Australia is in the middle of a great energy debate in which Tony Abbott, Australia’s former Prime Minister, has staked out a position about the future of renewables built around coal that is just plain wrong. Energy prices aren’t high because of what Abbott calls “wishful thinking” and “green religion” — they’re high because of too little thinking and the wrong kind of religion.
I’m a fiscal conservative. Politically and socially I lean to the right. And I’m in the energy business. So naturally, I’d be an ally of Tony Abbott on energy policy, right? Nope. I’m anti-coal; vehemently. Here’s why.
Coal may be abundant but it is not cheap. It isn’t failing as an energy solution because “green religion” has a stranglehold on common sense or the levers of commerce and government. Coal power isn’t being regulated out of existence, it is being priced out of existence. We have witnessed an unprecedented drop in the price of renewables and the market isn’t stupid. We are moving to a zero-emissions future because it now makes obvious economic sense to do so.
The Economics of Alternative Energy in Australia is a Coal Killer
I’m not a lone voice here. The Big 4 banks made headlines recently when they announced that they would stop lending to coal projects. An analysis of the Adani coal project loan concluded it was “high risk.” And the global head of BlackRock infrastructure investment group, Jim Barry, said this after claiming the Australian government was “denying gravity” on coal investment: “That’s not to say all the coal plants are going to shut tomorrow. But anyone who’s looking to take beyond a 10-year view on coal is gambling very significantly.”
Why a significant gamble?
In part because we are witnessing an energy revolution driven by a rapid decline in price in the cost of renewables, particularly solar. The same number of people, 50,000, are already employed in renewables as by both coal industry —and the renewable number will only grow. Solar panel prices have dropped by more than 300 percent in just three years. As a result of this price drop, innovative economic models have emerged that can supply free power through solar and generous returns to investors impossible only a few years ago.
There are now large-scale solar projects that can cut power bills in half from day one. Moreover, much of this is locally generated, meaning the cost of the energy transporting infrastructure is completely avoided. This kind of micro-generation is supplemented by the rise of solar farms that are generating serious power for communities, power that, as battery storage likewise declines in price, will be readily stored.
The risk of coal is not just market-driven, it’s built-in.
Coal Has Unknown Long-Term Liabilities and They Are Potentially Massive
Is coal today’s tobacco? There’s good evidence to suggest it is and that any prudent policy must treat investment in coal as potentially as risky as an investment in asbestos, tobacco, or Takata airbags.
This week’s news about Energy Australia possibly needing to shut a new coal-fired plant because of pending litigation is one harbinger. If you think an even more damning class-action lawsuit implicating coal producers and energy suppliers is far-fetched, consider the Australian Medical Association’s submission for the inquiry into health impacts of air quality. In it, the AMA singled out coal-fired power stations: “Populations who live in close proximity to major sources of air pollution, including coal-fired power stations or traffic freeways, may also be at a heightened risk due to high exposure levels.”
Every coal-fired plant comes with this huge unknown risk. Causation of poor health outcomes might seem hard to prove, but with cadmium, dioxins, formaldehyde, lead, mercury, arsenic, and particulate matter, it’s not far-fetched.
The Big Lie: Coal Is Subsidized More Than Alternatives
The coal industry’s mouthpiece, the Minerals Council of Australia, recently released a report into the viability of ‘low emission’ coal generation and how it could fit into Australia’s energy market. While the report itself is riddled with assumptions that favor the Council’s intended outcome — many of which have been extensively covered — one particular point is so deceitful, it lays bare the bold-faced, white-knuckled lies of an industry struggling to cope with its impending obsolescence.
One of the report’s key findings was that $3 billion in government subsidies were paid to Australia’s renewable energy industry in 2015-2016. The suggestion was made that this was a bad investment and the funds would be better spent on ‘low emission’ coal generation.
Nowhere in the report did it mention the subsidies currently keeping the coal industry sputtering along. Exact figures of the total subsidies flowing to the mining industry are notoriously difficult to find (and the mining industry has extremely creative definitions of what does and does not constitute a subsidy) although recent estimates place the taxpayer-funded umbilical cord feeding the coal industry at, conservatively, AU$7.7 billion.
No More Politics
So if coal is dead, what’s next? Well, first, we need to make energy apolitical. We need to recognize that we don’t do alternative energy to save the planet, we do it because it will save individuals, businesses and taxpayers a lot of money and help the economy grow. The energy wars are essentially over. Renewables should be anointed the clear winner, and Australia needs to embrace the future full (non-coal-powered) steam ahead, assuming its rightful place as a world leader in renewables. When Australia’s largest energy provider, AGL, begs the government to scrap coal from its Clean Energy Target, isn’t it time to listen?
Let renewable energy growth go free, let it go nuts. Prices will plummet. Imagine an Australia where off-peak energy costs nothing and businesses thrive because energy — now strangling enterprise — is so cheap it becomes little more than detail on the bottom line. We’re not too far from this reality; but if we’re going to get there, we need to start travelling in the same direction.