The outlook for coal exports and domestic electricity demand/supply Presentation to the Hunter Business Chamber quarterly Hunter Business Mining lunch Greg Evans Executive Director - Coal, Minerals Council of Australia and Chief Executive, ACA Low Emissions Technologies Ltd (the COAL21 Fund) 23 February 2018
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The outlook for coal exports and domestic electricity demand/supply
Presentation to the Hunter Business Chamber
quarterly Hunter Business Mining lunch
Greg Evans
Greg Evans
Executive Director - Coal, Minerals Council of Australia and
Chief Executive, ACA Low Emissions Technologies Ltd (the COAL21 Fund)
23 February 2018
• The economic contribution of the coal
industry to Australia
• Global coal market trends and outlook
• Low emissions coal technologies – Role of
HELE
• Australian coal industry funding for CCS
development
Australia and black coal
$57 billion of export revenue in 2017. A new record and Australia’s second largest source of export income
200 million tonnes of thermal coal and 172 million tonnes of metallurgical coal exported in 2017
51,500 people employed across Australia & 120,000 related jobs
$6 billion in wages paid to Australian workers, particularly in regional areas
$5 billion in royalties paid in 2016-17
Source of 75% of Australia’s National Energy Market electricity
95% of Australia’s coal exports are from
the Sydney & Bowen basins
Australia’s export coal infrastructure
Note: Mining includes minerals, petroleum and refined metals. 4
Abbot Point2017 Capacity – 50 Mtpa2017 Throughput – 27.8 Mtpa
Hay Point and Dalrymple Bay2017 Capacity – 130 Mtpa2017 Throughput – 86Mtpa
Gladstone & WICET2017 Capacity – 102 Mtpa2017 Throughput – 82 Mtpa
Newcastle (PWCS & NCIS)2017 Capacity – 198 Mtpa2017 Throughput – 160 MtpaPort Kembla 2017 Capacity – 18 Mtpa 2017 Throughput – 5.5 Mtpa
Brisbane2017 Capacity –.10 Mtpa 2017 Throughput – 7.2 Mtpa
Billion tonnes recoverable black coal resource:
Australia >42, Bowen Basin >15, Sydney Basin >13.5
Australia’s merchandise export revenueBy industry, 2017
0
10
20
30
40
50
60
70
A$
bil
lio
n
Coal exports were a record
high $57 billion in 2017.
Coal was one of Australia’s
largest sources of export
revenue in 2017.
Coal exports exceeded
exports of both rural goods
and manufactured items.
Source: ABS Cat No. 5368 International Trade in Goods and Services
Note: Mining includes minerals, petroleum and refined metals. 5
Australia’s coal exportsValue and volume
0
10
20
30
40
50
60
0
50
100
150
200
250
300
350
400
450
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Ex
po
rt va
lue
, A$
billio
nEx
po
rt v
olu
me
, M
t
Thermal Volume Metallurgical Volume Total Value
Despite a drop in metallurgical coal export volumes in 2017 due to the impact of Tropical Cyclone Debbie, coal export values reached a new record high.
Australia exported 172 million tonnes of metallurgical coal worth $36 billion in 2017.
Australia exported 200 million tonnes of thermal coal worth $21 billion in 2017.
Source: ABS Cat No. 5368 International Trade in Goods and Services; Department of Industry, Innovation and Science; Resources and Energy Quarterly – December 2017
6
Australia’s key coal export markets2016-17
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
A$
mil
lio
n
Thermal Coal
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
A$
mil
lio
n
Metallurgical Coal
Source: Department of Industry, Innovation and Science; Resources and Energy Quarterly – December 2017
7
Australia’s thermal coal export volumes by state
0
20
40
60
80
100
120
140
160
2013 2014 2015 2016
New South Wales Queensland
In 2016 Australia exported
202 Mt of thermal coal.
This included:
1. 143 Mt from New South
Wales
2. 58 Mt from Queensland
These exports were valued
at $15.8 billion.
