasury recognise that the long term direction for both coal and gas prices is up (notwithstanding an anticipated short term reduction in coal prices as supply catches up with demand) but they seem to have substantially under-estimated the costs of CCS and under-estimated the extent to which the cost of renewable energy is falling.

The modelling also assumes that no new conventional coal power station will be built in Australia, and it is clear that Julia Gillard and Martin Ferguson are planning on using this as an excuse to avoid their election promise to implement an emissions performance standard.

I asked the PM about this at a breakfast on Monday and pointed out to her that the Deloitte modelling of Electricity Generation Investment (commissioned by DRET) concluded that a carbon price of at least $70/tonne would be required to rule out new coal in WA, where three proposed new coal plants have environmental approvals.  She said that she was more optimistic than me about the impact of a carbon price on directing the future of energy investment.

It is true that she is more optimistic than me about the impact of a $23 carbon price – much more. As far as I can tell, the only thing that is stopping three new coal power stations being built in WA is a strange combination of State Government policy incoherence and an increasingly convoluted commercial stoush between Lanco Infratech (the Indian buyer of Ric Stowe’s Griffin coal mine) and their customers over coal supply contracts. A low carbon price of only $23/tonne simply isn’t going to rule out coal in WA, even though their poor quality coal makes WA coal plants among the dirtiest in the country.

Similarly in Victoria, the proposed new HRL coal power station continues to stagger on – albeit without finance from the major Australian banks. The big question is whether or not Ferguson will give HRL $100Million of taxpayer money as promised (by the Howard Government). Mind you, it would be quite embarrassing to be publically subsidising a polluting coal plant immediately after the introduction of the carbon price package – so no doubt the Government will be looking closely at how they can get out of the contract.  It shouldn’t be too hard given HRL’s record of missing deadlines.

As for the coalition, their climate and energy policy is a wretched pile of nonsense and despite claims of being interested in ‘direct action’ it is becoming abundantly clear that they are only really interested in ‘direct opposition’ to whatever the Government is saying. The only vaguely good thing that can be said about their approach is that it is so incoherent and destabilising that it is likely to undermine investor confidence in both coal and gas for some time to come, regardless of any actual regulation (This obviously isn’t a sensible policy approach but anything that delays fossil fuel investments is arguably a good thing as the price of renewables continues to fall). Abbot continues to play a high stakes game of wrecking the consensus for climate action for his own short-term political interests – without heed to the costs. It will no doubt define his legacy and it is difficult to imagine it being well regarded by those who follow.

Ruling out new coal power stations should fit perfectly with Abbot’s “Direct Action” approach, and it should fit perfectly with Gillards pre-election promise to “rule out new dirty coal power stations”. The fact that it seems so difficult for both of them seems more a reflection of the political/ideological aversion to putting the words ‘no’ and ‘coal’ together in the same sentence, rather than any rational policy objections.

We still need an emissions performance standard to rule out new polluting power stations.

“The fact is, it is just the worst place you could put a desalination plant,” Dr. Andrew Melville-Smith, chairperson of the Save Point Lowly group, told Crikey. He also says there will be severe ecological damage on Point Lowly’s recreational, coastal and living areas.

BHP recently released its Supplementary Environmental Impact Statement (EIS), which examined a range of environmental issues regarding the proposed desalination plant and found Point Lowly to be the most appropriate fit. Furthermore, its proximity to Olympic Dam mine, easy construction of a water pipeline and availability to land and utilities made it the most viable option for the company.

Both the Olympic Dam mine and township of Roxby Downs do not have a long-term sustainable water supply due to its isolated location, and if the mine wishes to expand it will need an alternative water supply, which the new plant would provide.

Olympic Dam is a multi-ore mine and produces copper, uranium, gold and silver. Robert Gottliebsen from Business Spectator reports that BHP has converted Olympic Dam into the most profitable mine in the world, with the worth of the ore estimated at “around $863 billion including $470 billion in copper, $270 billion in uranium, $116 billion in gold and $8 billion in silver.”

“There have been calls for us to find another location, but we’ve remained firmly convinced that from an environmental perspective, we have found the best place on the coast at Point Lowly,” said Dean Dalla Valle, BHP’s Uranium President, in a recent speech to the American Chamber of Commerce in Australia (AMCHAM). He says that independent studies by leading Australian and international experts determined that Point Lowly was the best location.

Melville-Smith disagrees, arguing that Elliston, a town 150km up east of the coast from Port Lincoln, “remains the best option.” He cites the Elliston’s lack of fishing industry as a key reason why it would be suitable because it would have minimal ecological damage. Also, the town’s landscape of high cliffs and valleys would make it a viable option to be powered by wind.

BHP’s latest statement says that the expansion would deliver enormous benefits to the South Australian economy. They project that the Olympic Dam expansion would generate up to 6,000 new jobs during its construction and create a further 4,000 fulltime positions at the open mine. It is also expected to boost South Australian revenue by several billion dollars over the project’s lifetime.

