What's changed in a decade?

If you would indulge me, I’d like to tell a story about the Australian power industry.

In early 2011 I was a fresh faced graduate in the power industry. I’d just started working for a small consultancy which specialised in asset inspection and condition assessment of power stations; mostly coal-fired power stations.

I attended a breakfast session put on by Engineers Australia. They had two guest speakers in to talk energy - the first was Glenn Schumacher , the General Manager of Gladstone Power Station. The second was John Rolfe , an economist and Director of the Centre for Environmental Management at CQUniversity.

My memories are a little hazy, so forgive me for any mistakes, but three anecdotes from that breakfast are stuck firmly in mind and over a decade later are still more relevant than ever.

The first anecdote is that Glenn Schumacher, General Manager of Queensland’s largest coal-fired station, stood up in front of a crowd of professional engineers and announced that there would be no new coal-fired power stations built in this country. I wish I could say the room gasped (it was a room full of engineers, there may have been some quiet tittering at best), but this was a bold statement in 2011. He didn’t add any qualifiers. He just calmly and carefully explained why there would be no new coal-fired stations built (sadly I don’t remember the specifics of the argument).

At that very moment in time a sister company of the one I worked for was designing and attempting to build a new 600 MW brown coal-fired power station in Victoria. Bluewaters in WA had only just been commissioned in 2009. So for someone so influential, experienced and respected within the Queensland power sector, in 2011, to make an unqualified statement like that was bold.

Spoiler alert: a decade on, he was right. Bluewaters was the last coal-fired station built in this country and that title will not change; despite what an increasingly vocal fringe of Australian media and politics would have you believe.

The arguments against new coal-fired stations is more nuanced than I’ll go into here, but simplistically:

• The capital expenditure to build a coal-fired station is somewhere in the order of $2,000,000 per megawatt, in early 2000s dollars. For a station the size of Kogan Creek (the most modern and advanced coal unit in the country) that’s $1.5 Billion. Add inflation. That is a lot of money for a single private company to invest. Which leads us nicely to point 2…
• As best I can tell only one coal-fired station has been built in this entire country without government funding (Millmerran in Queensland). Everything built before 2000 was prior to the privatisation of the electricity sector and thus paid for entirely by the public purse. This fact should suggest that there is little to no interest from the private sector to fund or operate these projects or asset types. Post-privatisation investment has gone almost exclusively to gas-fired and renewable assets, which have much lower capital expenditure…
• Coal-fired stations are typically built to a 25 year design life and routinely extended with mid-life refurbishments to ~50 year lives. These assets have been historically cheap to run because the high asset cost is depreciated over such a long timeframe and operated with very high capacity factors (building them with taxpayer dollars doesn’t hurt either). These conditions no longer exist and with the energy-only pricing design of the NEM the situation doesn’t exactly scream investor confidence. In fact something that costs a few billions dollars and takes decades to return a payback in an uncertain market might as well be the definition of a stranded asset (see also, Kurri Kurri ).

Astute readers (and perhaps less astute ones) will notice I haven’t mentioned the looming spectre of climate change action yet. Coal-fired power stations simply don’t stack up on economics alone. The business case gets even worse if you factor future climate change mitigation (or even adaptation) strategies into the mix.

The energy sector has well and truly moved on since 2011 and no-one credible in the industry believes that a new coal-fired station could, should or would be built. Anyone arguing in 2022 that a new coal-fired station should be built is little more than a stalking horse (oh hello Matt Canavan’s coal interests ).

The second anecdote from this breakfast that stuck with me was from the economist John Rolfe. In early 2011 the Gillard government was working on the design of the Emissions Trading Scheme, which would be signed into law as the Clean Energy Act in November 2011 (and later unceremoniously dumped by our favourite onion-eating Prime Minister in 2014).

Despite the vociferous, vitriolic cries from the right about how awful carbon taxes are, this economist very rationally pointed out that the most effective way to reduce carbon emissions, is yes, put a goddamn price on it. Archy de Berker wrote a lovely summary last year on why a carbon tax is far and away the most efficient economic mechanism for dealing with carbon emissions. In short - pricing signals are highly efficient means of propagating information through incredibly complex, partially connected networks (i.e. an economy).?

In early 2011 in Australia there was much debate over the form of the ETS and the price that would be put on carbon. Some of this was bullshit, some of it was legit. But the point that this economist made in a conference room in Brisbane’s CBD was that taxes can be economically efficient. If you get the initial carbon price wrong (as was a legitimate discussion in 2011), you can change the price (up or down). If activities that pollute are not currently taxed, you can bring them under the umbrella (or exempt certain activities). And importantly a carbon tax provides a mechanism for the development of markets, unlike subsidies. If you agree that anthropogenic climate change is a significant societal problem (mild understatement) that should be addressed, then a carbon tax is arguably the most efficient mechanism by which to address it.

A decade later and the climate and energy wars which really ramped up during 2011 have left our country stupider and worse off. Heading into the recent 2022 federal election neither major political party was willing to put forward any particularly bold vision for what the future of Australia’s energy sector could look like. Energy and climate policy has stagnated over the last decade. In fact Australia is now an outlier and not a leader. We are going backwards. Every new policy announced over the last decade has been progressively less effective than a carbon tax. Any significant moves forward have either been driven by the private sector or by economic pressures from our closest allies (Boris Johnson is the good guy in this story? )

The incredibly hateful rhetoric around ‘axe the tax’ and other such bullshit means that no politician of any colour other than green is willing to even broach the topic of putting a price on carbon. Discussion of a carbon tax appears unpalatable for even the teal independent candidates whose entire platform was based around climate action.

Despite this, I’m cautiously optimistic that the change in government over the weekend and the significant crossbench of Greens and the Teal Independents holds promise for at least some sensible discussion around addressing climate change and moving forward with the energy transition.

The third and final anecdote was a spicy little comment about the safety of old, run down American nuclear power stations and surprise that more catastrophic accidents had not occured in the US. Fukushima was a very, very recent memory at this point. (??)