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Wednesday, February 8, 2017

LNG exports and heatwaves drive up energy costs

The Australian Government's LNG export policy - with no reservation for industry and residential consumers - has resulted in a 250 percent increase in the cost of natural gas since 2014. The resulting $8.60 per gigajoule price for natural gas makes efficient, low emission combined cycle gas turbine (CCGT) power stations like that at Pelican Point, South Australia, quite costly to run compared to a high emission low efficiency (HELE) coal-fired power station.

The raucous noise over renewable energy in South Australia and the upsurge in government members spruiking high emission low efficiency (HELE) coal-fired power stations is most likely a deliberate distraction from this fiasco that is the government's "sell-it-all" LNG export policy.

AEMO Short Term Natural Gas Trading Market Quarterly Average Price

Gladstone LNG plant places a demand on gas from NSW and elsewhere

Energy Action | Feb 19, 2016

Gas flows on the Moomba-to-Sydney gas pipeline has supplied NSW with gas since 1976. However, according to data from the Australian ­Energy Market Operator (AEMO), the flow was reversed in December for the first time as the third of three gas export projects being built at Gladstone powered up.

New Moomba Gas Supply Hub launched

Wednesday, 1 June 2016

The Australian Energy Market Operator (AEMO) has today announced the launch of the newly established Moomba Gas Supply Hub and two additional trading locations at the Moomba to Adelaide pipeline and the Moomba to Sydney pipeline, which are now open for trading.

The Moomba Gas Supply Hub follows the successful introduction of the Wallumbilla Gas Supply Hub (GSH), established in 2014 to enhance the transparency and reliability of gas supply by creating a voluntary market that offers a low-cost, flexible method to buy and sell gas at interconnecting transmission pipelines.

Gas and LNG Market Outlook, January 2017

National Australia Bank

The exposure of eastern Australia to LNG export markets will have far reaching implications for domestic gas use.

Wholesale prices are likely to increase significantly and some questions remain over availability of commercially recoverable gas from Queensland coal seam gas fields.

Higher wholesale gas prices are likely to spill over into electricity markets by increasing fuel costs for peak load open cycle gas turbines.

Higher gas prices are already flowing through to large domestic customers, with reports that contracts are being offered well in excess of current netback export parity prices.

The price of gas for residential customers in Australia’s five largest cities could increase by more than 50% by 2020.

Boyne Smelter to close cells, cut production after power price spike

Tegan Annett | 21st Jan 2017, Updated: 23rd Jan 2017
Gladstone Observer

IF nothing changes in Queensland's electricity market, 40 aluminium-producing cells at Boyne Smelter will be closed.

That's the message from general manager Joe Rea who says it will result in jobs lost and leave the Boyne Smelter down 45,000 tonnes in aluminium production.

The price hike was driven by high electricity demand in response to very hot weather conditions in Queensland. He said on January 18, a new demand record was set at 9,357MW exceeding the previous record of 9,097MW.

Queensland moves to reserve gas for domestic use

Matt Chambers | 26th Jan 2017
The Australian

Gas producers have voiced alarm at Queensland’s move to earmark a small patch of new exploration ground for domestic use, although former federal resources ministers and previously staunch domestic gas reservation opponents Ian Macfarlane and Martin Ferguson have changed their position and now back the move.

Queensland Resources Minister Anthony Lynham yesterday announced the release of 58sq km of exploration ground in the onshore Surat Basin with the “strict” condition that any gas produced must be used in Australia.

The Queensland Resources Council, which counts both the big gas exporters and some big gas users (such as Incitec Pivot, Rio Tinto and Glencore) among its members and is now run by Mr Macfarlane, applauded the move.

