Coal on the outer as US goes green

Peter Beattie | September 05, 2009
Article from: The Australian

I GREW up to a Rolling Stones song that said, "Time is on my side. Yes it is." For our coal industry, sadly, it is not. In fact, if the US experience is anything to go by, time is fast running out.

Projects to build new coal-fired power stations are being abandoned from Florida to Utah. Money is pouring in for renewable energy and legislation is being enacted to support it.

The only long-term hope for coal in the US is clean coal. The same is true for Australia.

Australia needs to take a long-term, 20-year view on energy and not just look at the increased demand projections for coal for the next five or 10 years. We need to look at what the energy mix will be in 2030.

The clear and present danger for Australia's coal industry is, unless there is a powerful push to see clean-coal technology developed and implemented, the traditional markets for its product will start slowly shutting down as green energy becomes more price-competitive and public policy continues to demand greener outcomes.

The coal industry needs to realise that there has to be a sense of urgency about delivering significant low-emission coal technology and carbon storage projects. Clean coal has to be an integral part of the world's clean-energy mix before it becomes a victim of heavy regulation and other technologies overtake it. The pace of change is faster than most people realise.

Too often the coal industry sees its advantages as being too strong to be ignored. These include the abundance of cheap coal against the expense of building new power stations, the cost of gas and solar, and the unreliability of wind and wave power. Lehman Brothers, the big American merchant bank, thought coal was too big to be ignored. That bank doesn't exist any more.

World energy use is changing and, as so often happens, US innovation is pivotal to that change.

This is notwithstanding that the US has the world's largest known coal reserves - enough to last about 225 years at today's level of use - and that last year US coal production reached an all-time high (1.17 billion short tons). Coal is mined in 27 US states, from Wyoming and Texas to West Virginia. Thousands of jobs, communities and families depend on coal and about 90per cent of US coal is consumed domestically. So where is the shift to other sources of energy coming from?

California has a population of about 40 million and an economy that is as big as France's and nearly twice the size of Australia's. It may have serious budgetary problems and climate issues but it is the home of energy and environmental innovation and has set the US, and often world, standards on climate change regulation. When California Governor Arnold Schwarzenegger convenes a climate change conference, people from across the world turn up. (I have been invited to speak at the conference in September, but that's another story.) Anyone driving the Los Angeles freeway system would say: "And so California should."

California was the first US state to set tougher vehicle emissions standards under the Federal Clean Air Act. Thirteen other states and the District of Columbia promptly adopted California's standards.

The Golden State also has some of the best universities and innovative alternative-energy programs in the world. And, notwithstanding the world economic crisis, it has large amounts of private equity, a point illustrated by Vinod Khosla's $US1.1 billion ($1.3bn) green energy fund announced recently. (Khosla, who founded Sun Microsystems, is a venture capitalist out of California these days.) It also has a strong anti-coal movement.

An environmental group is funding a public campaign placing large billboards at Los Angeles airport and across the city featuring a photo of Mayor Antonio Villaraigosa, applauding him for pledging to make LA coal-free by 2020.

This is not just rhetoric. Villaraigosa's decision has scuttled plans for a new coal-fired power station in Utah that was to supply the city of four million with power. The municipal city sits amid greater Los Angeles and its more than 13 million people.

This is the latest example of a trend that started in 2007 when utility TXU decided to reduce the number of planned coal-fired power plants in Texas from 11 to three. Even those three are being challenged and the state government is shifting its energy focus to wind. This is despite the fact Texas is a big coal-producing state.

In May 2007, Florida refused to license a giant $US5.7bn coal plant. The state's Republican Governor Charlie Crist is opposing new coal plants, shifting his focus to building the world's largest solar-thermal power plant. Even Google has taken a powerful stand. In November 2007, the giant search engine company launched a campaign called Renewable Energy Cheaper than Coal, or REC. It is funding projects to make utility-scale renewable energy cheaper than coal, with a focus on advanced solar thermal, wind and geothermal systems. Google has invested in a California-based company called E-Solar, which my office is working with.

The reality is that by 2020, and certainly by 2030, the world's energy mix will be very different. The Californian push, refusing to take coal-fired power and funding the development of cost-effective renewables, will spread to other countries and lead to a profound change in the world's energy mix.

Another Californian company, Amyris, is using yeast to produce diesel andjet fuel and is about to go intoproduction in Brazil. We are working on getting the next plant into Queensland. Its idea started with an anti-malaria drug and, with some process adjustments and one gene change, diesel fuel was produced, while a two-gene change produced jet fuel.

But it is not just the Californian factor. Hawaii has become a proving ground for renewable energy technologies. With one eye on national security, the US Department of Defence is pushing to make the state self-sufficient in transportation fuel. At the same time Hawaii's policy calls for 70 per cent of energy to be produced from renewables by 2030.

By any measure these are ambitious targets that are already driving innovation and changing the energy use mix. There are opportunities here for Australia and my office has established an energy independence working group to link Queensland's experts with Hawaii.

The other key elements for change in the US are the Obama administration's stimulus package and the new US climate change bill, the American Clean Energy and Security Act of 2009.

In June the US House of Representatives passed legislation including a cap-and-trade provision: a renewable energy and efficiency standard of 20per cent by 2020, with 15 per cent coming from renewable energy.

There's an investment fund to support emerging technologies such as biogas and biofuels.

The bill is in the Senate and, if it clears congress in its present form, the so-called Waxman-Markey Bill will put further pressure on the coal industry by reducing coal's cost-competitive advantage over renewable sources.

What this rapid and mandated take-up of renewable energy sources means is that coal will be slowly squeezed out of its traditional market share. There'll be a drop in coal royalties and a loss of the revenue we have come to take for granted to fund our schools, hospitals, roads and police.

And it's not likely we can rely on India and China to just keep using our coal at the present level of consumption. India has established a ministry for new and renewable energy and China is increasingly focusing on renewable sources of energy.

China is rewriting its renewable energy law, preparing a renewable energy stimulus package and developing a new fund to support science and research to develop emerging renewable technologies. Officials in China are aiming to raise the proportion of renewable energy to 15 per cent of total energy consumption by 2020, with solar set for a fivefold increase in that timeframe. China is the world's biggest producer of coal, while India has the fourth largest reserves. Both are important export clients for Australian coal.

Fortunately, the Obama administration, like the Rudd government, is strongly supportive of clean-coal technologies as a part of the new global energy mix.

In June this year, new US Energy Secretary Steven Chu, the former director of the Lawrence Berkeley National Laboratory in California and Nobel laureate physicist, announced that $US1bn from the stimulus package would be spent on relaunching FutureGen, the US's flagship clean-coal project. The FutureGen Alliance, a consortium of US coal producers and other companies, will contribute another $US400 million.

Chu's view is that making clean coal work is "critically important for reducing greenhouse gas emissions in the US and around the world".

The US, Australian and Queensland governments are all committed to clean coal. The relaunching of FutureGen is an ideal opportunity for a clean-coal research partnership with the US.

Time may be running out but there is still time for Australia's coal companies to increase their research and development investment and to ensure a future for the Australian coal industry. Such clean-coal technology can then be sold to China and India as part of the fight against climate change and clean coal will remain the key ingredient in the world's energy mix for the long term.

Peter Beattie, a former Queensland premier, is his state's trade commissioner in Los Angeles.

http://www.theaustralian.news.com.au/story/0,25197,26027626-7583,00.html