Opinion: Australia sells off energy independence for renewables ideology

Australia is exporting the coal and gas we used to use for energy, then buying back the things China makes with our coal, writes Matt Canavan.

A coal-fired power plant at Kaifeng in central China's Henan province

The Financial Times reported this week that China is building more coal-fired power stations than it has in a decade. In the past decade China has signed up to the Paris climate change agreement and “committed” to net-zero emissions. The biggest lesson from a generation of climate conferences is that talk is cheap.

Why is China building so many coal-fired power stations when Australian elites constantly tell us that solar and wind is the cheapest form of power? It’s as if China has not read the CSIRO reports.

Or maybe they have, and the CSIRO has it wrong. An economic analysis released last week indicates that might well be the case.

In a new paper for the Alliance For Responsible Citizenship conference, Australian economist Gene Tunny and researcher Gerard Holland have looked at what it has cost to build real power plants.

The numbers show China might be on to something. Coal is the cheapest form of power. In round numbers, the cost of building a coal-fired power plant (of 1000MW) is $1.5bn compared with an average cost of $11bn for a renewables-based system.

So, on a capital cost basis, a coal-fired power station is almost a tenth of the cost of renewables. And after considering fuel costs, coal-fired power delivers wholesale power prices of $50 to $100 per megawatt hour, half of that of renewables.

Aluminium smelters need an energy price of less than $60 a MWh to stay in business. Without coal, it will not matter what Donald Trump does with tariffs, Australian aluminium jobs will be lost.

According to the report, nuclear power would deliver wholesale power prices of $100 to $150 per MWh: higher than coal but still lower than renewable energy.

This result mirrors that of the International Energy Agency, which concludes that the long-term operation of nuclear power plants constitutes the least-cost option for low-carbon generation.

This is not to argue that we should just build coal and nothing else. The Kia Picanto is the cheapest car in Australia, but I do not think we should force everyone to buy it because the Kia cannot do the jobs that some Australians need to do, with, say a ute.

Likewise for energy. Data centres require always-on power. A data centre operator will pay enormous penalties under their contracts if they lose power for even just a few minutes.

Gene Tunny

Therefore, a data centre cannot rely on energy sources that depend on the weather. If we don’t build reliable power stations like coal, gas and nuclear, we will not be able to store our data in Australia, putting our personal and national security at risk.

Some people are happy to pay the premium to use renewable energy. Good luck to them. It is a free country.

Things become misguided, however, when the rich people who can afford this green energy surcharge force poor people to pay it too. That is why the new US energy secretary told the Alliance for Responsible Citizenship conference that net zero is a sinister goal.

At this conference there has been a perverse competition about who has the craziest energy policy. Germany shut its nuclear power stations, only to lose lots of its famous industry and import nuclear energy at higher cost from France. The UK shut its coal-fired power stations only to reopen them fuelled by wood chips made by clear felling large swathes of beautiful, pristine North American forests. Their energy policy is for the environment, but all Brits have got is the highest electricity prices in the developed world.

It is a tough competition, but I think Australia wins this unwanted gold medal. Like Europe we have shut our coal-fired power stations, pushing our power prices towards European levels. BlueScope Steel reported this week Australian electricity prices are now double those of the US.

But Australia has achieved this feat while simultaneously exporting the same coal and gas we used to use to China and other countries that compete with us for manufacturing jobs. We then buy back the things that China makes with our coal (like solar panels), just to further entrench our energy poverty and dependence.

The good news for Australia is that we have the resources to dig ourselves out of this energy hole. That same coal we export to China, we can use ourselves. Our coal does not get cleaned on the boat over, so a coal-fired power plant here rather than China makes no difference to the world’s environment.

So with China building two coal-fired power stations a week, Australia can build a few for ourselves. That would not blow up the planet, but with the facts showing that coal is the cheapest, new Australian coal power stations would bring our power prices down and save Australian manufacturing jobs.

Matt Canavan is an LNP senator for Queensland

Originally published as Opinion: Australia sells off energy independence for renewables ideology