Investing in the ‘new generation’ of coal – Part One

By Paula Wallace

There’s been a lot of talk lately about “clean coal”, now also being called “new generation” coal, not unlike the talk that has been going on for the better part of a decade. It hit the headlines again last week with Prime Minister Kevin Rudd officially opening the Global Carbon Capture and Storage Institute (GCCSI). Its aim: “the deployment of carbon capture and storage technology globally and the sharing of information.”
Sounds like what the coal industry has already been trying to do for a while, with the assistance of various Governments and research agencies. Its first major foray was the establishment of the COAL21 Fund which had its genesis in 2003 with a monetary fund established in 2006 by Australian Coal Association member companies.
To date, the COAL21 Fund has made commitments to several active and in-development carbon capture and storage (CCS) research projects, and was originally aiming to facilitate large-scale deployment of CCS by 2017, now 2015.
With similar aims, the new GCCSI will receive up to $100 million Government funding each year. Headquartered in Canberra, the GCCSI currently has 85 members, including 16 national Governments. Nick Otter has been appointed as interim chief executive officer and James Wolfensohn to the position of chair of the International Advisory Panel of the GCCSI.
Wolfensohn appeared on ABC television last week talking about his appointment. His primary message appeared to be that it was an ‘admirable’ move by Kevin Rudd to address climate change.
He said, “I don't think that you can criticise someone for having a shot at trying to deal with an evident problem; where China, for example, is putting in one coal-fired plant a week and in the course of a year, an amount equivalent to the whole of Australia's energy production from coal.
“And I think - I take the Prime Minister seriously; get the best people to come along to give us criticism and advice. How can you be against that?”
It may be admirable, but will it be effective in curbing world GHG emissions or at least help Australia to meet its own GHG reduction targets? Like many aspects of “new generation” coal or the capability of CCS, these questions are yet to be answered.
The ‘green’ lobby and others accuse the Government and pundits of “new generation” coal of being, at worst part of a “dirty” business with vested interests in fossil fuel, or at best in denial about the urgency of the world climate problem.
Currently there are no industrial-scale CCS plants operating in the world, but demonstration plants are being built, including some in Australia.
For now, coal-fired power stations provide about 80 per cent of our electricity, and coal is our biggest export earner - $43 billion this financial year. And about 30,000 jobs depend on the coal industry directly.
Launching the GCCSI, Kevin Rudd said "the cold, hard reality (is) that coal will be the major source of power generation for many years to come".
Major resource companies like BHP Billiton, Rio Tinto and BP are behind the newest initiative - but have not yet committed any money.
As recent reports have highlighted, CCS projects like Santos' $700 million Moomba storage project in South Australia have been shelved in the wake of the financial crisis and lower oil and gas prices. A joint Rio Tinto-BP carbon capture project in Western Australia was halted last year, after it was found that the rock formation wouldn’t seal in carbon dioxide. The project would have required between $1.5 and $2 billion in investment.
The GCCSI has a mandate of facilitating development of 20 integrated, industrial-scale CCS demonstration projects worldwide by 2020 – that’s 11 years from now. Opinions vary widely on this question of how long it will take to determine the commercial viability of CCS – anywhere from five years to 30 years.
The New South Wales Minerals Council recently had a crack at trying to define the role of CCS in the context of the Government’s proposed Carbon Pollution Reduction Scheme (CPRS).
Speaking at the event, chief of CSIRO Energy Technology, Dr David Brockway had this to say:
“I’m not sure that Australia, even with huge amounts of money can accelerate to a three or four year time frame. I think you’re talking about 15 years for that sort of technology to come to a commercial scale.
“So…it’s not fiction it’s real but it’s not going to happen in the short term and it’s going to take a lot of money.”
He said that Government programs are “terrific” but history has shown that industry doesn’t always take up this kind of money and in any case the funds currently on the table are “less than what we need to actually get these technologies installed and being trialled.”
“You can’t just go from 10,000 tonne (carbon sequestration) to 5 million tonnes…you’ve got to go through a number of steps to take the risk out…and it really requires leadership right now to achieve that big investment,” said Dr Brockway.
Fellow panel member, Nick Rowley, director of Kinesis said, “Coal is part of the problem…but it’s also part of the solution.
“And the other thing we need…to be clear about is the difference between what is possible, what is probable and what is actual. And there are plenty of technologies out there that provide energy and electricity and not probably but actually without emissions.”
He believes that CCS is in the ‘possible’ category at this stage and that in terms of addressing the climate problem we are all engaged in an “ongoing learning exercise”.
“I certainly think that coal needs to be part of the answer,” said Rowley, “…if there’s any technology that I desperately want to take from ‘possible’ to ‘actual’ would be some way of combusting coal to create steam to turn turbines to generate electricity.”
David Brockway believes that renewable energy technologies will be part of the portfolio of low emissions technologies.
“By the time we get to the sort of prices that Treasury was talking about, three times the current wholesale price of electricity, in ten or fifteen years’ time…there’s every chance they could become cost competitive with clean coal but we will need clean coal well out into the future.”

To read the final part of this report, click here.