Saturday, February 4, 2017

Searing heat years too soon for salad growers

The third heatwave in two months has hit salad growers in Queensland's south hard, with many farmers battling to harvest 30 per cent of their crop.
Farmer Clem Hodgman said he has been losing about 50,000 lettuces and 25,000 cauliflowers a week at his property near Toowoomba.
"The temperatures are so high, crops are burning off in the fields."
He said while prices were rising in supermarkets, farmers would not reap the benefit as energy and water costs rose accordingly.
"We don't want another summer like this for many, many years," he said.
But Rachel Mackenzie from farm lobby group Growcom said the heat could be the new norm.
She said an industry study into heat impacts on the salad industry did not predict such high temperatures for another 13 years.
"We were looking at 2030 in terms of when some of these thresholds would be reached," she said.
"This could be our new reality. We've had three years in a row where we've had significant heat, and we need to start saying what can we do to make sure we have the right [ways] to deal with this."

Birdsville sweats out record

The record for hottest February day in Birdsville in the state's far south-west has been broken, with Bureau of Meteorology (BOM) figures showing the mercury in the town hit 46.2 degrees Celsius at 4:10pm.
Previously, Birdsville's hottest February day was 45.8C in 2006.
The all-time record at Birdsville airport was 49C in January 2013.
More temperature records could be broken next week unless a high pressure system over the Tasman Sea arrives to cool things down.
The hot weather is the continuation of a low pressure surface trough over southern Queensland that contributed to higher than average temperatures in January.
Overnight minimums in January were the highest on record for a large area of southern Queensland, while maximum temperatures were in the highest 10 per cent of historical records for nearly all of the state's southern half.
The mercury peaked at 39.1C in Warwick on the Southern Downs yesterday, more than 10C above average.
BOM forecaster Vinord Anand said it was the hottest February day in the town since records began more than 50 years ago.
"The record before yesterday was 39 degrees, which was in February 1983," he said.
Applethorpe hit a scorching 36.8C, more than 11C above average.
"The last time it was nearly that hot was in February, also in 1983, when it was 36.1C," Mr Anand said.
The all-time maximum record for Applethorpe is 37.8C, while in Warwick it is 41.7C.
Mr Anand said it had cooled down slightly in the region today, with Applethorpe reaching 25C by 11:00am.
"It's cooler today in those areas compared to yesterday, but we do expect it to warm up again into the weekend and next week," he said.

Friday, January 27, 2017

Coal hard cash

India builds a low-efficiency, high emission (LEHE) coal-fired power station for Bangladesh

This is not so good for the Bangladesh economy and its environment. But it's not all bad news: the Government of India is lending Bangladesh the money for the project that will create jobs for India and boost India's economy.
Maitree Super Thermal Power Project gets cashed up
Business run by Indian Government bags Maitree Super Thermal Power Project contract

Ultra-supercritical tech won't be used in Rampal plant: official
October 31, 2016

Environmentalists have been pressing the government to relocate the Rampal power plant arguing that emissions of the power plant, and transportation and handling of coal through the Sunderbans would destroy the biodiversity of the world’s largest mangrove forest.

In the backdrop of severe criticism against the Rampal power project, the government has been claiming that it would use ‘ultra-supercritical’ technology which would put minimum impact on the Sunderbans, only 14km off the location of the power plant in Bagerhat.

Bangladesh-India Friendship Power Company Limited managing director Ujjal Kanti Bhattacharya told New Age on October 27, ‘The term ultra-supercritical has been made popular by the manufacturers of steam generators for commercial purposes.’

A top official of Bangladesh Coal Power Generation Company, which would implement Matarbari 1,200MW coal-fired power project, said that they would use supercritical technology and there was nothing called ‘ultra-supercritical’ technology in coal fired power generation.

Contract signing for Maitree Super Thermal Power Project
July 13, 2016

"I am extremely happy that Bharat Heavy Electrical Ltd has been awarded the engineering, procurement and construction (EPC) contract for the 2 X 600 MW Maitree Super Thermal Power project (also known as the Rampal power station) in Rampal (a small village in Bangladesh)."

