Australia’s stranded coal assets

The Oxford University Smith School Stranded Assets Programme has produced a new report into global coal and the news for Australia is poor:

Coal provides 40% of the world’s electricity, with 1,617 GW of global capacity. Of this capacity, 75% is subcritical, 22% supercritical, and 3% ultra-supercritical. Subcritical is the least efficient and most polluting form of coalfired generation – it requires more fuel and water to generate the same amount of power, and creates more pollution as a result. The average subcritical coal-fired power station (SCPS) emits 75% more carbon pollution than an average advanced ultra-supercritical – the most up-to-date form of coal-fired power station – and uses 67% more water.

While the average age of all coal-fired power stations globally is 21 years, ultra-supercritical power stations are considerably younger, with an average age of just 5 years. To limit global emissions to a level consistent with a 2°C future, the IEA estimates that it will be necessary to close 290 GW of subcritical generation worldwide by 2020. Subcritical coal accounted for 8.6 GtCO2 of emissions globally in 2009. For context, in 2010 annual gross greenhouse gas emissions globally totalled ~50 GtCO2-equivalent, with ocean and land sinks absorbing just over 50% of these emissions, resulting in net atmospheric emissions of around 22 GtCO2 per annum.

Since SCPSs are the least efficient and most greenhouse gas (GHG) intensive centralised generation technology, they are both vulnerable to regulation and a logical first step in any climate mitigation strategy. Furthermore, because subcritical plants are typically the oldest part of nations’ power generation fleet, they may also represent a practical policy choice for closure by budget-constrained policymakers looking for costeffective emissions reductions.

In addition to climate change policies targeting GHG emissions, due to their greater average fuel-burn, SCPSs are also more vulnerable to non-GHG policies, such as policies regulating the emission of PM, NOx, SOx, and mercury. SCPSs are also highly vulnerable to water policies. Given these three potential drivers of asset stranding – carbon intensity, air pollution, and water stress – we have examined the exposure of SCPSs to these risk factors. We have also examined which country and company SCPS portfolios are most exposed to these risks. As part of this process we have ranked company exposure to SCPSs affected by these three different environment-related risk factors. The full rankings of company exposure can be found in Section 5.

The objective of this research is to provide investors with the information required for screening, engagement, or divestment actions on the basis of exposure to the SCPS assets at most risk. SCPS assets are not identical, and investors (and companies) need the tools to identify which portfolios have assets with more (or less) exposure to environment-related risks.

And who has most these plants?

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Straya punching above its weight with 90% of its coal-fired power sub-critical. That puts large utilities at very high risk.

But that’s not the end of it, coal mines are equally precarious. Check out where the dirtiest Chinese coal plants are located:

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The outlook for the Chinese SCPS fleet is poor. The GHG, non-GHG, and water regulatory regimes around coalfired power generation in China are tightening. While it is likely that the impact on generation will be nationwide, SCPSs in the heavily polluted and water-scarce northeastern region will be most heavily impacted. Given the young age of Chinese SCPSs and enormous size of the SCPS stock in northeastern China, this may well create a significant number of stranded SCPS assets through forced closure and impairment of profitability. In addition to regulatory risk, physical water scarcity is a serious risk to a significant portion of the SCPS fleet, with nearly 37% of the fleet located in watersheds with high water stress and 33% of the fleet in watersheds with both high water stress and mean 100km Radius PM 2.5 pollution above WHO levels.

Because of the severity of this pollution, both water availability and air quality should be considered a significant direct risk to the profitability of plants and indirectly via reputation. Potential reputational risks will increase over the short term in northwestern provinces as a result of tightening regulatory regimes that will push coal-fired generation westward, away from population centres and water resources. Previous analysis suggests that this shift will cause severe supply capacity problems beginning in 2015.

