How has the US smoothly shut 1000% more coal power than Straya?

This might be hard for you to believe. As we know, President Donald Trump does not believe in climate change. Indeed, he professes a love for coal and delivers policy in support of it. The US has trashed multilateral climate change agreements over and again while Australia has supported them.

To the Fake Left the US is climate change public enemy number one.

Yet the truth on the ground is very different. Thanks to a few sensible policies, the US is leading climate change mitigation globally and its efforts not only put Australia to shame, they humiliate it.

The key is the US is transitioning from coal power at astonishing speed. It has retired 65kMW capacity since 2012 without any rise in power costs. Australia has retired…wait for it…6.5kMW and seen its power costs skyrocket.

Indeed, the US will retire more than twice the coal power capacity just this year than Australia’s total retirements since 2012. And the closures just keep on rolling going forward:

 At least 36.7GW of coal-fired capacity stand to be retired from 2018 through 2024 — 117 units in total. These are closures that have already been announced; more are known to be under review.

 Coal-plant economies in the Ohio River Valley will be among those especially hard-hit by the transition occurring now across the U.S. electricity generation sector. Companies in the region whose employees stand to be affected include FirstEnergy Solutions, Murray Energy and Westmoreland Coal, although those companies and that region are by no means the only ones confronting fundamental change.

 While the U.S. coal-fired power fleet still had about 246GW of capacity operating in July of this year, retirements already announced will cut that capacity by 15 percent through 2024.

 Cost is the biggest force in the decline of coal, as renewables and gas-fired generation are proving cheaper and more flexible.

 The electric-generating industry is well into a fundamental transition that is gaining momentum and will probably accelerate as technology disruptions occur, most notably around advances in energy storage.

 While the country’s coal infrastructure is aging and inflexible, renewablegenerated electricity, by comparison, continues to become increasingly cheaper to produce and gas-fired generation is proving more suitable to grid modernization as utilities embrace integrated distributed resources and system modernization.

 The future of coal-fired generation assets in the U.S. is limited, with no new plants being built and a majority of existing plants 40 years old or older.

How can this be when the two countries were so similar? Both had big coal sectors and lobbies. Both were utterly reliant upon them for power. Both have suffered from partisanship on the issue and both have seen policy innovation and back flips. Like in Australia, some successes have been delivered by state policies and some of it is just the pure economics of cheaper renewables.

So why is the US so far ahead of Straya? One simple policy difference overwhelms all others many times over. The US has a version of domestic gas reservation and, until recently, Australia did not. And that has made all of the difference.

For the past few decades, much of the world has shared with Australia a simple plan to decarbonise. It had two prongs. The first poured trillions into promoting renewable energy, very successfully. The second part of the plan was to displace base load coal power with gas-fired generation given it was much lower carbon output. This part of the plan was essential because renewables are intermittent and the energy storage technologies needed to counterbalance that are still not cheap enough (though they will be in five years or so). Gas power was to bridge this gap, all the more appealing because gas “peaking power” is the most flexible of all generators, turned on and off at will if wind or sun are temporarily inhibited.

The US is  following this plan, displacing coal with gas as renewables rise, just as was intended. And it’s power sector carbon footprint is tumbling as result:

This comes with a whole range of advantages. Stationary power emits roughly half of Australian carbon. In the US it is more like 30% but the flow-on effect is that transport will be decarbonised via electric vehicles next. As that happens, industrial processes will also follow. Electricity decarbonsation will drive the US to an entirely new low carbon economy.

So, what happened here? Over history, we have had much cheaper gas prices than the US with a big endowment of reserves. The respective up-sizing of unconventional gas reserves over the past decade was proportionately larger in Australia as well. We were sitting pretty.

Yet today, despite all its new consumption of gas, the US has a gas price of $4.50Gj. While we use bugger all of ours in power production and the price has soared from $3Gj to$10Gj (it has been as high as $20Gj until recently). Our gas is priced out of local use while US gas has become both an LNG export powerhouse and driver of its decarbonisation.

Domestic gas reservation policy is the key difference.  The US has ensured that enough of its gas stays at home even as it exports huge quantities via LNG. Australia has no such policy and has allowed an LNG export cartel to dominate reserves, overbuild plants and create an artificial shortage to gouge locals on price. Chaos is the result:

  • soaring gas and power costs;
  • mis-applied blame to renewables;
  • debates destroyed by false binaries of renewables versus fossil fuels;
  • missed Paris reduction targets;
  • literally, collapsing governments and prime ministers, and
  • in due course, exposure to massive carbon sanction risk by the global community.

All of this is directly attributable to the failure to keep enough gas at home to keep the price reasonable to drive stable decarbonisation.

Australia needs to toughen up its east coast gas domestic reservation regime so that the price falls back to $5Gj. A few LNG export firms will take a hit but that’s just too bad. They knew the risk when they ploughed in and decided to mercilessly gouge the gas price. There is no east coast gas market any more. It has failed. It is appropriate therefore to regulate it harshly, using quotas if necessary. We only need to hold back about 15% of current east coast exports, just 5% of our national total.

If that happens then Australia’s endless energy self-torture will end overnight, with crashing gas and power prices taking all the political heat out of it. Coal power will smoothly retire at rates similar to the US and Australia exceed its Paris targets with ease instead of missing them horribly as we are on track to do.

It’s really that black and white. As the US transformation shows in the perfect light of day, abundant gas is the key.

All else is chaos.

David Llewellyn-Smith
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