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Economy

Jul 21, 2014

Hunt pins hopes on uncompetitive clean coal technology

Analysis of cost forecasts for clean coal technology suggests it is uncompetitive compared to renewables.

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Federal Environment Minister Greg Hunt anticipates that clean coal technology will be available to cut emissions from coal-fired power stations within three to five years.

It is a misleading claim: the technology is years from commercial viability, let alone from being rolled out at scale, and the claimed emissions reductions pale in comparison to the cuts that would be made if cheaper renewable energy were chosen instead.

As Hunt told the ABC’s Four Corners a fortnight ago:

“The technology which is emerging now and which I think will be available over the next three to five years cleans up very significantly, not perfectly but very significantly by up to 30 to 50% the emissions from current generation. That can go around the world, and nothing would make a bigger difference, along with protecting the great rainforests, to reducing global emissions …”

Hunt’s office confirmed in writing that the minister was referring specifically to Direct Injection Carbon Engine (DICE) technology — modified large diesel engines running on a mixture of coal and water, being developed in conjunction with the Commonwealth Scientific and Industrial Research Organisation. But analysis of cost forecasts for DICE, done by the Bureau of Resources and Energy Economics, suggests the technology is uncompetitive.

In 2012, BREE did a “techno-economic” assessment of DICE, assuming it has been commercialised by 2020, based on CSIRO figures, estimating the turnkey capital cost of new 100MW engines at $2285 per kilowatt of generation capacity installed. (CSIRO believes it should be possible to get that lower, around $1800/kW, but the costs of competing renewable technologies is also falling.)

Energy consultant Bruce Mountain, director of Carbon Market Economics, says at $2285/kW DICE is much more expensive to build than gas-fired power stations, with open-cycle gas turbines used for peak power generation costing around $500/kW and combined cycle gas turbines used for baseload power costing $1000/kW. DICE would be slightly cheaper to build than wind, currently at $2700/kW and significantly cheaper than a new advanced black coal plant at around $3500/kW.

But when it comes to the delivered cost of electricity, wind farms win hands down, delivering power at a wholesale price of around 8c/kWh, compared with 10-15c/kWh for DICE. Even without a carbon price, according to electricity cost forecasts, wind beats DICE.

Rising gas prices could make DICE more competitive with new gas-fired plants. Gas prices are set to double or even triple from their historic level of about $4 per gigajoule, as east coast markets reach export parity, and DICE proponents say their technology will be competitive at gas prices above $6/GJ and higher.

DICE say its clean coal fuel could be made from brown coal for an estimated $3-$4/GJ, but Bruce Mountain says this lower fuel cost would be offset by higher capital costs. If DICE were to be used for peak power generation — or backup for intermittent renewables — the lower fuel cost would be irrelevant because peak power prices are so high and there are better alternatives. “Even the cheapest large-scale peaking resource is facing competitive pressure from demand response and possibly also storage,” he said. “At best [DICE] competes with black coal generation, but I’m baffled to see who is going to be building that.”

Given overall electricity demand is flat to falling, and we have a surplus of generating capacity, there is no need for the proposed DICE engines, unless there is some other objective like emissions reduction. But if that’s the objective, wind is zero emissions and delivers cheaper electricity.

John White chairs the DICE network of companies and agencies developing the technology, and is an executive and founding shareholder of Ignite Energy Resources, which recently won a $20 million state-Commonwealth grant to trial a technology to make, among other things, liquid fuel for DICE engines from Victoria’s vast brown coal reserves. White, who is well-connected politically and was previously chair of John Howard’s Uranium Industry Framework, claims the capital costs will be lower than BREE forecast — around $1200-1400/kW. “DICE is the economic back-up that renewables need, as batteries are too expensive and polluting,” he said.

White told Crikey that CO2 emissions from DICE would be around the same as from open cycle gas turbines — that is, about half that of current brown coal fired electricity generation in Victoria. “This is why private enterprise is willing to risk investment in the development of Ignite’s lignite upgrading technology and the DICE testing program. It halves CO2 emissions and will be eligible for Emissions Reduction Funding under Direct Action policies.”

Mountain disagrees. “Yes, if you switched out the existing brown coal generation with this new capacity, your greenhouse gas emissions would go down. But they’d go down to practically nothing if you built the alternatives such as wind, which is going to cost you less anyway.”

That’s assuming the DICE program hits all its targets — trials go well, construction and operating costs come in as expected, and the roll-out goes smoothly — and does not factor in risks like the reintroduction of a carbon price.

Given the long and colourful history of attempts to develop coal-water fuels — exposed on Background Briefing on Sunday — it seems highly unlikely DICE will be able to deliver substantial reductions in the medium term. Which begs the question, why is Greg Hunt pretending that it might?

