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New South Wales coal export volumes have peaked and are now facing a terminal long-term decline, says a new report from the Institute for Energy Economics and Financial Analysis – but the NSW Minerals Council disagrees.
“Thermal coal exports out of the Port of Newcastle peaked three years ago and are now set to decline,” says report co-author Tim Buckley. “Going forward we will witness a permanent, terminal decline as Asian markets continue their technology-based energy transition towards cheaper more sustainable renewables.”
The IEEFA says the four Asian markets New South Wales heavily depends on – Japan, China, South Korea and Taiwan – experienced a 74% decline in their new coal plant pipeline (almost 423GW capacity) since 2015, and with more contraction expected.
Its figures don’t take into account closures of existing plants.
“If current pipeline decline and plant closure trends continue, plant retirements will exceed additions by 2022 and the global operating coal fleet will start to shrink,” states IEEFA.
The Institute has encouraged the NSW government to begin planning a transition for communities and businesses that will be affected by the downturn.
The NSW Minerals Council begs to differ on the IEEFA’s assessment, calling reports of the demise of the state’s coal industry “dodgy”.
“The NSW thermal coal sector is enjoying healthy conditions with expert independent analysis forecasting this to continue to at least 2040,” says a release from the Council. “Demand for NSW coal is strong, particularly from traditional Asian markets such as Japan, Taiwan and Korea.”
“Healthy” may not be a good choice of words considering the product in question, but anyway. The release also cites figures on exports to Japan rising by 2.4% between December 2016 and December 2017; so nearly a year ago.
On a somewhat related note and across the border in Queensland, Adani has reportedly scaled back its plans for the Carmichael coal mine project in order to secure financing. Coal from the mine will primarily be destined for India. IEEFA notes:
“…imported thermal coal power in India costs US$60-80/Megawatt hour, double the cost of new renewables at US$34-40/Megawatt hour, fixed with zero inflation indexation for 25 years.”
While the Carmichael coal may be earmarked for India, it will mainly be used for Adani’s own electricity generation activities in the country. According to the company, Adani Power Ltd is India’s largest private thermal power producer, with a portfolio capacity of 10.44GW.
The IEEFA report can be downloaded here.
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The NSW Minerals Council, in its November 1 release headlined “Positive Outlook for NSW Thermal Coal Sector” (linked to in the post above), includes these statements:
“The IEA forecasts coal consumption in South East Asia will more than double by 2040 to 390 million tonnes, driven by an increase in demand for reliable and affordable electricity. Electricity demand in the region is expected to grow by 3.7% per year to 2040 and coal share in the region’s power mix is forecast to increase from around 35% today to a little over 40% over the same period.”
What “IEA forecasts”? In the IEA’s “World Energy Outlook 2017”, on page 40, in the Spotlight box, it includes these statements:
“The scenario results presented in the WEO are sometimes mischaracterised as forecasts. They are not. Each scenario depicts an alternative future, a pathway along which the world could travel if certain conditions are met. The IEA does provide short- to medium-term forecasts for different fuels and technologies, but there are no long-term IEA forecasts; in our judgement, there are simply too many variables in play for this to be a viable approach.”
And on page 41, also in the continuation of the Spotlight box, it includes:
“The bottom line is that, with so many uncertainties and so many moving parts, a forecast as far out as 2040 would be highly susceptible to intervening events.”
See: https://www.iea.org/media/weowebsite/2017/Chap1_WEO2017.pdf
The IEA’s WEO-2017 clearly states, “there are no long-term IEA forecasts … as far out as 2040” – they are SCENARIOS. “Each scenario depicts an alternative future…”
And the EIA’s WEO Special Report Southeast Asia Energy Outlook 2017 includes in the Executive Summary, p11:
“Our aim in this analysis is to provide a framework for understanding the region’s energy choices, examining the pitfalls and opportunities that lie ahead and what different pathways might imply for future energy security, the environment and economic development.”
See: https://www.iea.org/publications/freepublications/publication/WEO2017SpecialReport_SoutheastAsiaEnergyOutlook.pdf
Yet it seems the NSW Minerals Council falsely asserts that the “IEA forecasts coal consumption in South East Asia will more than double by 2040”. The evidence presented suggests to me that the NSW Minerals Council is engaging in wilful duplicity.
The NSW Minerals Council also claims in its Nov 1 release (linked to in the post above):
“This positive outlook is supported by company forecasts and expert industry analysis.”
This prompts me to cite Upton Sinclair (US novelist & socialist politician, 1878 – 1968), who said:
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
See: https://en.wikiquote.org/wiki/Upton_Sinclair
Ian Dunlop, in his April 26 RenewEconomy op-ed headlined “Climate Change: The fiduciary responsibility of politicians & bureaucrats”, includes:
“The IEA is no paragon of virtue regarding climate change.
It downplays both climate impact, and the potential of alternative energy sources, as a result of strong pressure politically from its developed country membership, and from vested interests who make up its advisory bodies such as the IEA Energy Business Council and the Coal Industry Advisory Board.”
See: https://reneweconomy.com.au/climate-change-fiduciary-responsibility-politicians-bureaucrats-59891/
I think the IEEFA report presents compelling evidence and credible assessments of a likely permanent, terminal decline of NSW coal exports henceforth.
The NSW Government has a fiduciary duty to protect its citizens, and thus it’s incumbent upon it to begin planning a transition for communities and businesses affected by the inevitable downturn.
Posted earlier today at the IEEFA website is a Press Release headlined “IEEFA report: Australia’s key export market – Japan, moving beyond thermal coal”
See: http://ieefa.org/australias-key-export-market-japan-moving-beyond-thermal-coal/
It refers to a Report published today by IEEFA’s Simon Nicholas, Research Analyst, & Tim Buckley, Director of Energy Finance Studies, and highlights:
“Japan is by far the largest thermal coal export destination for the state of New South Wales (NSW) in Australia, representing 45% of all NSW exports in 2018. As a result, any moves by Japan away from thermal coal have great significance for the NSW thermal coal industry.”
And:
“With demand for imported thermal coal in NSW’s big four export destinations to continue to decline, the market is set for long-term oversupply, lower prices and lower royalties.
Continuing to approve new thermal coal mines in Australia will add more production into an oversupplied market. A cessation of new thermal coal mine approvals represents a rational economic step in the face of a declining market.”
It will be interesting to see what the NSW Minerals Council has to say about this. More denial perhaps?