The Continent of Australia is one of the most energy rich countries in the world. And yet the state of South Australia has become blackout capital of the OECD. Nine coal-fired power stations have been closed and some renewable energy deployed in its place. Electricity prices are soaring to the extent that Energy Matters’ readers are alarmed. Is there a connection between these events?

In 2016, Australia exported 403 million tonnes of coal against domestic consumption of 89 million tonnes. It makes no sense for the Australian government to burden its citizens with more expensive and less reliable electricity if the coal that Australians would have burned is simply exported. If the Australian government is genuinely concerned about CO2 emissions, it should begin by closing down its coal export industry.

Uranium

Australia has by far the largest uranium reserves in the World [ref 1] (Figure 1) and in 2016 was the world’s third largest producer (Figure 2). Kazakhstan and Canada beat Australia into third place. In 2007, Australian production was almost as large as Canadian but since then Canadian production has grown while Australian production has declined (Figures 3, 4). What lies behind these trends? The Cigar Lake uranium deposit is one of the richest and largest in the world and after significant delays it eventually came on line in 2014 explaining the expansion of Canadian production. Most of Australia’s production comes from the Olympic Dam deposit, which is one of the world’s largest. However, unlike Cigar lake which produces a high grade ore, Olympic Dam is primarly a copper mine where uranium is produced as a by-product. Copper was in a bear market from 2011 to 2016, declining from $4.5 to $2 / lb in that 6 year period. I suspect that mine operator BHP Billiton will have reduced copper production whilst simultaneously reducing uranium production.

Figure 1 Australia has by far the largest uranium reserves in the world, much of it located in the Olympic Dam copper deposit. [Data from ref 1]

Figure 2 Australia has the third highest uranium production.

Figure 3 Kazakhstan is the new kid on the block and has seen production quadruple since 2007. Note how Australian production has declined while Canadian production has grown. See text for details.

Figure 4 Same as Figure 3 but plotted as percent.

Figure 5 CO2 intensity of electricity generation for selected countries from Shrink That Footprint.

At the heart of the Australian energy conundrum is the fact that despite this wealth of uranium the country produces zero nuclear power. I suspect the reason for this is the abundance of coal and 20+ years ago it was simpler and cheaper for Australia to go down the coal route. But Australia was still opening new coal plants as recently as 7 years ago (Bluewaters 2, WA in 2010) (Figure 9). Perhaps commenters can advise what underpinned Australia’s energy policy back then?

In contrast, Canada has large nuclear and hydro electric production and has a low CO2 intensity of electricity on a par with Sweden and France. Australia, heavily dependent upon coal in power generation has one of the most CO2 intense electricity supplies in the world (Figure 5). We have made the case on a number of occasions that if a country wants to reduce CO2 emissions then nuclear power provides the proven route that is now being followed by China, India, the UAE, Poland and Russia, to name but a few countries. Australia has joined Germany in trying to achieve decarbonisation of power supplies using wind and solar.

Coal

Australia has the world’s fourth largest coal reserves (Figure 6) and is also the fourth largest coal producer in the world (Figure 7).

Figure 6 Australia has the fourth largest coal reserves in the World. Data from the 2017 BP Statistical Reveiw.

Figure 7 Australia has the world’s fourth highest coal production where most of the production is exported (Figure 11). Note how China is punching way above its weight in terms of production in relation to the reserve base. The reserves / production (ROP) in China is 72 years compared with 381 years in the USA.

Figure 8 The NEM = The National Electricity Market that is the connected grid of Eastern Australia. Fossil fuel accounts for 87% of generation [ref 2]. Year unknown.

Figure 9 Coal Fired power stations in Australia [ref 2].

Figure 10 Closed coal-fired power stations in Australia [ref 2].

Figure 8 [ref 2] shows just how dependent Australian power generation is on coal (77.2%) in the NEM (National Electricity Market) which covers the eastern grid. The SWIS (SW interconnected system) has 50% coal and 35% gas. Figure 9 shows the age of operational stations spanning 1964 to 2010. Australia, rich in both coal and uranium, faced a choice between coal fired or nuclear power. There is little doubt that coal is cheaper than nuclear and this simple economic fact probably drove Australia in the direction of having one of the most coal and CO2 intensive power systems in the world.



