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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.

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.          

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

  1. Bort

    Renewables such as solar are finally competitive from a market standpoint right here, right now. It’s complete ideological madness from our government and it quite rightly opens up claims of vested interests. Solar thermal is an amazing technology that could easily replace coal fired plants and utilise existing poles and wires infrastructure.

    We stand on the verge of the next industrial revolution (despite ridiculous claims that the Greens want to send us back to the stone age), it’s ironic that this government are the ones who want to keep us in the past. I’m sure telegraph operators tried to deter use of the telephone, but we know how that turned out. Renewables will eventually come into mainstream use, but I worry, not just about the environmental damage, but the damage to our international reputation as a leader in technological innovation.

  2. Jimmy

    Not surprising that Hunt is again peddling misinformation, the whole anti carbon tax campaign has been built on untruths and even in the last week or so he has been denying the existance of oher carbon trading schemes and claiming that the Libs Carbon farming policy (which is just expanding the ALP’s policy) will be the answer to stopping climate change (despite CSIRO research showing about 2/3rd of the australian mainlaind would have to be used just to get close to the 5% reduction levels.

  3. Roger Clifton

    DICE could help wind win over the Bush.

    Thank you for providing those costings. However please include costings for the gas backup for when the window doesn’t blow. In that instance, the cost of the fuel appears strongly in the $/kWh column for wind. And the cost of liquefied coal is likely to decrease with time whereas gas is more likely to rise. That is apart from any tax on GHG emissions, which should be harder on (methane) gas than coal.

    However on the small scale, compared to diesel, the lower fuel cost for liquefied coal potentially enables wind to penetrate all those diesel micro-grids around the Bush. Liquefied coal uses the same plant as diesel, so the existing standing diesel generators may (or may not, depending) be converted to liquefied coal at much lower capital cost than new plant.

    With wind to offset the cost of fuel, the micro-grids converted to wind+DICE may well outcompete diesel on sites ranging from homesteads to minesites, and even to minor towns.

  4. MJPC

    Hunt is kidding himself. Available 3-5 years, clean 30-50% of current emissions…the world will be beating a path to our door wanting to buy this technology…not!
    The US has solar plants/molten salt (no emissions, available now) coming on line that will make solar the way to go (together with other renewables)
    This is indeed a sad government, wasting CSIRO research on yester-centuries technology.

  5. zut alors

    What do Greg Hunt & Walt Disney have in common? Both manufacture fantasy.

  6. 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.]

  7. leon knight

    Hunt needs to hire Andrew Blot as his press-secretary, this is a very hard sell that needs a PR master – I reckon Blot would take the job on for lazy mill or so per year, part-time.

  8. Electric Lardyland

    Why is (rhymes with) Hunt pretending that it might? Well, I suspect that it might be because so-called, clean coal, provides coal infatuated, denialist governments, with a permanent alibi to do nothing in regards to emissions reduction.

  9. Patrick

    I can remember Howard banging on about clean coal technology several years back saying it was a solution in the “near term”. I have read about several pilot clean coal projects since then and they always seem (a) to suck a big chunk of money from government and then (b) end in failure. It’s like a conversation I have with my kids – we can do this the easy way (solar & wind) or the hard way (clean coal).

  10. Scott

    You want to talk about exportable technology…if we get this carbon capture stuff right we could sell it to the world.

    According to the IEA, 27% of the total energy supply comes from coal, compared to 0.9% renewables (exluding hydro)(2010 data). And this has grown from the 70’s.

    If we could sell the DICE technology (under licence of course) to every one still using coal; not only will be will generate some income from that technology, we will also keep the coal industry alive in Australia, and possibly grow it.

    Surely that is in Australia’s best interests.