Archive for September, 2015


The appointment on Sunday afternoon of Josh Frydenberg as federal Minister for Resources & Energy (and Northern Australia), with long-serving Ian Macfarlane’s departure from the ministry, will be a substantial surprise for many stakeholders in the mining and energy field.

Extra-ordinarily, Frydenberg becomes only the fourth person to hold the portfolio since 2001 — Macfarlane was in the job from 2001 to 2007, he was succeeded by Martin Ferguson, Gary Gray held office briefly in 2013 during the Gillard/Rudd shenanigans and then Macfarlane returned after the September 2013 election that swept the Abbott-led Coalition back to office. (Just look at the Defence portfolio by contrast.)

There seemed to be a strong view in the resources and energy sector as late as Friday that Macfarlane would continue to oversee the portfolio as Malcolm Turnbull put a broom through the Cabinet and the outer ministry even if the juggernaut that Tony Abbott created with the Department of Industry & Science was also widely expected to be broken up.

One could argue that Frydenburg’s appointment is almost as much of a surprise to the sector as was Peter Walsh being given the job back in 1983 by Bob Hawke. (When, as the upstream petroleum industry association manager, I suggested Walsh as a possible energy minister to a roundtable meeting of 28 national lobbying bodies shortly before the election, I was greeted with derision.)

If so, the omens are good — Walsh, who served just two years before being promoted to Finance Minister and who died in April this year, remains widely regarded by energy industry people with long memories as one of the “good guys” who set out from the get-go to understand the portfolio and keep his door open to stakeholders.  (He was the father-in-law, by the way, of Gary Gray.)

Forty-four-year-old Frydenberg comes to the resources and energy portfolio with good marks already on his scorecard from his short stint as Assistant Treasurer (from December last year after Arthur Sinodinos, who now returns as Cabinet Secretary, stepped down) and as Parliamentary Secretary to the Prime Minister (i.e. Abbott).

He is the member for the Melbourne federal seat of Kooyong — which he won in 2010, just the seventh holder of the seat since federation.  (Bob Menzies held it for 32 years and Andrew Peacock for 28 years.)

A skilful tennis player (he won an Oxford Blue in the sport while studying in England) and a barrister by initial profession,  holding honours degrees in law and economics from Monash University and an Oxford masters degree, Frydenberg worked in Canberra as a ministerial adviser from 1999 to 2004, including time as a senior adviser to Prime Minister John Howard, before joining Deutsche Bank as a director of global banking and then finding his way in to full-time politics five years ago.

He is certainly going to discover a great many balls in his court just in terms of energy policy after he is sworn in on Monday, not least in chairing the CoAG Energy Council, which will meet again in Canberra in December with a significant agenda, including the Vertigan panel report on governance and the Australian Energy Market Commission’s report on strategic market directions — the latter being prepared at present.

A harsh view of the energy landscape is that we only have half-baked national policy despite both the Gillard and Abbott governments preparing industry white papers.

Martin Ferguson and Ian Macfarlane made herculean efforts to get us beyond this point; the former was not at all helped by the chaotic nature of the Rudd and Gillard regimes and decisions made elsewhere that heavily undermined efficient energy management — and the latter was burdened by Abbott with a “super ministry” of Industry & Science that required far more of his time outside the energy space than has been good for the sector’s health.

Macfarlane deserves applause for what he has been able to achieve despite the baggage he has had to bear — but the state of the sector is far from satisfactory.

Frydenberg inherits a portfolio where the energy elements are characterised by ongoing concerns about the east coast supply of gas for domestic purposes, its cost and the outlook for energy-intensive manufacturing plus a grossly over-supplied wholesale electricity market (the NEM), highly unstable renewables policy and no credible path to deliver the power sector’s share of the new emissions reduction target.  As well, electricity network tariff reform is a priority on which progress is tardy and a delivery of full east coast retail deregulation is by no means a sure thing.

In April 2016 he will receive a report on gas markets from the Australian Competition & Consumer Commission that may well require significant federal work to ensure genuine stakeholder collaboration on key improvements. Here, and everywhere else on the energy patch, the need for such high quality consultation and for decisions on the run to be wholly eschewed could hardly be higher.