China is swiftly turning from coal to gas and various renewables as pressure builds for environmental reform. But wait, the pressure is global:

The US and EU SCPS fleets face similar and seemingly final challenges. Both fleets are ageing, significant amounts of subcritical generation capacity have recently been closed by regulation, and future regulations promise further closures. Footnotes: 3 Greenpeace (August 2012). Thirsty Coal: A Water Crisis Exacerbated by China’s New Mega Coal Power Bases. Stranded Assets and Subcritical Coal: The Risk to Companies and Investors 11 In the US, non-GHG policies will force the closure of at least 16% of SCPS capacity in 2015. Proposed regulations on maximum allowable GHG emissions will essentially preclude the construction of coal-fired power plants without carbon capture and storage. Furthermore, proposed state-based GHG emission reductions promise to put further pressure on existing SCPSs. Early analysis of this proposed regulation suggests that $28 billion in industry value will eventually be stranded, though immediate plant closures are expected to be minimal.

In the EU, little regulatory pressure is expected from the EU ETS. However, Europe’s non-GHG emission policies have and will continue to close significant amounts of coal-fired generation. 35GW of capacity have been closed by the Large Combustion Plant Directive, an amount that may still increase by the end of 2015. This scheme will transition to the Industrial Emissions Directive, which has the potential to close up to 40GW of Europe’s remaining 150GW of coal-fired capacity by 2023.

The report concludes:

There is a strong case for financial institutions to utilise the information contained in this report to evaluate the risk of companies that hold subcritical assets and, where appropriate to then screen, engage, or divest. As part of further analysis and engagement with companies exposed to at risk subcritical assets, investors and civil society could encourage companies to: i) publicly confirm their exposure and the proportion of their total generation portfolio that is subcritical, ii) disclose what proportion of this is most at risk, for example, the bottom quartile in terms of carbon intensity, air pollution, and water stress, iii) disclose how much of their capex pipeline is subcritical and how this might change portfolio risk exposure, and iv) describe the strategies employed at an asset-level and across a portfolio to minimise carbon intensity and manage deleterious contributions to local air pollution and water stress.

That is, sell. Full report.

 

Comments

  1. Abbott telling us that coal has a “big future” and “is an essential part of our economic future, here in Australia” was a clear indicator of his good judgement.

    • 1) Does he believe it? (Can he be that stupid?)

      2) How much funding of his party comes from Big Coal (Rinehart, BHP+Mitsubishi, Xstrata, Palmer, GVK, Adani, Rio Tinti et al)?

      • Does anyone doubt that Abbort is merely mouthing the things his sponsors want to hear?

        Today’s news:

        Climate change: UN backs fossil fuel divestment campaign

        The UN organisation in charge of global climate change negotiations is backing the fast-growing campaign persuading investors to sell off their fossil fuel assets. It said it was lending its “moral authority” to the divestment campaign because it shared the ambition to get a strong deal to tackle global warming at a crunch UN summit in Paris in December.

        “We support divestment as it sends a signal to companies, especially coal companies, that the age of ‘burn what you like, when you like’ cannot continue,” said Nick Nuttall, the spokesman for the UN framework convention on climate change (UNFCCC).

    • After driving through the Hunter at Xmas for the first time, easy to see why: lots of trucks/utes driving around with stickers about stopping the “Extreme Greens”

      • You should fly over it tmarsh. The Hunter is rapidly disappearing as all the giant holes slowly connect up. “Moonscape” comes to mind.

      • Don’t think I’d like to Uteman. It was horrific enough.

        As we drove through I was just (with a farmer’s eye) struck by the prime and apparently fertile land. Beautiful country.

        Moreover, it’s a cyclist’s dream.

      • Cyclists dream?

        I guess if you don’t mind dodging trucks because normal cycling is too boring for you then sure.

        The air quality is also fantastic for cycling – nothing like a bit of coal dust and the ever present haze of unburned diesel to let you reach you V02 Max!

      • Uteman, I should have been clearer.
        In the absence of dust/trucks, it would be amazing.
        Rolling hills, big sky, beautiful scenery.

      • You could regenerate the workings with native trees, etc, create a series of man-made lakes, drought proof the region. Its not damaging the area permanently. Rocks are not that porous – and from my understanding, most of the workings target ridges.

        Once the coal is gone, you may actually have a bunch of small but nice nature reserves….