Figure 11 Live chart from Energy Matters’ Global Energy Graphed data base. The blue bars = production and the red bars = consumption. The balance is the difference between the two representing either exports (as here) or imports. Australia is a major exporter of coal. The dip down in recent years reflects weakening demand for coal globally.

Figure 12 Electricity consumption is often a symbol of prosperity. After many years of growing consumption, Australian electricity consumption has plateaued since 2011.

Figure 11 shows Australian coal production (blue) and consumption (red) and the large export balance (black). Peak consumption was 2008 and one has to suspect that the post-2008 decline in coal consumption has something to do with the finance crash. Looking at total electricity generation in Australia (Figure 12) we see that generation peaked in 2011 and then flattened out. I believe we are seeing a number of variables in play in Figure 11 causing Australia’s coal consumption to decline: 1) closure of 9 coal-fired power stations (Figure 10) 2) finance crash and 3) growth of subsidised wind power. This pretty well replicates the story seen in many OECD countries like the UK and the USA.

The main purpose of looking at energy in Australia is to get to the root of energy policy and blackouts. Figure 10 shows the 9 coal fired stations totalling 3559 MW closed since 2012, presumably in pursuit of a CO2 reduction target. The main point I want to make at this stage is that there is zero sense in Australia closing down domestic coal-fired power for as long as it is exporting large amounts of coal to other countries. If Australia is genuinely concerned about CO2 emissions then it must surely close down its coal mining industry and commit to leaving the coal in the ground forever. I am not for one moment suggesting this should happen and simply pointing out that it is plain stupid to deprive your own citizens of cheap reliable power while exporting cheap coal to other countries.

Oil

Figure 13 Australian oil production, consumption and balance from Global Energy Graphed.



Oil is the one energy resource that Australia is short of. In the year 2000 oil production and consumption was in balance, but since then consumption has grown steadily while production has declined. In 2016, oil imports stood at 650,000 bpd.

Natural Gas

Figure 14 Australia natural gas production, consumption and export balance.

The Northwest Shelf of Australia is a rich gas province where, for example, the Gorgon gas field alone is reported to contain 35 tcf of gas. Up until 1988 production and consumption were in balance and then the advent of LNG allowed Australia to commence gas exports which are currently growing exponentially. Many of Australia’s gas fields lie far offshore leading to the development and deployment of the world’s first floating LNG train.

Energy Mix and Per Capita Trends

Like electricity consumption, per capita energy consumption is a crude metric for prosperity. Between 1965 and 2006 per capita energy consumption doubled in Australia but since 2006 per capita consumption has gone into reverse. High energy prices is one likely component of the explanation. But CO2 policies have probably also left their mark with 9 coal fired power stations closed since 2012. The main contraction in energy consumption is coal. Note how new renewables, wind and solar, barely register which is the case in many OECD countries.

Figure 15 Global Energy Graphed. Primary energy consumption in Australia 1965-2016. Something clearly happened in 2006 to cause the trend of rising energy consumption to cease.

Figure 16 Global Energy Graphed. Per capita energy consumption peaked in 2006.

Australians have a relatively high per capita consumption which is often the case in countries that have large energy resources, and for example per capita consumption in the UK is below 3 toe per capita per annum. Australia is a big, hot, energy hungry country.

Concluding Thoughts

If Australia wants to be serious about reducing global CO2 emissions it should begin by closing down its coal export business before shutting down domestic coal-fired power stations. If Australia is serious about decarbonising its domestic electricity supplies while maintaining system reliability it should develop a domestic nuclear power program ahead of installing erratic renewable sources. New renewables currently represent a tiny fraction of primary energy consumption and if these are implicated in recent blackouts and electricity price increases, policy makers should really take note of the harm being done.

References

[1] World Nuclear Association

[2] Australian Parliamentary Report