The Future of Coal€¦ · Bio Energy Gas Coal Oil In 2030 coal, oil and gas will account for ~ 70% of primary global energy demand even with a US$100 price on carbon Source: IEA
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The Future of Coal
Presentation to
The Australian British Chamber of Commerce
Peter FreybergHead of Global Coal Assets
2 August 2017
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Globally coal will remain a key input for industrial sectors and a critical source of safe, reliable and secure energy
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Economic growth and access to electricity underpins stability and security
Source: IEA WEO 2016
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Asia drives coal electricity generation capacity growth to 2030 as fuel of choice to meet industrialisation and urbanisation goals
Source: IEA WEO 2016, Platts World Electric Power Plant Database 2015 & Glencore Analysis
-200
300
800
1300
1800
2300
2800
EU Americas Asia Africa
Mtce
Primary energy demand change (2013 to 2030)
-100
0
100
200
300
400
500
EU Americas Asia Africa
GW
Coal fired generation capacity change (2013 to 2030)
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Coal power generation is included in the Paris commitments of 19 countries responsible for 44% of global emissions
1 GW = power for 1.2 million households in Australia
power for 5.8 million households in China
power for 7.8 million households in India
Source: NDC’s, IEA WEO 2016 and Glencore analysis
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ND
C P
olic
y T
raje
cto
ry
29.0% 25.0%
18.3%
31.1%28.6%
26.8%
21.4%
22.8%
23.1%
4.8%
6.2%
8.5%
2.4%
2.9%
3.4%
10.1%
10.6%
13.3%
1.2%
4.0%
6.5%
2014Actual
19.3Btce
2030New Policy
23.1Btce
2030450 Scenario
20.7Btce
Renewables
Hydro
Nuclear
Bio Energy
Gas
Coal
Oil
In 2030 coal, oil and gas will account for ~ 70% of primary global
energy demand even with a US$100 price on carbon
Source: IEA WEO 2016
Btce : billion tonnes of coal equivalent – standardised coal quantity using coal with energy content of 7000kcal/kg or 29.31 GJ/t
GLOBAL PRIMARY ENERGY DEMAND
2014 Actual
• 81% of primary energy demand from coal, oil and gas
• 1% primary energy from new renewable energy despite
$2 trillion investment
2030 New Policy Scenario
• Energy demand to 2030 still grows by 20%
• 77% of primary energy demand from coal, oil and gas
• Includes Paris Agreement Nationally determined
contributions (NDCs)
• 4% of primary energy demand from renewables (incl.
250% growth)
2030 450 Scenario (2°C climate goal)
• ~70% of primary energy demand from coal, oil and gas
• ~7% of primary energy demand from renewables
• 30GW pa of CCS capacity must be installed from 2030
Spending $1 billion in India on a HELE coal power plant will do more for reducing global emissions and improving energy security than building wind turbines in Europe
Source: Adapted from World Coal Association report
Finite investment capital available
+Growing Asian energy demand
which will largely be met by coal
+Invest in reducing emissions from
baseload energy (coal / gas/ oil)
+Deployment of HELE and CCS
technology
=Coal delivers 4 times the energy
as wind or solar and still
materially reduces emissions
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Full suite of low carbon technologies are needed to achieve climate change goals: without deployment of HELE + CCS the task may become unaffordable
9Source: Krey et al (2014) “Getting From Here to There - Energy Technology Transformation Pathways in the EMF27 Scenarios”
Costs of achieving 2°C as a percentage (%) of Global GDP (2010-2100)
Cost of achieving 2°C climate
change goal rises to 5% of global
GDP without CCS
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Coal remains one of Australia’s most valuable export industries Resources sector accounts for 7 out of the 10 top exports
Source: DFAT: Composition of Trade Australia 2015-16. Spot market prices and 2017 export tonnes at 11 June 2017
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A decade of poorly designed and uncoordinated energy policy in Australia has led us to the current energy crisis
0
100
200
300
400
500
600
700
800
900
Dec-1980 Dec-1984 Dec-1988 Dec-1992 Dec-1996 Dec-2000 Dec-2004 Dec-2008 Dec-2012 Dec-2016
Ind
ex, D
ec 1
980 =
100
CPI Electricity price index
Renewable Energy
Target : 45 TWhRenewable Energy
Target : 9.5 TWh
Source: Adapted from MCA Presentation. ABS Cat No. 6401 Consumer Price Index, June 2017
Renewable Energy
Target : 33 TWh
Carbon tax
starts
Carbon tax
repealed
~20% of total baseload
power closes down
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Rhetoric vs Reality
Energy Australia Power Generation Mix by Source (as @ 31Dec2016)
Coal (%) Oil & Gas (%) Renewables (%)
The proposed renewable lithium
battery storage of 129MWh would
power a NSW Aluminium Smelter
for …
7.7mins
AGL EnergyPower Generation Mix by Source (as @ 31 Dec2016)
Coal (%) Oil & Gas (%) Renewables (%)
Last night in NSW coal
accounted for
~86%Total electricity generated
QLD Government net zero
emissions by 2050
• How?
• What is the impact on household
electricity prices?
• What is the impact on
manufacturing and mining?
Fossil Fuels continue to be the
major drivers of profit for
Australia’s leading power
generation companies …
Source: charts refer to installed capacity
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Australian Energy Crisis: energy pricing increases have undermined investor confidence, particularly in heavy industry
Impact on Australian Industrial Base?
• Cost pressures such as energy and labour will continue to
impact on Australia’s market competitiveness
• Without meaningful economic reform likely that heavy
industry and advanced manufacturing exits Australia
Glencore in Australia
• ~$400 million per annum in electricity costs
• Consumption 3,207,400 MWh
• Our heavy industry assets: copper smelters and refineries
are hardest hit
• Queensland accounts for 65% of our demand
Energy Escalation
• Gas price from $4/GJ to current $+11/GJ (2015-2017):
175% increase over 2 years
• Power increase from $42.5/MWh to + $100/MWh
Source: Glencore internal analysis
Glencore Townsville Copper Refinery
Costs by Category (%)
Other
Services
Consumables
Energy
Labour
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Finkel Review: what about affordability and what about the economy?
AUSTRALIA’S INDUSTRIAL BASE
• What is the impact on heavy
industry and advanced
manufacturing?
• How many businesses are likely
to either exit Australia or no
longer able to operate?
• What is the impact on
employment numbers?
ENERGY AFFORDABILITY
• What is the impact on
household electricity prices?
• What is the impact on energy
costs for industry?
Source: Adapted from Finkel Review Report
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Glencore has over $20 billion invested in our Australian assets and last year contributed more than $12 billion to the economy
`
Thank you
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