Even as the energy industry says a genuine thanks for Macfarlane for his commitment to its needs, the stakeholders should probably be grateful that Malcolm Turnbull has given them such an energetic new minister in all senses. He’s going to be very busy.

One can take some comfort from Frydenburg’s maiden speech in the House of Representatives — delivered as recently as 25 October 2010 — in which, among other things, he observed this “The opportunity to prosper is given its best chance through markets” and this “For problems large and small, bureaucratic outcomes always seem to be the default option (removing) incentives for innovation and creativity.”

And, specifically on energy, this: ” The reduction of our per capita consumption of energy and non-renewable resources is necessary, but part of being responsible is knowing what (this) will cost, who it will impact and how communities and businesses will need to react. There has never been a better time for innovative technologies, practices and solutions.”

Plus this: “It seems inexplicable that in Australia we have yet to have a constructive and thoughtful debate about nuclear power.”

As a broad statement, his observation that “surely it is time to move on from the ideological battles of yesteryear” applies across the energy sector, not just to nuclear generation.

Balance & perspective

This has been an extra-ordinary week, both nationally, as we changed prime ministers and hopefully shifted a gear in the national discourse, and personally, as I coped with turning 73, writing my On Power 2016 yearbook (for publication in February, a challenge in judgment about what will be meaningful then) and co-chairing (along with Mike Swanston) the 2015 Eastern Australia’s Energy Market Outlook conference in Sydney.

Catching up with a week’s email traffic, I find I have been sent the edited transcript of Grant King’s talk to a Committee for the Economic Development of Australia audience in Brisbane on 9 September – and, reading it, I find that, as is so often the case with the Origin Energy managing director, his thinking out loud helps to provide some balance and perspective in our crazy world of energy debate.

The pachyderm in every room containing an energy discussion these days, and certainly the room holding the EAEMO conference this week, is the criticality of balancing supply and carbon abatement management.

The Grattan Institute’s Tony Wood, another who always seems to have something worthwhile to contribute to the energy discussion and who was a keynote speaker at EAEMO (a paper titled “The role of renewable energy: wot?”), puts his finger unerringly on the right keys when he looks at where we are and where we might want to be.

In Australia today, he says, we have: (i) a grossly over-supplied power production sector, (ii) a highly unstable policy to drive large-scale investment in renewables, (iii) solar subsidies that have swung wildly over more than a decade and (iv) the federal Coalition’s “direct action” plan supported by the LRET and “a safeguard mechanism that isn’t.”

In short, he adds, we have no credible policy to achieve any realistic emissions target, and a “dog’s breakfast” of “proven, probable and possible policy actions.

”Our climate change policy is one of “consistent instability,” he declares, with State governments now gearing up for a new round of interventions and “the ALP and the Greens both wanting a real emissions trading scheme, but seemingly incapable of saying so.”

Segue now to King, who rightly opines that what passes for the Australian debate on energy and climate policies is largely two groups of people shouting art each other and that we have had “a very unproductive conversation for way too long.”

The trifecta for policymakers here and overseas, he says, is to achieve three things simultaneously in economies: economic growth, reduction in absolute carbon emissions and a reduction in carbon intensity.

In the top 20 global economies, he adds, only three countries have done so: America, Canada and us – and we have done better than the other two and done so for longer.

To underline the point, he notes that Italy has achieved lower carbon emissions in absolute terms and lower emissions intensity – but it’s done so because its economy has contracted significantly.

Societies, he argues, will not give up economic gains solely for the purpose of environmental outcomes.

There are many angles to this discussion.

King notes, for example, that France, Canada and Brazil perform better that Australia when it comes to what should be a key measure: carbon emissions per unit of GDP – but this is because the French have high levels of nuclear power and the other two high levels of hydro-electric generation.

And, again, he points out that the Brits have reduced their carbon emissions on a production basis by 20 per cent in 20 years – but, when you measure emissions on a consumption basis, the UK’s has increased one per cent because it has been outsourcing them to other countries, not least China.

In passing, King notes that we are a country that has provided massive subsidies for solar PV panels for Australian roofs that are produced in China using electricity from brown coal-fired generation in Mongolia………)

As he says, grappling with the challenge here in Australia is not made easier when the debate is “shrouded in ideology” ands fuels are put in good and bad baskets.