Financing for the project has been arranged by EXIM Bank under the special financing package for strategic projects approved by the Government of India.

BHEL bags NTPC's Bangladesh project
July 14, 2016

Indian public sector company, Bharat Heavy Electricals Ltd (BHEL), has bagged the engineering, procurement and construction contract for a 1,320 megawatt power station for Bangladesh-India Friendship Power Company (BIFPC).

BIFPC is a 50:50 joint venture floated by Bangladesh Power development Board and Indian public sector company National Thermal Power Corporation (NTPC) of India. The company signed a contract agreement for the main plant engineering, procurement and construction contract on a turnkey package with BHEL India to construct the 2 X 600 MW Maitree Super Thermal Power Project...

...The contract value of the project is $1.49 billion which will be financed by Indian EXIM Bank. The plant is expected to start generation during 2019-20.

The Export-Import Bank of India - Indian Exim Bank

Export-Import Bank of India (EXIM Bank) is a specialized financial institution, wholly owned by Government of India, set up in 1982, for financing, facilitating and promoting foreign trade of India.

Bharat Heavy Electricals Ltd - BHEL

The Indian Government's Department of Heavy Industry is concerned with the development of the Heavy Engineering and Machine Tools Industry, Heavy Electrical Engineering Industry and Automotive Industry. It administers 32 Central Public Sector Enterprises (PSEs), including Bharat Heavy Electricals Limited (BHEL) of which the Government of India is the majority shareholder.

China builds a low-efficiency, high emission (LEHE) coal-fired power station for Pakistan

China strong-arms 'all-weather friend' Pakistan on coal power project
January 26, 2017

China has strong-armed 'all-weather friend' Pakistan to scale back up a coal-fired power project in Balochistan, Dawn reported.

In November, Pakistan had scaled down its Hub power project - that was to be run on imported coal -from 1,320MW plant to 660MW. This was as part of an overall decision to restrict power plants based on imported fuels. The project is being developed by a consortium of Hub Power Company and China Power International Holding Company at an estimated cost of $2.5 billion, Dawn said.

"The Chinese side is reported to have told Pakistan that commercial viability of the Hub power project on supercritical technology was possible only with 1,320MW for which it had also been given tariff by the National Electric Power Regulatory Authority on the request of the government of Pakistan," the newspaper said.

Thursday, January 26, 2017

Last days of coal on planet earth

World Energy Outlook 2016

Could cutthroat competition prolong the coal industry crisis?

The global coal market is suffering from excess capacity and low prices. Although many mines have been idled or closed, the effect on markets has been more than offset by expanding production from lower cost producers which effectively impeded the market from finding its way back to balance. Prices bottomed out in early 2016 and have recovered since then but, given the dire financial situation of many coal companies in late 2015, the price recovery has only just started to lift producers out of the red. The majority of Chinese coal firms still remain unprofitable and the future of the fifty US coal companies that are under bankruptcy protection is uncertain. Producers targeting the international market are now largely covering their cash costs, but profit margins remain slim (with the exception of coking coal).

The answers as to why coal companies keep on churning out coal despite losing money are many

The answers as to why coal companies keep on churning out coal despite losing money are many. Much has to do with the cost structure of the industry in which the bulk of the costs are variable rather than fixed. As long as prices exceed the variable costs, operating assets contribute to service liabilities or take-or-pay obligations. Additional debt, unless lenders pull out, can keep companies going for a long time, despite increasing the companies’ liabilities and thus worsening the situation. Another part of the answer lies with market expectations. Like other extractive industries, the coal industry is used to business cycles with extended boom-and-bust periods. Many company executives believe that current losses will be more than offset once the market tightens and that keeping assets operational will pay off in the future.

Competition in the coal industry leads to producers cutting prices in the hope that their rivals will have to exit the market. Economic theory suggests that this triggers an adjustment process in which excess capacity is shed and only the most efficient producers survive. However, collective over-optimism in the industry is capable of delaying this adjustment. This notion is not incompatible with a general expectation in the industry of decline; it simply means that the industry consistently acts as if it expects a better outcome than what turns out in the future.

