The high cost of Australia losing coal

YOU are forgiven for thinking that the big story about coal this week was a report on its $66 billion value to the Australian economy, or a fresh price warning from the ANZ Bank, because the event which most interested Hogsback was a looming power outage in Europe.

Staff Reporter

Small in the overall scheme of things, the outage will start on March 20 at precisely 8.40am central European time and last until 12.50pm, with those four hours being a time when the region turns to coal and other fossil fuels to save the power grid.

How do we know the time so precisely? Because that’s when much of Europe will enjoy its first total solar eclipse since 1999 and the reason there will be a power problem is that losing the sun for four hours means losing 10% of the region’s electricity supply.

Plans are being made now to fill the gap by cranking up conventional power stations and ensuring there is enough coal available to keep the lights on.

But what the eclipse should remind everyone in Europe is that the further the region travels down the wind and solar power route, the more susceptible it becomes to the vagaries of nature.

The March 20 eclipse will show what happens when the sun doesn’t shine, and what will happen to the grid in the future on days when the wind doesn’t blow.

Those simple, almost trivial observations are becoming quite important warnings for Europe which has seen its reliance on solar-powered electricity boom from less than 1% at the time of the 1999 eclipse to more than 10% today.

In a way, the region’s power grid is rushing from over-reliance on conventional fossil fuels to over-reliance on solar and wind with the eclipse a reminder to governments that they cannot control everything and that a balanced power system is important.

The same comment about balance applies to the governments in Australia where the lure of renewable energy and the constant criticism of coal is putting at risk one of the country’s most important industries.

Just as the Europeans will get a surprise on March 20 when 10% of their power grid goes down for four hours so will Australians get a surprise if they wake up one day and the coal industry has disappeared.

The cost of losing coal, which sounds like a comment almost as weird as Europe without sun or wind, was quantified during the week in a study by an economic research firm, Lawrence Consulting.

The two key numbers in the analysis were the $66 billion annual value to the Australian economy from selling coal to the world, and the 381,000 full-time jobs created by the industry.

Not asked, because it was probably considered too political, is which Australian government wants to be remembered for causing the country so much pain should coal be forced out of business.

Some coal industry leaders used the Lawrence study to remind governments, both state and federal, that the problems caused by over-regulation at a time of low coal prices was pushing some big coal projects towards the brink of closure.

Seamus French from Anglo Coal described the attitude of some governments as “unsupportive”, an under-statement if ever there was because the more accurate description is hostile.

Michael Roche from the Queensland Resource Council took the issue a step further by pointing out that there was too much “easy talk” about Australia living without coal in the economy.

And that’s the real point because the combination of low prices and unsupportive (hostile) government is conspiring to produce a toxic environment for investment in coal, and while that pleases the critics of the industry no-one has ever put a price on closing the industry.

Today, they have those two numbers to consider – $66 billion a year being taken out of the economy, and 380,000 jobs eliminated.

The next question for government to consider is what industry replaces the missing money and the missing jobs, and that’s when the debate swings back to balance.

What Australian governments need is a reminder that if price forecasts – such as the latest from the ANZ of a very slow recovery – in coal prices is correct, then the threat of increased regulatory cost will force more producers out of the industry.

Just as Europe is striving to achieve a balanced power grid so too should Australia be trying to achieve greater balance in its treatment of coal as a critical part of the national economy.

Losing coal might be a win for the environmental movement but it would devastate an already weak national economy.

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