King emphasizes the need for Australia to remain firmly focused on the fact that climate change is a global problem needing solutions weighed on a global basis.

The key, he says, is to work with measures that allow us to truly understand the contributions individual countries are making – and to recognize here that Australia is actually doing well, “not a view you get from just reading the newspapers.”

As he points out, the big challenge locally is for us to understand how we are going to meet the 26 per cent abatement target that has now been chosen.

Right now, do we know the answer any better than we did 20 years ago when setting a five per cent target?

A big part of the pursuit of the 26 per cent target is fuel substitution and we need to have a proper handle on the size of the challenge.

Just meeting the re-legislated 33,000 gigawatt hour target for 2020 from large-scale solar, King notes, would require 250 projects of 40 megawatts each.

Or eighteen more wind farms of the size of the Snowtown project (270 MW, the second largest wind development in Australia) his company has just commissioned in South Australia.

And meeting the 2030 abatement target will require much more renewables than this.

Missing from the media coverage of King’s talk is the fact that he underlined scoping the size of the challenge does not imply that it can’t be achieved, citing the LNG developments in Queensland as an example of what “extraordinary things” can eventuate when people are really focused.

To bring my commentary today round full circle, I think what I have reported in this TiP underscores the confronting point also shown up repeatedly at the EAEMO conference: how far we are from achieving a realistic perspective and a real balance in pursuing King’s policy trifecta because the dialogue continues to focus on “shouting.”

As Wood told the conference, change and adjustment to change are permanent features of the energy landscape, effective governments should resist most of the frequent and loud calls to “do something” and must get a grip on where policy intervention can be truly effective, such as re-invigorating the national reform agenda and protecting the primacy of markets and free trade.

“If we want markets to have a place in the energy future,” he asked the EAEMO audience, “why are things going the other way? Why, for example, do we see increased potential for intervention in energy retail delivery?”

The issue is not only in the marketplace, of course. In the monopoly area of electricity supply, we see resistance to network tariff reform as, Wood says, “the voices of losers dominate.”

What really needs to dominate, a point King urged on his Brisbane audience, is appreciation of what must always be the energy industry’s critical focus: balancing reliable supply that communities require with affordable prices and sustainability.

You won’t be surprised to know that this is a theme that will be also strongly threaded through the On Power 2016 yearbook when it appears, a publication my publishers and I will be sending to every east coast MP and all of them in what one of the EAEMO attendees described to me this week as “the zoo on the hill,” Parliament House, Canberra.

Market in a muddle

A lot can happen in two years.

Take for example the biennial review of the electricity and gas markets undertaken by the Australian Energy Market Commission.

The last one was published in 2013 and the commission is now embarking on a new version.

Since the 2013 review appeared, we have changed governments federally and in two major States (Victoria, Queensland), rewritten the renewable energy target, downsized the bounty for residential solar PV installers, made little real progress on creating extra east coast gas supplies for domestic use, embarked on a controversial new approach to network regulation, launched privatization of grid businesses in one State (New South Wales) and canned it in another (Queensland) while setting a new goal for national carbon emission reduction. And that’s not a complete list of recent developments.

Some things don’t change, however.

The AEMC quietly emphasizes this in the review discussion paper it has published this week.

Just as many of us were arguing in 2013 (and earlier), it is still the case now (to quote the commission) that “for energy and environmental policies to be mutually reinforcing, it is important that they are designed and implemented with regard to one another.”

Which, of course, they have not been for a decade with no sign this poor strategizing is about to cease.

As the AEMC adds, “when a policy external to the energy sector places investment risk on to consumers, this reduces the incentives for businesses to manage prudently and exposes consumers to the cost of inefficient investments.”

(Beyond all the vested interest advocacy, the political spin and the media noise of not just the past two years but the past decade, this is the cardinal concept of good energy policy – and governments’ inability to grasp the point poses risks that will bite suppliers and users if not remedied.)

The commission discussion paper also contains another timely reminder to the body politic: “ (electricity) price growth may be moderating (but) affordability will continue to be an important issue for consumers, industry and government.”

