Good news: the carbon price is hurting coal power stations

Only four days since the carbon price has been instituted and we can chalk up some quick wins (if only the federal government would let the natural course of events actually occur).

A few days ago, Climate Spectator outlined how South Australia wouldn't miss the fact that coal power station Playford was to be closed for good and Northern was also going to be put out of action for six months of the year.

On Friday, the bailout announced for Energy Brix suggests that it's on its last legs too, if only the government didn't jump in to prop the thing up for another two years.

Also the June 30 deadline for HRL to reach financial close on its new 600MW brown coal power station, in order to qualify for clean coal funding support from the federal government, has passed without any word from either the government or the company. This suggests this project proposal has finally been euthanised after being announced as the recipient of $150 million in state and federal government subsidies back in early 2007.

The carbon intensity of the project is twice that of a natural gas combined cycle power plant and no noticeable improvement on a conventional new black coal power plant. Even back in 2007, when this project was announced as a successful recipient of funding under the Howard government's Low Emissions Technology Demonstration Fund (LETDF), questions were being raised about the likelihood of it raising bank financing. Indeed documents released under freedom of information and reported by The Age showed the project was initially rejected for federal funding in 2006 on the basis it was ''not realistically based'' and involved ''a high degree of risk''.

In an environment where both sides of politics publicly state the need to drastically reduce emissions, it is ridiculous that any bank or government would sink hundreds of millions of dollars into a brand new power station with a lifetime of 30 to 40 years, whose original design actually had worse emissions intensity than a modern black coal power station. While infrastructure might one day be built to capture the emissions from the plant and pipe it underground, you'd be a bigger punter than Kerry Packer to allocate money on that coming true.  

And yesterday we learned that Munmorah coal-fired power station, which was on its last legs having been mothballed since August 2010, will now be closed and decommissioned permanently.  While it was already slated for retirement in September 2014, what we've learnt since electricity market liberalisation is that businesses can manage to keep these assets going for many more years than the engineers originally envisaged, provided market conditions are conducive – Hazelwood being the most prominent example.

According to Munmorah's owner, Delta Electricity, in 2010 they had gained planning approval for the rehabilitation of Munmorah's turbine units 3 and 4 and associated infrastructure, which would have reduced the plant's operating costs and allowed baseload operation at 700 megawatts. While you'd always have to doubt the likelihood of that project proceeding, the fact that it has now been ruled out is unambiguously a good thing for Australia's greenhouse gas emissions.

Delta Electricity provided the following explanation for closing the plant:

“Decreasing energy demand in NSW has created an excess supply situation. Munmorah's place in the market has been overtaken by newer and more efficient generators and alternative electricity sources.

The station's ageing infrastructure and high maintenance costs mean that it is not economically viable to operate. The carbon tax further erodes its viability.”

A carbon price of $23 per tonne of CO2 is clearly not going to lead to any kind of renewable energy nirvana, nor will it shut down coal overnight. But we now have a situation where a combination of reduced electricity demand and the 20 per cent Renewable Energy Target, and high black coal prices have created conditions that are acting to remove a lot of the food the herd of fossil fuel generators need to survive and prosper.

The carbon price is then acting much like a pack of wolves does in nature. While they tend to leave the strong within the herd unharmed e.g. Loy Yang A, they act to weed out the old, the weak, and maladapted young such as HRL's power station proposal.

This may not be the desired end point on carbon emissions, but it most certainly represents progress over no carbon price at all.