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

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