This may become an increasingly important point, it adds, as concerns rise over vulnerable parts of society being left behind while technological innovation grows.

(I keep wondering when politicians are going to wake up to the fact that, although rejigged regulations have put the brakes on power bill growth, the current cost levels are obviously – see the opinion polls – still uncomfortable for a non-trivial chunk of voters.)

A further thread running through the 30-page AEMC paper (available now on its website) is the problem of complexity and how it disadvantages the mass market whether by just making it too hard for householders to figure out how to get the best deals or too hard for new service players to make inroads in the market, thereby eroding competition and reducing bill-payer benefits.

An example is how the jurisdictions have fiddled with the “national energy customer framework” – the NECF – created to provide better protection for residential and small business users after retail deregulation.

The result, says the commission, may turn out to be that the NECF is not fit for purpose in the market environment of new products and services.

The AEMC poses a series of questions for consideration its new review: Do consumers have enough useful information to facilitate shopping around? Do the prices they pay reflect the costs of supply? Do they have the ability to respond to price signals? How responsive is supply to their changing choices? Is protection up to its job?

Given that we are talking about 9.3 million residential and small business account-holders on the east coast alone and potential multi-billion dollar savings in expenditure over several years, these are not issues to be brushed aside.

They, of course, are far from the only issues for the market – and I am focusing on electricity here whereas the AEMC review also takes in to account the troubled gas market.

Buried in the commission paper is this observation: “the NEM is in a disinvestment phase, with multiple thermal generators temporarily or permanently withdrawing – with intermittent capacity making up a large proportion of the energy mix, this may present a number of technical challenges around managing power system security and reliability.”

And it adds “over time, a properly functioning market is likely to be unsustainable” when there is a disconnect between the bills faced by consumers and the prices available to generators and “when wholesale prices are not informing consumer choices.”

The timing of this commentary is useful for next week’s Eastern Australia’s Energy Market Outlook conference, which has an agenda picking up many (if not most) of the discussion paper issues and the AEMC chairman, John Pierce, as a participant.

The commission itself is holding a public forum on the review in Sydney on 30 September and has set a closing date of 9 October for submissions.

It will present its report to the December meeting of the CoAG ministerial Energy Council – which will also be receiving the final report of the Vertigan panel on energy market governance.

Over the horizon

What will east coast electricity supply look like in 2030?

I ask because this week I have participated in the “Australia’s Energy Future” Q&A forum staged at the SBS studios (with Jenny Brockie as moderator) by the Australian Financial Review and GE Australia — watch the “Fin” for more about this later in the month — and today I am reading an interesting speech by Ivor Frischknecht to the “Disruption & the Energy Industry” conference before, for a large part of next week, co-chairing the Eastern Australia’s Energy Market Outlook conference in Sydney.

Frischknecht, who is CEO of the Australian Renewable Energy Agency, asserts today that in 2030 “most new energy generation (will) come from solar panels, both large and small scale. It (will be) less than half the cost of solar today. This generation is widely distributed. It’s mostly close to where its needed. A combination of load management and energy storage means we’ve forgotten our earlier fixation on needing baseload generation.”

It’s a point of view that can’t be dismissed, but it’s loaded, of course, to the corner from which he is speaking. The potential for different outcomes is not trivial.

Frischknecht is a thoughtful stakeholder in the energy debate. He has spoken at a number of the Quest Events “Energy Outlook” conference I have helped to organise and co-chair and he is never less than interesting. At today’s “disruption” event, he has commented: “We know our energy sector (in 2030) is going to be cleaner, more diverse and just as reliable — with a lot more renewable energy. The increasing penetration of renewables, particularly solar, can’t be stopped.”

Given the recent goings-on in federal government, I can understand the “can’t be stopped” frame of mind. ARENA is one of the entities created under the Rudd/Gillard regime that the Abbott government has sought to close down, so far unsuccessfully.

However, the assumption in “can’t be stopped” rides lightly over what else (beyond renewables) may happen technologically.