Source: Department of Industry, Innovation and Science
8
• The economic contribution of the coal
industry to Australia
• Global coal market trends and outlook
• Low emissions coal technologies – Role of
HELE
• Australian coal industry funding for CCS
development
Main thermal coal trade flows in 2016 (Mt)
Source: IEA, COAL 2017: Analysis and Forecasts to 2O22, December 2017
10
World coal-fired electricity generationIEA New Policies Scenario
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
OECD Non-OECD
Ele
ctr
icit
y G
en
era
tio
n T
Wh
2016 2030 2040
The International Energy Agency (IEA) forecast low growth in world coal consumption out to 2040 in its 2017 World Energy Outlook .
But their were very different outlooks for OECD and non-OECD countries.
Declining coal consumption in OECD Europe and North America will be offset by growth in highly populated Asian economies.
Australia is well positioned to supply the growing coal demand in the non-OECD countries of Asia.
Source: International Energy Agency, World Energy Outlook 2017
11
IEA outlook for electricity generationNew Policies Scenario
0
2,000
4,000
6,000
8,000
10,000
12,000
Ele
ctr
icit
y G
en
era
tio
n T
Wh
2016e 2030 2040
Coal is expected to remain
the largest source of
electricity generation in the
long-term.
Wind and solar are
forecast to grow, but are
expected to supply less
than half the electricity
provided by coal in 2040.
Source: International Energy Agency, World Energy Outlook 2017
12
New generation capacity under developmentAs at June 2017
0
200
400
600
800
1000
1200
1400
Ca
pa
cit
y (
GW
)
Under Construction Approved & Planned
Over 300 GW of new coal fired capacity is currently under construction.
There are plans to develop another 950 GW.
Some of this will replace retiring older plants, but there will still be a net increase in capacity – and coal demand.
In comparison, only 47 GW of wind and 17 GW of solar capacity are currently under construction around the world.
Source: Enerdata
13
0
50
100
150
200
250
300
Number of Coal-fired Unitsin Construction and Planned in Asia
(Total = 857)
Construction Planned
Asian countries constructing & planning coal-fired unitsAs at December 2017
Source: Platts
14
Main coking coal trade flows in 2016 (Mt)
Source: IEA, COAL 2017: Analysis and Forecasts to 2O22, December 2017
15
Australian coal trade share rises over the
period to 2040
Major exporters of coal by type
Source: International Energy Agency, Coal 2017 and World Energy Outlook, 2016 (New Policies Scenario)
16
• Australia is forecast to export 198 Mtce of metallurgical coal in 2022, dominating the market with a trading share of 72%
• Thermal coal exports are projected to increase from 177 Mtce in 2016 to 187 Mtce by 2022.
• Out to 2040, the IEA projects Australia’s share of the coal trade to increase from 34% in 2016 to 36%
• The economic contribution of the coal
industry to Australia
• Global coal market trends and outlook
• Low emissions coal technologies – Role of
HELE
• Australian coal industry funding for CCS
development
State-Of-The-Art HELE Power Generation FacilityIsogo USC Power Plant - Japan
• Commenced commercial operations in 2009.
• The two USC black coal-fired generation units
have a combined capacity of 1200MW and a
thermal efficiency of 45%.
• An advanced treatment system removes such
pollutants as SOx, NOx and soot/dust from flue
gas, using almost no water.
• The No. 2 Unit has achieved the following
environmental performance:
• SOx – 10 ppm
• NOx – 13 ppm
• Soot and dust – 5 mg/Nm3Source: Power Engineering International
18
Communications Focus
19
Getting the facts out to the community:
• To those interested in the nation’s economic future, trading opportunities in Asia and technological improvements making coal cleaner and more efficient
• To politicians and voters looking for reasoned arguments
• To address some anti-mining and anti-coal groups.