      • What fantasy land are you living in Researchtime? The tailings are toxic – a layer of stuff that was neatly squeezed between a couple of layers of compacted rock will now be mixed into the soil through hundreds of metres in some cases.

        It will never be farmed productively again. “Nature reserve” is a neat way for the mining companies to admit that humans should never go there after they are finished.

      • Hence the nature reserve bit – and not sure who told you nothing will grow??? Coal actually provides a very carbon rich flora base, as does oil… wouldn’t use it for growing vegetables – but otherwise, could support more exotic shrubs than our poor soils typically are capable. The water in the lakes likewise would be perfectly able to be used for grass fields for cattle and the like (not not for drinking unless filtered and cleaned).

      • Even then – it would be clean after a period of time. Nature always changes things around eventually.

  2. HnH. WRONG!. CO2 is here to stay so get used to it.

    Coal-fired power plants will grow by 35% in next 10 years.
    World coal-fired power plant capacity will grow from 1,759,000 MW in 2010 to 2,384,000 MW in 2020.
    Some 80,000 MW will be replaced.
    So there will be 705,000 MW of new coal-fired boilers built.
    The annual new boiler sales will average 70,000 MW. The annual investment will be $140 billion.

    Coal-fired power in Asia will rise to 1,464,000 MW in 2020 up from 918,000 MW this year.
    This will account for an increase in CO2 of 2.6 billion tons.
    So even if the US and Europe were to cut CO2 emissions by far more than the targeted 20 percent, the total CO2 increase from Asia will offset it by a wide margin.

    Coal-fired power in India will rise from 95,000 MW to 294,000 MW over the next 11 years.
    This accounts for the largest percentage rise (300) plus the biggest quantitative rise (199,000 MW).
    So India alone will increase CO2 by 955 million tons per year

    The US presently operates coal-fired power plants at a much lower efficiency than those in Europe. Many of the new Chinese power plants are highly efficient.
    A number of small old power plants have been replaced.
    However within the last decade China has increased capacity from less than 50 per cent to more than 200 percent of the US capacity. Its CO2 emissions far exceed those from US power plants.
    Since coal is also still burned in residential and commercial boilers, Chinese total coal burning CO2 emissons far exceed the US.

    China and India have coal resources.
    Other Asian countries have access to supplies from Australia and other nearby sources.
    The cost of coal-fired power is low compared to the alternatives in the near-term.
    Since planning of new coal-fired power plants occurs as much as a decade in advance, there is not likely to be a major change in the forecast through 2020.
    Any impact of renewable energy in Asia is only likely to happen after 2020. WW
    http://www.engineerlive.com/content/21600

    • “HnH. WRONG!. CO2 is here to stay so get used to it.”

      So just to be clear, we’re basically giving future generations a big old one figured salute?

      • Facts as he wants to see them.

        A tobacco executive, interviewed in the 1950s, would have painted a similarly rosy picture of the future of cigarettes back then. Likewise a manufacturer of chlorofluorocarbons, back before they were banned.

      • I didn’t say he was cheering them on, but if coal consumption continues to rise then future generations will wear the environmental costs. Even if the climate science is wrong, there will be significant environmental consequences from burning that much coal!

      • Even if the climate science is wrong

        On the general facts of anthropogenic global warming, not a snowball’s hope in hell that the science is wrong …. unfortunately. 🙁

    • Disagree, Mr Wolf. As Tim Yeo (Tory MP in the UK) says: “Investors are starting to think by 2030 the world will be in such a panic about climate change that either by law, or by price, it will be very hard to burn fossil fuels on anything like the scale we are doing at the moment”.

      The campaign against burning fossil fuels is gaining momentum. Every day I see new calls on pension funds and others to dump their involvement in miners and oil companies. Recently we had a “global disinvestment day“, and that is just the beginning.

      A lot of your post above seems to be hand waving to me, WW (this “will” happen, that “will” happen). Humanity IS going to get VERY SERIOUS about emissions any year now, and when that happens, everything you take above to be a given will change so fast that your head will spin. 😯

      • Guys, Here is your answer “While the average age of all coal-fired power stations globally is 21 years”,

        Now I have built a few of these in my time and for the old generation of coal fired pulverized fuel stations to be still going after 20 years, especially since they usually have had very little or very poor maintenance is a miracle.