The coal industry is often a major employer. High unemployment in a coal producing country could trigger a downward spiral in wages (or other employee benefits), as a low income is preferable to unemployment if chances of finding a new job are slim. This effect lowers the cost base and gives companies additional headroom to stay in business and further cut prices. As well, the costs of closing a mine or transferring it to care and maintenance may be significant; as long as the mine is just able to cover its variable costs, the company may want it to keep producing.

These potentially detrimental effects of too much competition are difficult to counteract; market-based mechanisms, such as price floors and scrappage bonuses are unlikely to have the desired effect. The Chinese are tackling the problem through direct intervention: in the period to 2020 up to 1,000 million tonnes per annum of coal mining capacity is to be shed. Successful implementation of these measures underpins our projections for China, while the outcome for many other regions rests on market forces restoring a broad market balance by the mid-2020s. Failure to reduce excess capacity or delays in the process, whether market led or administratively managed, could significantly prolong the current industry crisis and leave coal prices at rock bottom for much longer than is projected in the New Policies Scenario.

First published by the International Energy Agency, November 2016 (pages 220-221)

Wednesday, January 18, 2017

Efficient coal power plants are bad investments

The coal industry lobby is abuzz with talk of ultra-supercritical (USC) coal power plants and, more recently, "high efficiency, low emission" (HELE) coal power plants. The technology is very expensive. The carbon dioxide (CO2) emissions are very high.

The coal lobby turned its back on efficient coal-fired electricity generation in 2011 on realising the demand for coal would fall dramatically. (See "The coal industry's "War on Coal" campaign is all spin".)

The current buzz is a sad attempt to sell inefficient and very expensive coal technology in the hope of locking naive customers into buying coal and wasting money for decades to come.

Australia's Resources Minister, Matt Canavan is receiving very poor advice. According to an article by Michael McKenna in "The Australian" on 17 January 2017:

Matt Canavan backs technology to cut our carbon emissions

Resources Minister Matt Canavan
Resources Minister Matt Canavan. Picture: Jack Tran
"Australia could reach its carbon reduction target by replacing its ageing electricity generators with the latest and emerging low emission coal-fired power station technology [sic]."

The Minerals Council of Australia issued a media release on the same day as The Australian printed Michael McKenna's article about Resources Minister Matt Canavan. The Minerals Council's media release also made incorrect statements about coal-fired power technology.

This wasn't the first time the Minerals Council of Australia issued the same media release with the same incorrect statements about coal-fired power technology.

The following extract from the article "Setting the Benchmark: The World’s Most Efficient Coal-Fired Power Plants" has two key points:
  1. The 600-MW ultra-supercritical (USC) coal power plant in the United States cost $1.8 billion to build. That is $3,000 per kW of generating capacity. 
  2. The Japanese ultra-supercritical (USC) coal power plant is hailed as the cleanest coal-fired power plant in the world in terms of emissions intensity, but the amount of CO2 produced per kilowatt-hour of electricity produced is not given.

The CO2 emission intensity of the much-vaunted Japanese USC coal power plant is 802 kilograms per megawatt-hour which is 802 grams per kilowatt-hour. (See "Japan’s Isogo Power Plant Burnishes Clean Coal’s Credentials" for the information: "'As a result, we can achieve a gross thermal efficiency as high as 45 percent,' says Sasatsu. This, he adds, compares well with the 40 percent efficiency achieved by the old units, and it results in a reduction in carbon dioxide of 17 percent. That brings it down to 802 kg/MWh")

In contrast - if you really feel you must use fossil fuels to generate electricity - combined-cycle gas turbine power stations are about one-third the cost to build ($1,000 per kW of generating capacity) and have CO2 emissions of just 330 kilograms per megawatt-hour which is 330 grams per kilowatt-hour. (See "EIA publishes construction cost information for electric power generators" and "The coal lobby scores an own-goal".) Note the EIA hasn't any data on construction costs of coal power stations because no-one in its survey wasted their money building one.

