The Clean Coal Conundrum  

Tim Flannery has an interesting, but demoralising, look at the prospects for clean coal, now arguing that we'll need it (retrofitted to existing plants) regardless because of the huge size of the installed base - The coal conundrum. His closing comments - "Do not assume from any of this that I believe clean coal technologies to be safe or cost-effective. In some circumstances they may prove to be as dangerous as nuclear power and as expensive as solar panels" - hardly inspire confidence that this is anything other than a disaster waiting to happen.

The enormous growth in energy generation in China, most of which is coal-fired, adds to the urgency of the need for a clean coal solution. Power generation capacity is projected to rise from 442,000 megawatts in 2004 to 920,000 by 2010 - a doubling in just seven years. That equates to the installation of around 1300 megawatts of power capacity each week, about the equivalent of a new Yallourn-sized power station.

It is obvious that enormous investment in electricity generation infrastructure will dictate key elements of the world's climate response. China will not simply knock down its newly constructed power plants in response to the need for emission reductions. Instead, carbon capture will have to be retrofitted to these plants, and ways found to cover the costs. The bad news is that such retrofitting is even more economically and technologically challenging than building a FutureGen clean coal project from square one.

Just how the required technology will be developed, and such a huge retrofit financed, is far from clear. The challenge is all the more difficult because in China electricity prices are capped. Power companies cannot pass on rises in the cost of power generation to consumers; nor, given that recent increases in the price of coal are leading to financial losses, is it feasible for the companies to invest in the new technology themselves.

Despite the effect on future investment, the central government is reluctant to raise electricity prices because inflation, driven by rising food prices, is already straining social harmony. The only feasible solution in such a case is for the developed world to help shoulder the cost burden of reducing the pollution.

One way of achieving that is to allow transfer of funds through a Clean Development Mechanism, such as the one available in the European trading scheme, which allows polluters in Europe to pay for emissions abatement in places such as China if that is more cost-effective than reducing pollution themselves. Unfortunately, there are strong signs that in a future carbon-trading scheme the US will allow no such transfers, believing they are tantamount to helping the opposition. More fundamentally, while carbon capture remains an unproven technology, no funds transfer can occur under any scheme. Therefore, there's an urgent need for someone to invest in the development of carbon capture technology.

With the fate of their industry dependent on investments in new technology, why, you might ask, are the coal companies waiting for government agencies (such as the US Department of Energy) to foot the bill for clean coal? After all, the price of thermal coal - the kind used in power plants - is expected to double this year to about $US112 a tonne. Coking coal used in steelmaking is doing even better, bringing $US300 a tonne, up from $US97 a year before. With such windfall profits accruing to the industry, there's plenty of latitude for investment in technologies that promise to secure its future. Thus far investments by coal companies in clean coal technologies have been insufficient even to fund a single large-scale demonstration plant. It seems that leadership, vision and will are more sadly lacking in this industry than in government.

Of course there are reasons for this. Coalmines and coal-fired power plants often have different owners, so while the mines are making a profit, the power generators might be feeling the squeeze. Yet they are ultimately interdependent and you'd think that the coal industry's peak body would be busying itself to find a solution. In fact nothing effective is happening, and it's clear that government must take on the responsibility. In this year's budget the Rudd Government promised $500 million of taxpayers' money to develop clean coal technology.

This is not enough. Coal exports are said to be worth $23 billion annually to Australia's economy. If a surcharge of just 10 per cent was placed on such exports (and who would consider that unreasonable in light of the GST we all pay?), a war chest of $12 billion could be built up in only five years.

If clean coal is to become a reality, this is the sort of money required, and it's morally right that the coal companies, rather than the Australian public, should pay it. Following this, Australia could pool its funds with reliable partners such as the German utility RWE, whose 450-megawatt power plant is scheduled for commissioning in 2014, to really speed progress towards a clean coal solution.

One other aspect of clean coal technology is worth touching on: the reliance on appropriate geological structures to store CO2 underground. Where such structures exist near coal-fired power plants, the cost of clean coal will be much reduced. If, however, we envisage replacing every conventional coal-fired plant on earth with clean coal, things look very different, for the amount of pipeline infrastructure required to do this is staggeringly large.

Indeed, it probably rivals the entire existing pipeline infrastructure deployed by the oil and gas industries. The required pipelines cannot be in place by 2030. Of course, this kind of argument could be applied to any energy technology that requires rapid ramping up, as all face severe bottlenecks of one sort or another. I merely note it here to make the point that clean coal technologies can never be a complete, worldwide replacement for existing coal facilities. Globally, renewable energy will have to take a significant portion of conventional coal's market share.

Do not assume from any of this that I believe clean coal technologies to be safe or cost-effective. In some circumstances they may prove to be as dangerous as nuclear power and as expensive as solar panels. My point is that the world, and China in particular, has gone so far down the road of using coal as an energy source that we have little choice but to pursue a solution that involves it.