        So either you build new coal fired stations with an equivalent life of another 20 years, or you look to new technology, or you sell the old ones off (privatise) to mug corporations, who when get to do the explaining to the population as to why the reliability of the power supply is not there.and the price of electricity has rocketed.

        Now remember this is not about mining the stuff, we cant compete there on price alone, so I dont expect anymore mines in Australia, this is about who is going to front up the money to build a new power station to replace the old, and keep the population in energy, given that the life of the asset is 20 years, and probably will take 5 years of panning before construction even starts.
        So the person taking the risk with the loot is assuming that new technology wont knock coal fired off as the preferred source of steam generation. There are any number of new technologies in the wings, but right now none that compete with the reliability of coal.
        My call is that no one will front the money and the coal fired boilers will be run into the ground.
        At the moment nuclear is the only alternative.I suppose that when the power goes off, the population will quickly decide, WW

      • My call is that no one will front the money and the coal fired boilers will be run into the ground.

        And my call is that a carbon tax/ETS will make coal burning so expensive that no coal will be burned, anywhere, in 10-15 years time.

      • WW,

        Again probably missed the boat, but;

        nuke is buggered by cost if nothing else – it really doesn’t have a look in. Hinckley C says it all with a strike of $180/MWh.

        Considering page 70 in link above; nuke gets smashed by everything – the UK is probably only going for it for energy security reasons, (just as France did).

        storage will be a game changer;
        – domestic storage will start to work – but more slowly I think than the market expects – (paybacks are 10-20 years)
        – but EVs will take a part in domestic storage – working on the top 30-50% of the “tank” given the next day’s drive is mostly only short. So domestic storage will depend more on EV sales. EVs can also work when parked all day too. The business case for battery storage is crap – but not once the business case for a car, renders the battery cost sunk.
        – of the large scale storage solutions the only obvious near term option is Pumped Hydro – in the off river form. 80% round trip efficiency and gigawatts for hours if you want. Not Crazy expensive.
        – other storage forms – thermal (domestic), phase change (commercial) are likely to see (are in fact) commercial innovation.

        – wind, PV with storage could quite realistically knock a hole in coal by 2035, with existing technology. Who knows what market fundamentals will be by then – but they could easily result in storage catalyzing a much higher penetration of wind and PV.

    • WW,
      I’ve probably missed the bus here – but coal is expected to be the slowest growing fossil fuel.

      First line, page 65 here;
      http://www.bp.com/content/dam/bp/pdf/Energy-economics/energy-outlook-2015/Energy_Outlook_2035_booklet.pdf

      and don’t forget this;

      We’re not doomed. Action is not pointless. Coal is a sector in permanent decline.http://www.businessspectator.com.au/news/2015/3/13/carbon-markets/unprecedented-stall-global-carbon-emissions-2014-while-economy-grows

      • HR, you are too late, the curious crowd has moved on, why dont you upgrade to something like a v6 or v8, to keep up with the play.
        Your comments are valuable, but are being broadcast into a vacuum.
        You may wish to bring me up to speed on the value of energy security, ie the nuclear trend in the advanced economies.

        The coal fired stations we have in Australia are on their last legs, another 10 years will see them out. Not just the boilers, but the coal handling infrastructure as well, add to that the switch yards, transformers etc, and where used. the cooling towers.
        All the options you mention are good ideas but not sufficiently reliable to power anything other the houses of a few hippies at Nimbin.
        Ask your self why aluminium is known as solid electricity, and how much solar do you need to produce a ton of that.
        How much solar do you need to run an MRI at the hospital.
        How much solar to run an electric train?