I've got more than 99 pages of research but Matt Canavan's ain't one.

Matt Canavan and Michael McKenna have failed to respond to requests for links to the alleged "research" mentioned in the article printed in The Australian on 17 January 2017.

The Australian Government has wasted taxpayer dollars on the following research. Matt Canavan and Josh Frydenberg copy their "energy policy ideas" from media releases freely popped out by the Minerals Council of Australia.

Australian Energy Market Commission
Frontier Economics
8 December 2016
Australian Energy Market Commission

9 December 2016
Climate Change Authority

24 November 2016

25 November 2015
Department of the Environment and Energy
ACIL Allen Consulting
24 April 2015
Department of the Environment and Energy
5 May 2016
Department of the Environment and Energy
Dr Alan Finkel AO
13 December 2016
Department of the Environment and Energy

23 December 2016

Setting the Benchmark: The World’s Most Efficient Coal-Fired Power Plants

By Dawn Santoianni
Managing Director, Tau Technical Communications LLC
International efforts to mitigate climate impacts have intensely scrutinized carbon emissions from the electricity sector. Coal, in particular, has been targeted as a source of emissions that could be reduced. The International Energy Agency recognizes that “coal is an important source of energy for world…we must find ways to use coal more efficiently and to reduce its environmental footprint.”1
The 600-MW John W. Turk Jr. power plant in Arkansas holds many distinctions. Completed in December 2012, it was the first USC plant built in the U.S. It also reigns as the country’s most efficient coal-fired power plant with an electrical efficiency of 40% HHV basis (~42% LHV basis).2 After the project was announced in 2006, American Electric Power’s (AEP) Southwestern Electric Power Co. (SWEPCO) spent several years trying to secure the necessary permits while fighting legal battles launched as part of national anti-coal campaigns. Under the legal settlement, SWEPCO agreed to retire an older 582-MW coal-fired unit in Texas, secure 400 MW of renewable power, and set aside US$10 million for land conservation and energy efficiency projects. At a final cost of US$1.8 billion to build the plant, the Turk plant also became the most expensive project ever built in Arkansas.
The Isogo Thermal Power Station is located only six kilometers from Yokohama, the second largest city in Japan. The power station originally consisted of two 1960s-vintage 265-MW subcritical units. During the late 1990s, Yokohama’s environmental improvement plans aimed to enhance the stability of electric power supply while retiring older facilities. Electric Power Development Co., Ltd. (J-POWER), which owns and operates Isogo, entered into a pollution prevention agreement with the city. The new USC Unit 1 (600 MW) was built while the original facility remained in operation, becoming operational itself in 2002. The two older units were then shut down and demolished. The new USC Unit 2 (also 600 MW) was constructed on the site of the old plant and started commercial operation in 2009. Isogo Unit 2 operates at 25 MPa (3626 psi) and 600°C/620°C reheat achieving 45% efficiency, while Unit 1 operates at a slightly lower 600°C/610°C. Completion of both units more than doubled the power generated at the small peninsula site while lowering emissions levels to that of a natural gas-fired combined-cycle plant [sic].
Combined, the two larger new units emit 50% less SOx, 80% less NOx, 70% less particulate, and 17% less CO2 than the older subcritical units that were replaced.3
...The system provides such exceptional pollution control that Isogo is ranked the cleanest coal-fired power plant in the world in terms of emissions intensity.
  1. International Energy Agency (IEA). (2012). Technology roadmap:High-efficiency, low-emissions coal-fired power generation
  2. Williams, J. (2014). America’s best coal plants. Power Engineering, 118(7)
  3. Electric Power Development Co., Ltd. (2009). Replacement activities completed at Isogo Thermal. J-POWER Annual Report 2009