I have already written this week on this site about the emergence of high efficient, low emission coal-fired technology (HELE) and the prospects for small modular nuclear reactors can’t just be brushed aside. Nor can the possibility, given that we are talking 15 years, that the exploitation of gas may take a new, less costly turn, bringing gas-fuelled generation back in to contention — perhaps in a hybrid relationship with large-scale solar.

One of the most important changes of the next decade — sooner rather than later, one hopes — must be the cleansing of over-capacity in the NEM.

As the Australian Energy Market Operator has recently report, some 4,550 megawatts of conventional generation (mostly old coal plants) is being shuttered or is about to be. The mainstream energy industry, not surprisingly, wants the change to be “orderly” but it may not be — and how this works out, and whether governments can keep their sticky fingers out of the transformation, remains to be seen.  Like everywhere else in this discourse, there is muddle of vested interest in the politicians’ ears and in the media (mainstream and social).

I never tire of pointing out to people that 2030 is not just 15 years away; it’s about six federal elections away, too. Go back to 2000 and look at what has occurred in federal and State politics since then and you will appreciate my point.

Frischknecht has commented today that there are a number of “challenges” in looking at how change will emerge. Many renewables are intermittent (and there is hardly a lot of prospect of new hydro projects here although they are a critical part of the growth of renewable energy production in Asia), existing coal plants (fully depreciated) are the cheapest form of power supply and “there will be many changes, technical, business and regulatory.”  I wouldn’t have left political out of that latter point on his  list.

The important thing to remember about his and ARENA’s views is that they come from a particular angle. This is not a jibe; as Frischknecht says, developing and demonstrating renewable technology — which I prefer to the pejorative “solutions” — is the agency’s job. Providing an energy strategy and a market framework that is technologically neutral and attuned to both consumer long-term interests and an Australian contribution to addressing global climate change is the job of our political leaders, although you would never know this when you scan most of their contributions.

Generation, it hardly needs be said, is only part of the electricity equation.

Developing a new approach to power networks and more broadly energy services that go beyond a one-way delivery system for electrons is also a very important part of an agenda looking to 2030.

If you go on to the Energy Networks Association website today, you will find they have released a report by Accenture containing international case studies of networks pursuing the role of a services platform. It’s part of their pursuit, in harness with CSIRO, of a “network transformation roadmap” to 2025.

ENA chief executive John Bradley comments that his members appreciate a different connection role, agnosticism about forms of power supply and the capacity to integrate production in the grid regardless of source “will be the fundamental capabilities of the future network.”

The Eastern Australia’s Energy Markets Outlook conference starting next Wednesday also has 2025 as its horizon but the date doesn’t matter much; the focus is again on creation of a more effective east coast market and efficient energy investment over the next decade or so.

The audience will have barely settled in their seats before they find themselves challenged to think differently about the issues and the prospects, for example in an early Q&A session engaging John Pierce, chairman of the Australian Energy Market Commission, Jeff Dimery, CEO of Alinta Energy, and Peter McIntyre, MD of the soon-to-be-privatised TransGrid, in discussing whether the NEM is “broken” and how governments and companies can work together to pursue a secure, affordable and less carbon-intensive market — which really is the guts of the current debate.

Not long after this on the opening day Pierce again, ESAA’s Matthew Warren, Alinta Energy’s Michael Riches and Martin Moore, CS Energy CEO (who has chosen for an earlier keynote address the question of what our local energy world will look like in 10 years) in another Q&A are going to tackle NEM wholesale oversupply and how more renewables can best be integrated in to the power mix.

There will be a lot more gazing at the electricity (and gas) horizon over three days.

The good news, I think, is that there are a lot of people willing to tackle seriously the big questions hanging over the east coast power supply horizon.

And there is a converging concern among them, as I noted at Monday night’s “Australia’s Energy Future” discussion in the SBS studios, about the capacity of our present political leadership to take them on the journey — or even, I fear, to understand what really is involved in developing a durable roadmap that goes far, far beyond what UQ’s Chris Greig castigates as “simple soundbite solutions.”

Harnessing HELE

One of the points is the latest newsletter of the University of Queensland Energy Initiative that really resonates with me is the assertion that a key challenge in the climate change debate is the separation of means from ends.

The goal, the newsletter adds, is to limit global warming to less than 2°C above pre-industrial levels, “not to end the use of fossil fuels or achieve 100 per cent renewables.”

