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Tuesday, September 6, 2011

Coal Seam Gas Needs Carbon Tax

Without a Price on Carbon, the Coal Seam Gas Industry is Not Commercially Viable

See Askgerbil's Submission to the NSW Government Inquiry into Coal  Seam Gas that questions the viability of the industry if the Carbon Tax is not implemented and retained.

In its 2010 submission to the Senate Select Committee on the Scrutiny of New Taxes’ inquiry into Carbon Pricing , AGL wrote:

Ironically, investors today are also unable to secure project finance for baseload and intermediate thermal alternatives to coal (e.g. CCGT) while policy settings explicitly allow coal to be built. While all reasoned logic dictates that coal would not be built under current conditions, nobody can guarantee this. So while a CCGT plant would have a substantially lower emissions intensity than coal at 0.4 tonnes per MWh, the absence of an explicit carbon price creates unacceptable risks for investors in CCGT plant as the higher cost structure of CCGT plant would be undermined should new coal plant be financed and constructed.” 1

This was affirmed earlier this year...

Uncertainty over carbon pricing puts investment on hold

The Australian January 10, 2011

"...Companies such as AGL and Origin say they need a carbon price to make decisions on ... big gas-fired power stations.
AGL Energy chief Michael Fraser ...said last month that uncertainty about the carbon price meant new baseload power was not being built.
No one in their right mind was going to build a coal-fired power station with a carbon price looming, he said, but without price certainty baseload gas power could not be built either.
Origin managing director Grant King, ... says the government needs to move quickly...
"We've pointed out to government: your time is running out," King says.
"It takes a long time to build things, so you're going to have to make up your mind pretty soon what you want us to build."
Anyone considering making a submission to the New South Wales inquiry into coal seam gas (submissions close tomorrow) may also want to consider the following possibility -
It will help protect jobs and communities that depend on coal mining if we can find a commercially sensible way to improve the environmental acceptance of coal in energy supply systems. The article and the summaries at "Australia's Clean Energy Legislative Package" and "Power Station Operator gets great value for investors" provide some approaches that might help.
1 AGL submission to the Senate Select Committee on the Scrutiny of New Taxes’ inquiry into Carbon Pricing. “Delayed carbon policy certainty and electricity prices in Australia” March 2010. sub19, at page 7.