        Should the greenies have their way about the co2 issue, the only reliable option is nuclear. But my call is they would be more opposed to that, so someone is going to make the call to continue with coal fired.
        The quickest way to find out is to start turning off a few lights, and then see what occurs, and that is about to happen.
        The push for privatisaton of the electricity industry is a convenient way for the govt to by pass the issue.
        Maybe if the greenies dont want coal or nuclear energy we disconnect them from the grid, and they can find their own source of the stuff.
        But I think sanity will prevail and coal will be here for years to come, WW

  3. I’m no coal guru but I am sure someone will figure out a way of burning that asset.

    Didn’t South Africa come up with all these technologies for coal gasification in the 80’s (due to the apartheid sanctions).

    Won’t some entrepreneurs try to turn that coal into syngas or whatever if the coal suddenly can’t be sold (& therefore has an opportunity cost of zero as coal)?

    NZ’s south island has a s&*t ton of lignite (brown coal) and they are trying to work out what to do with it. It’s extremely cheap to mine, just like the coal mouth generators of Loy Yang down in Vic’s latrobe valley.

    • PS to get the energy out of coal you have to burn the carbon, ie convert it to energy and co2.

      And all the bullshit about carbon sequestration, they dont know how to find anything underground, let alone what will happen if you start pumping it back down and where it may squirt back out.
      Until Lockheed Martin get their project going, conventional nuclear is the only option. Follow the French.
      We keep on pouring more people into this country yet no one considers the consequences apart from house prices. Every year everyone is using more energy, we will soon have electric cars, WW

    • People are working on that. Believe GreenPower energy is working on a coal to liquids process with some US university. The brown coal resource of the LaTrobe valley is substantial and loaded with lighter hydrocarbon fractions.

      Would really help if we actually had a critical mass of chemical and pharmaceutical manufacturers that could actually take advantage of it and turn it into a value added product rather than just burn it.

      • Cee, the Germans invented coal to liquid in WWII.
        We had a coal to diesel, jet fuel, gasoline plant here in QLD.
        It is now in South Aust. the coal seam gas coys got their nose out of joint. Politicians and brown paper bags ??? WW

      • Thanks WW, was aware of the invention and Linc Energy operations. Point I was trying to make was that the Thermaquatica process is slightly different to Fischer Tropsch in that it does not pass through a gas phase.

      • Cee, with you now, the issue with Thermaquatica, is they still have a residue of toxic salts and heavy minerals.
        Like I said about carbon sequestraton you cant just pump this stuff back into the ground. Once it starts squirting out in someone’s backyard, even miles away then you have real trouble. WW

      • Fair enough WW. Still there is nothing wrong with trying it. Easier to deal with heavy minerals in a solution than as a gas or aerosol dispersed across the population.

        Besides if the process turns out to provide another route to plastics and other industrial chemicals that makes us slightly more independent then im all for it.

      • Brissy for now

        You mean the same Linc Energy group who were on the ABC news tonight accused of poisoning the ground, the air and it’s workers with syngas? IMHO, coal has had it for years now and a totally stranded asset is what it is now.

    • South Africa has SASOL, coal to liquids. One of the most polluting industries in the world, an absolute CO2 (and SO2) pig.

      • BTEX = benzene, toluene, ethylbenzene, and xylenes. All carcinogens and mutagens.

        Happy day! 😈

      • Mate is that current info, I understood the plant was closed some time ago.

        R2M BTEX is found in petrol, remember that next time you gas up you car and get a whiff of the fumes.
        Has wiped out half the aboriginal population already. WW

      • @WW

        Checked the date of the link article.

        3rd March 2015

        Like you I thought Under Ground Coal Gasification was banned in Qld 3-4 years ago when Cougar ran into trouble around Kingaroy, BTEX chems showed up in neighbouring water bores.

        UCG is a dirty / dangerous technology like CSG and other unconventional gas mining , they should all be banned.

      • B no mate the water table there is above the regions where the coal was burned. It would all be flooded by now.
        what could be occurring is that by products of the combustion are being forced to the surface as the water fills the combustion cavities.
        You can see that any night of the year at Winton, from natural causes. when the gas ignites it is the stuff of the legend of the Min Min lights.
        I dont know how it ended up with Cougar, it is still before the courts.
        Maybe the new govt can sort it out But something dodgy was going on with the water samples. WW