A project to fuel diesel power generators with a slurry of brown coal and water — recently described as a potential “clean energy bonanza” by federal Environment Minister Greg Hunt — is based on technology trialled unsuccessfully for three decades by controversial company White Energy, its forerunners and affiliates, which have seen hundreds of millions of dollars in public and private funds wasted.

A $10 million stage-one trial of the so-called Direct Injection Carbon Engine (or DICE) project, backed by 15 organisations including the CSIRO, aims to revolutionise brown coal use in Victoria’s Latrobe Valley and in November was tipped by the Herald Sun to be one of the first likely winners from Hunt’s proposed Emissions Reduction Fund, the key plank in the government’s Direct Action plan to tackle climate change.

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The minister’s office denied this morning that the ERF could be used to fund the DICE project, saying its purpose was to fund abatement, not R&D. DICE claims to be able to halve greenhouse gas emissions compared to Victoria’s existing brown coal-fired power plants.

If the stage one trial in Japan is successful in 2015, the next stage of the DICE project will be to build a $40 million to $80 million prototype power station in the Latrobe Valley, to be in operation by 2018.

A Crikey investigation has identified at least $25 million in public funding extended to White Energy and its affiliates — alongside at least $175 million of private money, including a $35 million convertible loan from BHP — to develop Ultra Clean Coal (UCC) and Binderless Coal Briquetting (BCB) technologies since the 1980s.

The UCC technology – which involves treating coal ground down to below 0.5mm to remove non-combustible impurities or “ash” so it could be used in power generation or transport applications as a substitute for oil or gas – was promoted by Auscoal, an unincorporated joint venture between White Industries (a forerunner of White Energy), the CSIRO and the Australian Coal Industry Research Laboratory. The BCB process, pressing the micronised coal into briquettes, resulted from the trials as a way of transporting UCC.

In 1987, then-CSIRO chairman Neville Wran, former Labor premier of New South Wales, called UCC a “marvellous Christmas present from CSIRO to the Australian coal industry”. Work on UCC at a trial plant near Cessnock was suspended last year by Yancoal, which inherited the technology when it bought Felix Resources for $3.5 billion in 2009. Felix had bought UCC from White Mining in 2005.

But both UCC and BCB have consistently failed to deliver commercial returns. While White Energy is not directly involved in DICE, the process is the latest iteration of coal upgrade technologies promoted by its chairman Travers Duncan and his associates, and employs some of the same scientists including Louis Wibberley, formerly of BHP.

Duncan is one of Australia’s richest men, with an estimated fortune of $680 million, but is facing possible criminal charges of obtaining financial advantage by deception, as recommended by the NSW Independent Commission Against Corruption inquiry into the granting of a tenement in the Bylong Valley to Cascade Coal.

Jim Smitham, deputy director of the CSIRO’s Energy Transformed flagship, yesterday told Crikey the commerciality of the coal upgrading technologies was subject to the vagaries of energy markets, but CSIRO had not done further work on UCC or BCB in recent years.

However, a team of four scientists was working on the DICE project, which was predicated on an assumption, backed up by the International Energy Agency, that coal would continue to be burned for decades and if it was to be burned it made sense to do it as efficiently as possible.

Smitham did not identify CSIRO’s total financial commitment to the technology but said it was at an early stage of development and would certainly cost “millions” more.

Also involved in DICE are a number of companies, including Ignite Energy Resources and Exergen, which are believed to be seeking grants under the $90 million Victorian and federal-funded Advanced Lignite Demonstration Program which is due to announce recipients imminently.

Environment Victoria recently produced a report looking at the companies interested in the program, most of which are loss-making and dependent on grant funding. The group’s climate campaigner Nicholas Aberle opposed public funding for DICE:

“Reducing the emissions of brown coal by 50% takes it from very bad to just plain bad. What they’re proposing is to make brown coal as polluting as black coal, which is hardly a solution. Not only that, it seems that this technology won’t even be widely available for another 10 years, with only a gradual roll-out in the decade after that. All the climate science makes it clear that we can’t wait that long to cut our emissions, and we certainly can’t be cutting them by so little. The good news is we actually don’t need to wait that long. Already it is cheaper to build wind energy than coal-fired power stations. By the time DICE is ready for commercialisation, solar energy will beat it on cost and will beat it hands down on emissions.”

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Peter Fray
Peter Fray
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