Using the emissions reduction fund to provide handouts to industry friends delivering sub-optimal abatement. It’s a perfect example of the risks inherent in the Direct Action policy.

*Paddy Manning’s “The search for the clean coal holy grail” investigation appeared on ABC Radio National’s Background Briefing program on Sunday and will be repeated at 2pm on Tuesday.          

Paddy Manning —

Paddy Manning

Crikey business editor

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27 comments

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27 thoughts on “Hunt pins hopes on uncompetitive clean coal technology

  1. michael r james

    @Roger Clifton at 2:04 pm

    “That is apart from any tax on GHG emissions, which should be harder on (methane) gas than coal.”

    With that illogic and inversion of facts, Roger (Dodger?) must be rehearsing for a PR job for Hunt …

    As to your final sentence, here is New York Times last week:

    [(nytimes.com/2014/07/18/opinion/wind-solar-clean-power-off-the-grid.html?)
    Clean Power, Off the Grid
    By DAVID J. HAYES, JULY 17, 2014
    .
    In Alaska, for instance, the vast majority of the more than 200 small, isolated communities populated primarily by native Alaskans rely on dirty, expensive diesel fuel to generate their electricity and heat. As in other remote communities throughout the world that have no grid to fall back on, diesel generators now provide the only reliable option for these desperately poor towns to meet their essential energy needs
    …..
    In collaboration with government labs, the state of Alaska, private companies and investors, the United States is developing modular wind and solar energy systems that will work in isolated communities in Alaska, on island nations, in the African bush and elsewhere.
    These systems are remarkably compact. Consider one that would provide enough renewable power for electricity, heating and cooling for a village of 100 to 200 people. It would include a refrigerator-size control center and a similarly sized container for storage batteries. The power would come either from one to five wind turbines, each about 100 feet tall with 20-foot-long blades, or from a solar panel array covering 700 square feet or more.]

  2. Roger Clifton

    Michael R James. Most of Australia’s gas production is conventional (rather than CSG), in the sense that a geological seal is broken, then pressurised methane begins to escape into the layers above and eventually to the atmosphere. In fact, shale gas (deep fracking) has less residual escaping methane. But it is the distribution network of pipes that leak the methane, regardless of its source.

    I am repelled by the inability of opinion leaders to use the word “methane”, instead using the wool-pulling euphemisms such as “natural gas”, “low carbon” solutions and so on. I’m pleased that you recognise carbon capture and storage as technically fraudulent, and say so.

    “Low carbon” is particularly deceitful. It misleads the reader to believe that by installing more methane they are eliminating emissions. However only the elimination of greenhouse gases including methane can save the greenhouse. No, gas is not a “transition” to anything except sales of more methane. The IPCC has recently declared that by 2050 we must have eliminated most of our emissions and be on the way to zero, repeat zero, emissions by the end of the century. That is in the lifetime of the toddler we see before us. And our continuing use of methane is a theft in full knowledge from the people who trust us most.

    Another such weasel word is “renewables”, which misleads the reader into thinking that the world is running out of mineral resources. As you say, we have vast reserves of gas and there is even more of coal . Instead, it is the opposite end of our consumption that is running out of resources: we have run out of room in the greenhouse to dump our waste gases.

    Yes, you can call me to task for mischievously suggesting new uses for coal. However by arguing that DICE is less emissive than methane, I do challenge the thinking reader to wake up and find he has been sleeping with the enemy.

  3. michael r james

    Roger (#24) you are overstepping by claiming so confidently that “shale gas (deep fracking) has less residual escaping methane.” This is the opposite of what has been claimed over the years. I will agree it is contentious but can hardly agree that it is likely that CSG will have lower fugitive emissions that standard LNG (even if there is not much difference in the mechanism the fact is that there are hundreds more CSG wells to yield the same amount of gas, so the cumulative leaks are likely to be more and the cost of containing them will be much higher in a relative sense.)

    Anyway, as it happens in today’s paper (below) is a report on this subject. However I cannot find the PNAS paper he says is published today (it must be a US versus Oz timezone thing; journalists get early access under an embargo system).

    [(theaustralian.com.au/national-affairs/policy/coalseam-gas-half-co2-of-coal/story-e6frg6xf-1226996664698#)
    Coal-seam gas ‘half CO2 of coal’
    Graham Lloyd, JULY 22, 2014
    .
    ELECTRICITY generated using coal-seam or shale gas produced less than half the carbon dioxide emissions of electricity from burning coal, a study has found. The report, published today in the Proceedings of the National Academy of Sciences, says the life-cycle carbon dioxide footprint of coal-seam and shale gas is the same as conventional gas supplies.]