I took up this point in a This is Power post on 24 August (headlined “Means & ends”) and I’m coming back to it today because the “little black rock” campaign the Minerals Council of Australia launched yesterday touches on something that has been interesting me for a while: the prospects for so-called “HELE” generation.

“HELE” is the acronym for “high efficiency, low emissions” and, away from the world bathed in an eerie green light where fossil fuels have been banished, it raises a potentially significant prospect.

The big context is that the world’s population is en route from 7.2 billion two years ago to some 9.6 billion in 35 years’ time – that is, mid-century.

This is an average rise of 70 million people a year, more than three times today’s population in Australia.

Here in Asia – because that’s where we live – the shift of population to the cities is rising at 37 million people a year.

What this means, in our terms, is that Asia will add about 100 urban areas equivalent to today’s Sydney by 2030 (a date now bandied around daily in our domestic political discourse in terms of carbon targets and RET).

To meet the energy demands of this population, all of whom, like us, want affordable, reliable and quality power supply in the digital age, let alone the many more struggling with energy poverty outside urban areas who would appreciate some lighting, cooling and an easier way to cook, Asia is investing vast sums in all forms of power generation – fossil-fuelled, nuclear and hydro-powered as well as such sources as solar and wind power.

This is where “HELE” comes in.

According to the Minerals Council, there are now 670 of these new power plants operating in Asia and “hundreds more are under construction or planned.”

The World Coal Association has also been out and about in the past few days, arguing that raising the average efficiency of the global coal generation fleet (33 per cent at present) to the “HELE” levels (40 per cent now, with the Japanese saying 45 per cent is achievable) would deliver carbon abatement of two billion tonnes, picking up on calculations initially made mid-year by the International Energy Agency.

What tends to be almost wholly lost to view in media coverage of the IEA’s multitude of energy commentaries is that, far from postulating the “death of coal,” the agency’s modelling includes the potential for 5,000 terawatt hours of annual global electricity production by burning the fuel in mid-century, of which the bulk is “HELE” plant with carbon capture and storage.

Now, for balance, one should interpolate here that part of what freaks out the IEA bureaucrats in today’s world is that about 75 per cent of current coal generation is non-HELE and more than half of total capacity is older than 25 years while a lot of it is burning low-quality fuel. (Australian black coal is high quality.)

What the agency wants to see is a situation where China, India and the ASEAN states are producing some 3,200 TWh of power using “HELE” generation and “HELE” plus carbon capture within 25 years. This would also be a world where North America and OECD Europe are then getting about 900 TWh of electricity from these technologies.

Getting there, the agency says, will require a rise in the average efficiency of coal-fired power of some four per cent, booting old, inefficient plant out of production as much as possible – and, wherever practical, not building small (300 MW) coal-burning units because they don’t lend themselves to commercial applications of emissions-efficient technology.

Deployment of CCS, it adds, is “essential” in pursuing the halving of carbon emissions needed by mid-century.

This really is not stuff that is getting air-play in populist, campaigning-for-green social media or in the mainstream media – and the coal industry has its work cut out in getting a hearing, hence the “little black rock” campaign the MCA has launched.

The other side, of course, are now also active, attacking the campaign – “ludicrous,” “weird” and “desperate” are the activist soundbites being peddled.

It says something (to me at any rate) that the news the “Sydney Morning Herald” chooses to run today on the MCA activity is a story about how social media are reacting to it.

Getting the facts across to the broad Australian audience is going to be quite a challenge in the face of this noise.

The “HELE” story can help. Explaining it to a constituency that sadly is fairly energy illiterate while activists pursue soundbite warfare is the task.










Mining for facts

The Australian coal industry has struck back at the panoply of anti-fossil fuel propaganda dominating its media coverage with a 54-page book (“Coal Hard Facts,” to be found on the Minerals Council of Australia website) that delivers a deluge of data.

This forms part of a wider coal campaign the MCA is launching today (see

With a century of black coal resources still at hand (at present levels of exploitation), the sector has a lot to fight for and it wants the community to understand the value it brings in economic benefits, including jobs, wages and taxes.