Tom Koutsantonis, SA Minister for Mineral Resource Development, told Crikey that this development would be critical in supporting the prosperity of South Australia through the rapidly expanding mining industry.

However, Melville-Smith argues that the Rann Government’s lack of foresight is being clouded by the short term financial windfall created by the mine. “It’s just the cheapest, nastiest alternative,” said Melville-Smith. “There is no planning for the future of South Australia, if it’s not in Adelaide than it doesn’t count.”

Koutsantonis continually referred to the planned industrial development as Port Bonython instead of Point Lowly. He insisted that the Rann Government had no plans to undertake industrial developments at Point Lowly, adding “I think it is a bit cute for the Save Point Lowly group to be referring to the entire area of Port Bonython as Point Lowly,” he said.

But Melville-Smith says this is another example of the Government’s dirty tactics. He said that what locals refer to as Point Lowly or Point Lowly Peninsula changed names to Port Bonython. “It’s still the same place. Just because it’s on the Port Bonython Peninsula doesn’t mean they can trash Point Lowly. Everyone continues to refer to it as the Point Lowly Peninsula, but we’ve been reduced to a speck on the map.”

In copies of Whyalla News ‘Letters to the Editor’ sent to Crikey by Melville-Smith, it shows locals referring to Port Bonython as the Point Lowly Peninsula. One reader named G. Butt from Whyalla wrote in a letter published on May 17: “Mr. Koutsantonis should check his geography. It is obvious he has not visited the area.” An anonymous contributor added on May 19: “If the minister bothered to visit Whyalla and speak to the locals, he would find that most people would have always referred to the area as Point Lowly. So making a claim that the area will not be industrialised is just trying to play tricks on the locals.”

Arguments over names and geography aside, the debate over economic versus environmental issues in the mining industry isn’t going anywhere.

In the federal budget last week, the government cut about half a billion dollars from CCS funding. The public deserves to know more about these decisions. If CCS is a failure, then we deserve to know where our money has gone.

Unfortunately, CCS is the foundation of long-term climate policy of both the Labor government and Liberal Coalition. Both the major parties have committed some billions of dollars of public funding to it. Both parties are assuming that is will come on line some time after 2020 and thus Australia’s coal industry has a rosy future.

The CCS concept was proposed around 1986, 25 years ago.

So far there are 4-6 commercial scale CCS projects in the world, depending on whose definition you use. They are mostly connected to natural gas fields, not used to capture and store post-combustion CO2 from coal, which is the whole point of the exercise.

I have been grappling with the budget papers because I want to understand how much public money is going to CCS. The Australian Coal Association’s budget response claims that CCS funding was cut by over $470 million.

My reading of the budget put the CCS cuts at $670 million over the next four years covered by the forward estimates. Martin Ferguson, Minister for Energy and Resources, claims that $420 million of this money has not been cut, but rephased out beyond the estimates period.

I am also keen to understand what value Australia has got for the $400 million allocated to the Canberra-based Global CCS Institute. As one of their bloggers has written “despite ambitious demonstration programmes, progress has been glacially slow”.

To make up your own mind about the glacial progress of CCS, here is a summary of progress over 2010, on a CCS industry site. Note that not one full scale plant was completed.

Where is the evidence that all this funding has been effective? Where is the peer review? What is the opportunity-cost? What is the net benefit?

If, as it appears, the Australian Government has lost faith in CCS, this will be a major blow to the technology globally. This is because Australia is the strongest advocate of CCS.

CCS has probably had a more favorable run in Australia’s media than anywhere in world. Most of that coverage has been in The Australian. A study of media coverage by the CSIRO back in May 2009 found that 34.3% of stories about CCS were printed in The Australian.

The Australian Coal Association announced its clean coal strategy with great fanfare in 2003. It claimed that CCS would work and be cost effective. It promised to spend $1 billion of its own money over 10 years from 2004-2013.

It would be interesting to know if this spending has actually taken place. You can see that the website for this project, New Generation Coal, has more news about renewables than about CCS, which is another indicator that the technology is a failure.

The International Energy Agency bases all its coal industry predictions on a faith in CCS. Its CCS Roadmap projects that 3,400 CCS plants will be needed globally by 2050, to make a substantial impact on emissions.

If we accept the claim made by the industry, that CCS will be ready and cost-effective by 2020, this means that all 3,400 plants have to be built between 2020 and 2050. This is one full scale plant every three days.

From what I can see on the websites of the various CCS bodies, there is rather a lot of research being done into the PR side of the technology. The same CSIRO study cited above describes in detail how to win the PR campaign to convince Australians that CCS will work.

The authors not that there are only nine journalists in Australia who comprise the “elite” and thus ‘require a sophisticated engagement plan’. It was proposed that meetings with these 9 reporters should be organised. As they note;

Use of scientists at these meetings would help to ensure the information is seen as objective and based on the latest science of the technology.

The public deserves to see the facts about CCS funding, with or without scientists used as a PR prop.

Dan Cass is a renewable energy lobbyist, company director and warmenist.