When the fantasy of new coal power goes cold

The political problem with coal is it comes in two sizes: mining and power generation. Australia currently has an abundance of both, but their futures lay on different paths. For different reasons, both major parties appear incapable of managing this duality, and are suffering as a result.

Australia is in the process of attempting to get out of coal fired generation to reduce its greenhouse emissions, while sustaining a thriving coal export industry. Around 80 per cent of Australian coal is exported. It’s an entirely logical response to climate change, so long as you aren’t in politics.

In February the Federal Government announced it would be committing up to $4 million for a feasibility study into a coal fired power station in Queensland that will never be built. It has since downgraded this to $3.3 million and is still yet to cough up any money.

Its original commitment was made in March 2019 in the lead up to the Federal election, to consider building a 1000MW high efficiency, low emissions coal fired power station located in Collinsville in north Queensland. This commitment was made to assuage the concerns of the pro-coal Queensland Nationals following the go ahead for the Federal Government’s $5.1 billion Snowy 2.0 pumped hydro storage project.

The rebel Nationals have convinced themselves that a new $2 billion coal fired power station in Collinsville is needed to bring down power prices. The site of the proposed investment is inside the Federal seat of Capricornia, held by The Nationals.

There are two big problems with this idea. First, the new power station will have no impact on either prices or reliability in coal-heavy Queensland. Second, the company that has been identified as the proponent, Shine Energy, has no capacity to deliver a project on this scale.

A new ultra-super critical coal fired power station would take around seven years to complete if it could get State Government approval and meet all environmental conditions. When/if it finally entered the Queensland market, it would have no local impact on wholesale prices at all. Electricity prices are set at the state level.

An additional 1000 megawatts of coal generation entering around 2028 would largely cancel out the 700 megawatts of capacity exiting at that time with the accelerated closure of Callide B power station.

If the Queensland Nationals in question were genuinely in favour of a pragmatic approach to coal, rather than their own political fortunes, they would logically lobby for a new coal fired power station in Victoria, where there is a more credible case for capacity to replace Hazelwood and Yallourn power stations. Trouble is, there aren’t many Nationals down there.

Shine Energy does not lodge financial statements with ASIC. It does not appear to own any assets, and its two Directors do not have any experience in large scale project management or operating multi-billion generation assets. One director, Ashley Dodd, is the CEO of Gurlijala services, a small indigenous labour hire company.

Constructing a $2 billion coal fired power station is a project on a scale more than twice as large as the re-build of the Sydney Football Stadium. There are only a handful of energy and infrastructure services companies in Australia with the capability to manage a project on this scale. It is not remotely credible continue to pretend that this can be done by a business on a similar scale as a Jim’s mowing franchise.

The fuel supply for the power station would presumably come from the nearby Collinsville coal mine owned by Glencore. It’s an ageing and increasingly expensive mine to operate, and closed in 2016 only to open two years later to exploit a spike in coal prices. With softening demand and oversupply, the mine’s long-term viability remains doubtful.

The Coalition now finds itself caught in a similar internal political conflict to Labor, just the opposite.

Opposition leader Anthony Albanese this week called for the approval of a new coal mine in Queensland to demonstrate that he could support both new coal mining and the exit of coal fired generation at the same time.

The Coalition’s reluctance to proceed any further with the absurdity of the Collinsville proposal is prudent and responsible, but will simply inflame its own internal political divisions on coal. It’s finally getting a dose of its own medicine.