More than a few Australians, fed an unrelenting diet of the “death of coal” in the media, may be startled to see the MCA asserting that the fuel’s national export values will increase from $37 billion in the financial year just ended to $47 billion in 2019-20 on the back of a rise in thermal coal sales from 201 million tonnes to 234 Mt at the decade’s end with metallurgical sales going up to 204 Mt (from 186 Mt now).

The latter is terra incognita for large numbers of people, a colleague was explaining to me only last week. For an awful lot of Australians, it seems, coal equals power stations and the critical global role it plays in steelmaking is lost to view.

(As a bystander these days – it is now 12 years since I left the energy industry lobbying game after working in it for 25 years – I am struck by the visual potency of the “Cars=Coal” two-page spread in the MCA publication driving (sorry) the point that every car on our roads is a product of the coal industry, given that every tonne of steel needs about 800 kilograms of coking coal.)

With the Paris summit of the UN climate change talks now weeks away, the gulf between rhetoric and reality is highlighted by the industry’s claim that, even with a downturn in Chinese demand, global metallurgical coal requirements will rebound to 305 Mt next year.

Overall, says the MCA, the world will use a billion tonnes more coal in 2019 than today and the fuel is a critical part of meeting a foreshadowed 21 per cent increase in global primary energy demand by 2030.

I’m a great believer in promoting the contribution the resources sector makes to the well-being of every Australian through cumulative corporate tax and royalty payments.

Jobs in regional Australia don’t seem to influence public opinion within four kilometres of capital city GPOs all that much – but the contributions of the petroleum and mining sector taxes to State government funding for hospitals, schools, roads and other services should, given that just about every suburban barbecue conversation contains some form of gripe about the need for more attention to these areas.

The MCA commentary says that black and brown coal royalties generated $2.9 billion in revenue for Queensland, New South Wales and Victoria in 2014-15, double what they were in 2007-08 – and the association forecasts that they will add up to $15 billion in aggregate in the four years to 2018-19.

In total, MCA adds, coal industry corporate taxes and royalties delivered $37.8 billion to Australian governments between 2007-08 and 2013-14.

To which one can add $6 billion a year now being paid in wages to 41,100 direct employees and another 109,000 workers providing services to the industry.

The immediate battleground for anti-fossil fuel activists, of course, is any new (or expanded) coal mine – and, given the volume of noise in the media, it may come as a surprise again to many that 15 Australian coal mine projects were completed in the two years to April, adding 57 million tonnes to this country’s export capacity.

For the MCA and its members, the big focus now is on the 63 mines and related infrastructure development in the pipeline, with 27 out of 40 proposed mines in Queensland and another 11 in NSW.

Meanwhile, of course, the main war of words here and overseas, which will hot up a lot on the last kilometres of the winding road to Paris, is heavily about the activist  greens’ belief that coal and gas power stations can be consigned to history as we embrace wind, wave, solar and other renewables.

The Minerals Council has produced another two-page spread in its book that really should get some exposure.

“What,” it asks, “would it take to replace fossil fuels in the global power business?”

The answer, it asserts, is 95,900 square kilometres of solar technology projects (ie South Korea) or just over a million square kilometres of wind farm sites (eg South Australia) with 3.46 million turbines.

And, it points out, there 16 mined metals and minerals in a solar panel while “there is more than 220 tonnes of coal in every wind turbine” because every part of the structure depends on steel (including the steel-reinforced concrete in its base).

A touch of sun

I do like reading good writing – my current book is “Flash Points,” a study of Europe’s potential future by geopolitical forecaster George Friedman and it is a great example of the power of well-crafted words – but in the energy arena any such pleasure is frequently marred by authors’ inability to get the basics right.

The classic and perennial problem, perpetuated by international media agencies and frequently on exhibition in local media, is the inability to understand the difference between power generation capacity and output.

Thus there is a story doing the rounds at the moment to the effect that solar power has met 10 per cent of Japan’s summer needs where the writers’ focus is on what capacity has been engaged rather than production.

In the real world, solar power has been meeting about two per cent of Japanese electricity demand in recent years.