    I find Lloyd’s piece on this to be confusing. First the paper doesn’t appear to create convincing new data but is some kind of rehash of old data (“harmonized” is a word to send up a red flag to me), and that data naturally mostly comes from the CSG industry itself. But then:

    [The effect of methane gas leaks, or fugitive emissions, remains uncertain. Dr Heath says the PNAS paper assumes fugitive emissions of between 1 and 6 per cent. Recent US research has estimated electricity from combusting natural gas could provide an immediate climate benefit compared with coal if leak rates were below 3.2 per cent.]

    Previously it has been suggested CSG has an industry average of 4.8%. I simply don’t know but my position on CSG is that Australia doesn’t need it and so why take the risks at this stage. (Foreign companies cashing in, is the only reason any of this is happening.)

    My stance is that if we don’t build some Combined Cycle Gas Turbine (CCGT) plants to replace 40 year old dirty coal plants, then they will build new dirty coal plants. This is what the utter nonsense about DICE and CCS is all about: it is pure political cover for building the dirtiest electricity generators on the planet (with empty promises of being cleaned up “later” when CCS blah, blah…).

    Incidentally standard gas has half CO2e when burned (ie. ignoring fugitive emissions) but a CCGT plant is the most efficient conversion of heat to power known while even the most modern coal plant is still poor. It is mind-boggling the amount of heat that is wasted in a coal plant. It is waste heat from the first-in-line gas turbine that is captured in the second-in-line heat exchanger (to drive the second turbine). Of course this double turbine system of CCGT has higher initial capital costs but much higher operating efficiencies (and thus much lower fuel running costs over the life of the plant; there is another great advantage w.r.t. inter-operability with solar-thermal that I can’t discuss here). Naturally the short-termist generator companies don’t want to invest that much and our politicians are even more short-termist (and probably too dumb to understand these technalities).

    Finally, standard gas CCGT is more than 2x efficient (on CO2e basis) than modern coal plant but we’re talking about replacing the likes of those ancient dinosaurs of Hazelwood and Loy Yang, so the difference is even greater, probably at least threefold better.

    But if the argument gets hung up on the likes of what you and MJPC (#23; whose message is not clear) are on about, then the Victorians will just go ahead and build new coal plants and we’ll be stuck with them for 40 years (actually they are claiming 60 years). I am certainly not proposing replacing all current (coal) generators with gas –it is not going to happen in any case because new generation will only be required as old coal plants are retired–but, even as a strong advocate of renewables, they are still not capable of replacing fossil fuels entirely.

  4. michael r james

    Sure, we can. These power plants are generally rated for 40 years though some industry types are hyping 60 years (that’s purely to make the financing look easier). The fact is most don’t even make it to 30 years. Hazelwood is old (and decrepit, I believe one or two of its 8 turbines is permanently shutdown, simply uneconomic to repair) and should have been shut a decade ago (2005, when the Vic gov extended its operating license by 25 years), but because of awful Victorian government shenanigans it keeps producing big profits for its (foreign) owners.

    My point (again) is that if a big gas CCGT is not built then they will build new dirty coal plants (on all the usual false pretexts of it being new-tech “clean” blah blah). IMO the fed and state gov should have combined to help/encourage those (undeserving) owners of Hazelwood and Loy Yang to build a CCGT integrated with solar-thermal (somewhere in the state’s perpetually sunny NW; another political problem because you can’t run such things in the Yarra valley). Then you would have double benefit of much lower carbon (perhaps one third compared to those dinosaurs) and cleaner, even when running 100% on gas. But the total amount of gas would be very considerably reduced by the solar thermal component. Note that a big part of the cost of a solar thermal plant (like any power generator) is the generator itself, which in this scheme is simply the second heat-exchanger/second turbine of an CCGT–ie. about 50% of the capital cost is shared.

    Naturally this is just way too imaginative or either Australian governments or the tired old men* (hah, fossils!) who run the industry. It is the reason we need a carbon price because Victoria will do just about anything to avoid importing the gas it doesn’t have, ie. to keep using the dirtiest fossil fuel in Australia (which it actually owns as part of the original deal with Hazelwood.)

    *Actually one cannot deny that for these types (the foreign entities that own them) it makes perfect sense to run the ancient coal-fired stations in the Yarra Valley into the ground. They are cash cows.

    Here is my stoush with Hazelwood’s PR honcho:
    ((crikey.com.au/2010/08/04/labors-problems-lie-with-labor/))
    Hazlewood:
    Michael R. James writes:
    International Power’s Jim Kouts (yesterday, comments) complaining about my article in Crikey, accuses me of “false and misleading statements”, only one of which

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