In 2009, Western Australia coal magnate Rick Stowe was apparently another winner.
Having made his fortune prospecting for black fuel at Coulee, 180 kilometers south of Perth, Mr. Stowe was heading downstream.
He was building his own power plant – a 440-megawatt plant that takes coal from the mine he controls before burning it to produce electricity.
It sounds like a recipe for printing money, said Peter Kerr, a former financial journalist and energy industry executive.
“It was actually a good time — a boom time, if you like — for coal,” Kerr said.
“The future looked bright. There was a lot of money for new developments and there wasn’t a lot of competition at the time from renewable energy.
And Rick Stowe was throwing everything he could to get this plant online.
“He was paying big bonuses to get employees to work longer hours, and he flew in Jimmy Barnes to get a big thank you party.
“On the surface, everything looked amazing.”
Less than a year after the Bluewaters power plant became operational, powerful investors pulled the plug on Stowe’s business empire.
Stowe’s downfall was in some ways an unsettling metaphor for Bluewaters itself.
Kerr, who now runs energy consultancy ATA Consulting, said circumstances conspired to bring Bluewaters down, culminating in the decision of its Japanese owners — Sumitomo and Kansai Electric — to write off their investments in 2020.
He said of the Japanese’s 2011 deal to buy power: “They would have invested, according to some estimates, half a billion dollars of their own money… in a $1.2 billion deal to buy this plant – the rest being financed through debt.” Station.
“They basically realized in 2020 that they wouldn’t earn anything for $500 million.
“So, as you do in accounting jargon, you write off the investment… and you accept the loss, and you take a big hit.
“It’s a bitter pill to swallow, but it’s the truth.”
The extraordinary events at Bluewaters resonate in the Australian energy landscape as everyone from governments and regulators to industry tries to keep pace with the dizzying pace of change.
This rapid upheaval has come to full effect so far in 2022, the year many critics felt Australia had reached a tipping point in its transition away from fossil fuels and toward renewable energy.
Incompatible and inefficient fuel source
An announcement of a bombshell was followed by another since Origin Energy said in February it would offer shutdown of Earing, Australia’s largest 2,880 megawatt coal generator, through 2025.
In June, the Western Australian government said it would shut down remaining coal plants by 2029, while both the Queensland government and energy giant AGL last month revealed they would be out of coal by 2035 – a decade earlier than planned.
The head of the Energy Policy Center in Victoria, Bruce Mountain, said there was little doubt that the Australian energy system was entering a period of unprecedented transformation.
Dr. Mountain argued that the reasons for this were inevitable and boiled down to the fact that coal-fired energy was simply incompatible with renewable energy, which was winning the economic battle.
He noted that the record price of coal, although a boon to exporters in NSW and Queensland, was hastening the demise of the fuel as a source of power generation.
“Coal generators are huge facilities with a big economy – they are cheaper per unit the bigger they are,” Professor Mountain said.
“But it is very capital intensive and very complex.
“And as a result, once it’s built, you need to run it day in, day out, day in day out to offset the capital outlay.
“Coal now finds itself being pushed out of the system because it is a more expensive fuel source and its technology and cost structure cannot compensate for that.
“It’s not built on resilience.
“They like to drive a B-double through downtown – it’s inefficient, they can’t do the start.”
I needed charcoal substitutes quickly
Dr Mountain said Australia faces a unique challenge in switching to green energy due to its historical fuel mix.
Unlike many other countries that bring in large amounts of renewable energy, he said Australia’s east coast used very little gas and was almost entirely dependent on coal.
As a result, he said, Australia is trying to deal with the influx of renewable energy without the flexibility that gas-fired power provides.
He said there is little chance that gas will play a role as a bridging fuel because of its high cost, which has been pushed to record levels this year, making it very expensive.
“The solution is to bring in storage very quickly,” said Dr. Mountain.
And governments now realize that, and politics is following it.
“It has to go farther and faster.”
The Australian energy market operator, which runs the electricity market and is responsible for keeping the lights on, echoed calls for swift action.
In its blueprint for the national electricity market, released in June, AEMO said the mass retirement of coal plants made the need for replacement capacity urgent.
The agency said that nine times the wind and solar capacity should be required at scale, five times that of rooftop solar, and a so-called installation capacity tripling to provide support.
“So things like water pumping, batteries, gas-fired power generation are smoothing out the tops in that variable renewable energy and filling in the bottoms,” AEMO President Daniel Westerman said.
“The lights will stay on”: AEMO
In addition to new and standby generation capacity, Mr. Westerman said there is also an urgent need for new 10,000 km high voltage transmission lines to connect new wind and solar projects.
He said 14 gigawatts – or 60 per cent – of coal-burning capacity in the National Electricity Market (NEM) is due out by 2030 and the rest will retire no later than 2043, meaning there was no time to lose.
Despite the challenges, he was confident that network security would not be compromised.
“I’m sure the lights will go on,” he said.
“This is our job. Certainly.
“Display reliability is first and foremost on our minds every day.”
Kerr said that building enough short, medium and long-term storage will be key to managing intermittent renewable energy production.
He also noted that gas-fired power could provide a vital network backup so that cleaner forms of online backup could be brought in.
However, Kerr agreed that the price of gas in the eastern states was a major problem that could make navigating the transition even more difficult.
“The ideal solution to reduce coal would be more storage to balance the variable renewables, but if you don’t have a lot of storage — or enough storage space — you’re going to use some gas,” Kerr said.
“But there is a shortage of gas on the east coast and prices are high, partly because of the Ukraine war but also because a lot of Australian gas has been exported abroad.
“So, yes, there are difficult moments and years ahead.”
The lifeblood of the city “dries up”
At the coal-mining hub of Coulee, Western Australia, locals have come to terms with the inevitable eclipse of coal generation using renewable energy.
However, former coal miner Jay Scovern said there are concerns about the speed of the industry’s demise.
Scovern, who until 2019 worked at the Griffin coal mine that supplies Bluewaters, said Cooley’s economy has been largely dependent on coal for the past half century, and finding other industries to support employment has not been easy.
“Coal was definitely a lifeline for Cooley,” said Mr. Scovern.
“But remember, we didn’t start with charcoal – we started with wood. And we switched to charcoal.
“And whatever happens next, we have the ability to move on to the next stage, whatever that may be for a greener future.”
Kerr said the sharp decline in wealth at Bluewaters should serve as a warning of just how quickly the electricity system is upending, and how little time is available to act.
“The stakes are huge,” Kerr said.
“I mean, it’s the highest you can get.
“We’re playing to keep the lights on here and politically speaking, the stakes don’t get much higher.”
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