The true picture of what has happened in Japan, post-Fukushima and the sudden withdrawal of nuclear power (meeting 27 per cent of electricity production in 2010), is that the natural gas share of generation has jumped from 30 per cent to 43 per cent and the coal share from 24 to 30 per cent. The oil share has doubled to 14 per cent. On the renewables side, hydro-electric power’s share has remained static at eight per cent and “other renewables” (including solar) have almost doubled to five per cent.

A significant development, but one not much publicized, I am told, is that Japan’s major trading houses are supporting the development of seven substantial state-of-the-art coal-fired power stations. A leading Japanese environmental group claims as many as 40 could be built eventually. Japanese technology sees such plants operating at above 40 per cent efficiency compared with 36 per cent in America (and 27 per cent in India) and a semi-experimental power station is boasting close to 45 per cent.

No less interesting is the fact that Japanese finance has backed more than 22,000 megawatts of new coal power plants using modern technology in countries around the globe, including Vietnam, India and Chile.

For the eager beavers of a green power future, the implication of the 10 per cent solar line mentioned above is “why not 100 per cent in the future,” enabling Japan to do away with nasty nuclear and unclean fossil fuels.

It never seems to cross the minds of the purveyors of this propaganda that meeting all Japanese electricity needs from solar power (allowing for the inconvenience of nights) would require some 20 per cent of the land area (a bit less than six times the area of Greater Tokyo) and roughly 70 per cent of the country is forest or mountain. Ah so.

Nonetheless, looking more widely, the issue of just how far use of solar can be driven, and what is required to drive it in terms of all the costs laid on consumers and the community, is fascinating.

Reading about it would be more enjoyable if those spruiking its future could resist playing arithmetical games.

There’s a salutary sentence in the most recent International Energy Agency commentary on the costs of various forms of power production: “No single technology (is) the cheapest form of electricity generation under all circumstances; many factors determine the final cost of investment, principally local influences such as market structure, policy environment and resource endowments.”

Horses for courses, in other words, and much depends on the political jockeys and the handicaps imposed on various runners – including, one should point out, the ultimate handicap in Australia of an outright ban on the use of nuclear energy.

That there will be surprises here and overseas in the energy stakes over the next 10-15 years (let alone longer time frames) should go without saying and the notorious inability of the body politic to foresee such changes is the major reason politicians should eschew picking winners.

All this said, Australia is a natural environment (literally) for solar power.

Household use of rooftop photovoltaics is steadily growing, interest in this application among factory-owners and the like is growing, too, and, supported by government funds, the initial tentative steps in to utility-scale solar generation are under way.

The extent to which this solar progress can proceed, its overall costs and the implications for a resilient east coast electricity market are the realm of much speculation.

I see Origin Energy’s Grant King quoted in a newspaper report today as saying that we should be prepared to be surprised by the rate at which utility-scale solar will take up “a significant amount” of our renewable energy target.

He says there is as much interest in solar sites now as there was in wind farm sites a decade ago.

It needs to be pointed out, however, that, even if utility scale solar accounted for half of the investment in generation needed to fulfill the RET as presently planned, its contribution to national grid-connected power production would be statistically minute at the end of the next decade.

It should also be said that a sea change in east coast gas supply, with lower wholesale prices than presently perceived (feared), would alter the equation, too – as would a political decision that opened the way to small-scale nuclear power production.

This, of course, is where politics looms large.

Governments too lily-livered to support new gas development or gung-ho about supporting renewables with taxpayers’ and consumers’ money in pursuit of votes or suddenly opting to open the door to nuclear energy can change the energy equation big-time.

Vested interest advocacy thrives in this environment, spin in the media soars to ever-new heights and context gets kicked in to the corner.

In closing, here is some context from a source that is both extremely well-researched and also well written, the 2015 “Energy Perspectives” publication produced by the economists of Norway’s Statoil.

In their modelling, the Statoil team observe that there is a 10,000 or so gigawatt difference in the renewables capacity built over 25 years in an environment where, post-Paris, the world is chasing a 450 ppm atmospheric concentration of carbon and one they characterize as a “disorderly world” where nations are not able to agree on “co-ordinated and forceful measures against climate change.”

That’s a massive financial incentive for vested corporate interests, never mind the ideologists.