The prosperity of developing nations depends on fuel we can supply.
When the Hazelwood power station in Victoria’s Latrobe Valley shut down last year, the Australian Conservation Foundation claimed its closure was a signal “the era of polluting coal is coming to an end”.
In its last full year of operation, Hazelwood generated 10 terawatt hours of power. In the past year, global electricity production has increased by 590 terawatt hours, almost half of this rise coming through the greater use of coal. In effect, in just one year, the equivalent of almost 30 Hazelwoods has been brought online. So much for an end to the era of coal.
Last week BP released its respected Statistical Review of World Energy. It showed a resurgence in the growth of coal-fired power after a few years of moderate decline. These earlier declines had been heralded as the death of coal but those claims have been shown up for the exaggerations they were.
This year opposition energy spokesman Mark Butler claimed “there is a clear structural shift under way in the global thermal coal market”. Numbers have never been Labor’s strong suit but this takes doublespeak to a new level. Far from structural decline, last year coal-fired power set a record for supply at 9724 terawatt hours. Coal-fired electricity has risen by 62 per cent since 2000. It has been the fastest increase in coal use on record.
These increases are the result of continued investment in coal-fired power stations. China has built the equivalent of 60 Hazelwood coal-fired power stations in five years. That’s equal to a new coal power plant opening every month in China for five years.
The construction of these coal-fired power plants will underpin the demand for coal for decades to come as the typical life of a coal-fired plant is 50 years. Continuing strong demand for coal will help support our terms of trade, our prosperity and employment in our mining sector.
While Australia is the largest exporter of coal, we are not a major producer. We produce just 4 per cent of the world’s coal. We produce a high-quality product that helps increase the performance of coal-fired power stations. This performance boost is even greater in new coal-fired power stations, so the demand outlook for our coal is strong. The buoyant coal market makes it likelier that the Galilee Basin will open up and the Adani Carmichael coalmine (the first in the Galilee) will start. Financial analyst Wood Mackenzie estimates that the cost of coal from the Adani coalmine will be about $US40 a tonne. The present coal price is more than $US100 a tonne, so there is a strong commercial rationale to develop these supplies.
That would be great news for Australia. The Galilee would be the first major, new coal basin opened for more than 50 years. There are five other proposed mines in addition to Adani’s and altogether they would create more than 16,000 jobs.
Higher prices reflect that coal is valued by the customer. Coal provides reliable and affordable energy and helps support the economic development of impoverished nations. It is good that Australia becomes more prosperous from the sale of coal. We do so because that sale creates value in another country.
If you value the reduction of poverty and the economic development of poorer nations, the greater use of coal is good. As coal use has increased by more than six times in Asia, poverty (as measured by those living on less than $1.90 a day) has been slashed by 95 per cent.
I hope that world poverty continues to fall. To do that, energy use in poor countries will have to rise and it is almost certain that affordable coal-fired power will be part of the equation.
At the very least, poor countries should not have rich countries hypocritically lecture them that they should not use coal. Those same rich countries often are wealthy thanks to their own use of coal.
The use of Australian coal benefits the world because it is cleaner and more efficient, and helps promote economic development, lifting millions from poverty. The era of coal is far from nearing an end.
Matt Canavan is Resources and Northern Australia Minister.