Australia can reduce generation sector emissions and improve energy
security with new coal generation
1500
920
760
120
0
200
400
600
800
1000
1200
1400
1600
Hazelwood Supercritical plant Ultra-supercritical plant With CCS
CO
2 e
mis
sio
ns p
er
kW Up to 40 to 50%
emissions reduction
by switching to USC Further 80%
emissions reduction
from CCS
22
What is CCS?
• Carbon Capture and Storage (CCS) is
a process whereby carbon dioxide
(CO2) emitted from the use of carbon-
based fuels or from industrial
processes is: – Captured,
– Compressed, and
– Permanently stored in suitable geological structures
at least 800m below the surface
• CCS can reduce CO2 emissions from
coal use by 90%
• CCS is not science fiction it has been
undertaken around the world for over
20 years
Photo courtesy of SaskPower
Boundary Dam CCS generation, Canada
Petra Nova, CCS generation USA
Photo courtesy of Global CCS Institute
Photo courtesy of Global CCS Institute
Abu Dhabi CCS from iron manufacture
23
Australian household electricity pricesHistorical trends
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
19
80 =
10
0
CPI Electricity price index
RET: 45 TWh
RET:
33 TWh
Until the year 2000
Australia’s electricity prices
increased in line with
inflation.
Since the year 2000
electricity prices have
increased much faster than
inflation.
Renewable energy targets
and carbon taxes have
been key drivers of
changes in electricity price
growth.
MRET: 9.5 TWh
Carbon tax
starts
Carbon tax
repealed
Source: ABS Cat No. 6401 Consumer Price Index, December 2016
24
Australian industry electricity prices
Electricity and gas prices for manufacturers Historical trendsSource: ABS
25
Prospects for HELE Power Station DevelopmentOptions for Australia
• Report undertaken by Solstice with GHD
cost estimate input
• Compares Long Run Marginal Cost for
power stations delivering reliable, secure,
affordable and sustainable base load
electricity.
• Provides an ‘apples-for-apples’
comparison for providing ‘firm’ generation
The reports are available from the MCA’s website: www.minerals.org.au
• Solstice Development Services, Prospects for a HELE USC coal-fired power station, June 2017.• GHD, HELE power station cost and efficiency report, June 2017.
26
#1. Context—continuous generation is essential
Australia continues to need secure and reliable electricity from a fleet of power
plants able to generate continuously and when required at an affordable cost.
The demand on the NEM exceeds 15 000 MW continuously, 24 hours a
day 365 days a year, accounting for 66 per cent of the energy sent out to the grid.
For the year ending 31 March 2017, NEM min demand was 15.33 GW or 134.3 TWh per annum. This is equivalent to 66% of total energy demand (202 TWh) over the same period.
TWh % Cal Year 2006Year to Mar
2017
Coal 87 75
Hydro 7.1 7.9
Gas 5.9 8.7
Renewables 0 8.6
Source: Desktop Study, Fig.6 p.14 Source: Desktop Study, Tab.5 p.14
66% of electricity demand never goes away – it is there 24/7
27
#2. Scheduled closure of baseload capacityNEM, Coal and gas power plants
0
5
10
15
20
25
30
35
40
2010 2015 2020 2025 2030
Ca
pa
cit
y, G
W
NSW coal QLD coal Vic coal SA coal NEM Gas
14.2 GW of
baseload capacity
3.5 GW of coal fired generation capacity has closed since 2010. A further 8.1 GW (or 33 per cent of current capacity) is scheduled to close by 2030.
A further 2.6 GW of gas fired power plants are scheduled to close by 2030.
To replace the lost output with wind turbines would not only create intermittency problems it would require over 25 GW of wind farms to be constructed due to their lower output per unit of capacity.
At $2,400 per kW1 of wind farm capacity this would cost over $60 billion.
1Source: Jacobs, Modelling Illustrative Electricity Sector Emissions reductions Policies, report for the Climate Change Authority, 2016 28
#3. HELE capital cost requirements are relatively low and
other ‘firm’ generation options can’t match HELE New HELE plants have significantly lower capital cost requirements compared to “firmed”
renewables.
Source: Desktop Study, Table 41 p.106
(ratio of high case estimates)
1 2.2
9.4
14.5
BLACK COAL HELE USC
BLACK COAL HELE USC + CCS
WIND + BATTERY SOLAR PV + BATTERY
Capex Ratio2030 Deployment
• New 650MW Wind + Battery
power plant capital cost could
be as high as $16.8 billion
• New 650MW Solar + Battery
power plant capital cost could
be as high as $25.8 billion
29
#4 Brownfield HELE is the lowest cost generationEstimated long-run marginal cost of new generation (2017)
0
100
200
300
400
500
600
700
800
900
1000
USCblackcoal
Variablewind
USCblack
coal withCCS
CCGT Variablesolar PV
Wind &CCGT
CCGTwithCCS
Solar &CCGT
Wind &CCGTwithCCS
Solar &CCGTwithCCS
OCGT Wind &battery
Solar &battery
A$
/MW
h
Source: Solstice Development Services, Prospects for a HELE USC coal-fired power station, 2017
30
Australian Government view on HELE
“Japan are building ultra-supercritical clean coal plants that produce 40 percent less emissions, using Australian high quality coal. It would be a little silly for us to send our coal to Japan to use in clean coal plants but not even consider building them here.”
Minister Matt CanavanFederal Resources MinisterTownsville Bulletin, 07.01.2017
“As the world’s largest coal exporter, we have a vested interest in showing that we can provide both lower emissions and reliable baseload power with state-of-the-art, clean coal-fired technology.”
The Hon Malcolm Turnbull MPPrime Minister of AustraliaNational Press Club address, 01.02.2017
“Cleaner coal is part of the solution, it is a proven technology which has application in Australia.”
Minister Josh FrydenbergFederal Environment and
Energy MinisterThe Australian, 24.01.2017
31
• The economic contribution of the coal
industry to Australia
• Global coal market trends and outlook
• Low emissions coal technologies – Role of
HELE
• Australian coal industry funding for CCS
development
COAL21 fund
33
• Demonstrating low emissions coal technologies in
partnership with government and other investors
• Over $300m committed to 14 projects
• Achievements so far include:
– Captured CO2 at Queensland’s Callide coal-fired power plant
– Sequestered 65 000 tonnes of CO2 in Otway Basin in Victoria
– Intensified the search for storage sites in Australia
– Contributed to the international R&D effort.
• COAL21 Fund extended to 2027
• More information is available at:
http://www.minerals.org.au/resources/coal
Aerial view of Callide Oxyfuel project
Otway project injection, CO2CRC, Victoria
Australian CCS Projects
34
Gorgon ProjectCommissioning underway
First Injection 2017Planned 3Mt/a
SW Hub Flagship4 Wells Drilled
5th Well Planning
CarbonNet FlagshipSite selection completed
Appraisal underway
CTSCo1 well Drilled, 3D Seismic
CompletedAssessment underway
CO2CRC Otway Pilot2C Experiment underway
Phase 3 in planning
CallideOxyfuel demonstration
completed
Precompetitive Exploration
Underway
Key messages
Demand for Australia’s coal will be supported by the development of new electricity generation and steel-making capacity, particularly in Asia.
1
3
2
4
Australia is and will continue to be a major producer and exporter of coal.
Coal has an important role in a secure and sustainable energy future in Australia too.
Australia’s supply capacity, geographical location and coal quality ensure we are well-positioned to meet future demand in the region.
5However in Australia there is considerable scope to do better by creating
conditions to enable the use of advanced, cleaner, more efficient (HELE)
technologies and CCS.
35
THANK YOU
What is the difference between a sub-critical and HELE plant?
• Subm
Subcritical versus supercritical:• Basic operation of steam cycle is the same (Rankine Cycle)• Constructional features are the same except supercritical involves a drumless boiler
whereas subcritical involves a drum-type steam generator• The equipment & philosophy of working are similar
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