Frydenberg’s carbon capture pipe dream
Back in 2008 under the perennially polluted grey skies of Beijing, then prime minister Kevin Rudd took a busload of press gallery journalists to the 800 megawatt coal-fired power station in the suburb of Gaobeidian. The purpose: to see a functioning pilot program in carbon capture.
On top of the smoke stacks was a device capturing 3000 tonnes of carbon and sulphur gases a year – 2 per cent of the plant’s emissions. “A small beginning,” Rudd conceded. The $4 million Australian-funded program was developed with the co-operation of the CSIRO. A seasoned reporter asked one of the scientists what happened to the captured pollutants. The media pack was taken around the corner of the plant, where there was an exhaust outlet. “We let it go,” was the answer. The scientist explained that working out how to store the stuff was another project.
It still is.
So it was with some bemusement that some of the old hacks who were on that trip greeted Energy and Environment Minister Josh Frydenberg’s announcement that he would remove the legislative prohibition on the Clean Energy Finance Corporation (CEFC) to allow it to support investment in carbon capture and storage (CCS). The very optimistic minister said such technology could reduce emissions by up to 90 per cent.
According to its mandate, the $10 billion so-called Green Bank must lend funds to viable projects that would lead to a healthy return on investment. Indeed the CEFC – which the Liberals under Tony Abbott wanted to abolish – has been very successful in funding renewable energy projects that have turned a nice profit for taxpayers.
Frydenberg quite reasonably argues that excluding the Green Bank from investing in technology that would deliver clean coal as a reliable energy source is not incompatible with its original mission. Except the Greens insisted the Gillard government exclude anything to do with coal from the bank’s mandate. “Renewables are the future” was their firm conviction, then and now: taxpayers should invest in the future and leave coal to the billionaires who profit from it to pay their own way in seeking to keep it commercially feasible.
Labor’s Bill Shorten says the government’s announcement is nothing more than kite flying: “It seems like they’re trying to feed some red meat to the right wing of the Liberal Party. I think the government needs to explain what is a viable project they want to invest in?” Indeed, earlier on the day of the Frydenberg announcement the prime minister told the Coalition party room there would be no price on carbon, ruling out both an emissions trading scheme or an emissions intensity scheme, both of which he once supported and one or other of which business is urging the government to implement.
Seven years ago Malcolm Turnbull’s assessment of CCS was that it was an industrial pipedream. He said it was sobering that “as of today, there’s not one industrial-scale coal-fired power station using carbon capture and storage – not one”. Both sides of politics had reached the same conclusion about its viability. Labor began withdrawing funds from research and the Abbott government shut down Rudd’s $1.7 billion Carbon Capture and Storage Flagships program. Industry had lost interest. Treasurer Joe Hockey returned nearly half a billion dollars of funds allocated to it back to the budget.
This week Frydenberg pointed out that government has invested $590 million in CCS and said it is now being successfully employed in three overseas power plants. But a closer look shows the lessons learnt from those plants mean its use has already peaked. The proponents of these plants are on the record stating they won’t be investing in any more. Renewables entrepreneur Simon Holmes à Court told the ABC that exponential cost blowouts and disappointing results are the rule.
One plant visited by the energy minister – Petra Nova in Texas – cost $US1 billion. It’s touted as the world’s largest and most successful operation, yet it captures only about 6 per cent of the output of its adjacent power station. That’s “an incredibly low bang for buck”, concludes Holmes à Court. Another CCS plant targeted to cost $US2 billion will open three years late and with an incredible final bill of $US7.5 billion.
Holmes à Court agrees with Frydenberg that CCS has a role to play in cutting emissions in industrial processes such as cement or steel production. Carbon can be captured in these cases for about $15 to $30 a tonne. “So with a healthy carbon price, those projects make sense,” he says. And there’s the rub. The very government wanting to be a champion of CCS for industry is denying it any incentive to spend a cent pursuing it. It’s commercially cheaper to keep polluting. Industry may get away with that but finance markets are now pricing climate change into lending for major energy projects. Bloomberg New Energy Finance earlier this year costed CCS coal at $352 a megawatt hour, compared with wind and solar at between $61 and $140 megawatts an hour.
It’s little wonder that experts can’t see private industry investing in new coal-fired power stations without substantial government input. But none of this seems to deter the resources and Northern Australia minister, the Nationals’ Matt Canavan. With an eye on the Queensland election probably later this year, he sees votes in talking up a new coal-fired power station for Townsville and in giving a leg-up to the giant Adani Carmichael coalmine in the nearby Galilee Basin. While Labor parts company on the power station, it has one foot on both sides of the barbed-wire fence when it comes to the Adani mine.
The politics here is excruciating. One Labor strategist says there are different fault lines on the Adani project. One running from Cairns down the coast is hostility fuelled by fears for the Great Barrier Reef and the 50,000 jobs dependent on it. The other fault line runs from Townsville to Gladstone and inland. Here support for the project is strong – its hyped promise of thousands of jobs is beguiling in a region of high unemployment. Then from Gladstone south all the way to Tasmania support is weak to hostile.
But no matter what voters think of the project, they are overwhelmingly against any taxpayer funds bankrolling the Indian billionaire Gautam Adani. Research by the advocacy group GetUp! in marginal seats in Queensland and elsewhere has found resolute opposition to any government loan. Paul Oosting from GetUp! says opposition ranges from 70 to 86 per cent depending on the seat. He has mobilised dozens of his 350,000 members to make 50,000 scripted phone calls into marginal seats in Queensland and around the nation.
It sort of worked with the Palaszczuk Labor government. Much to the delight of Adani, the premier organised a royalties pause. The miner will be given 60 years to pay the tax, although he will attract an interest charge for any delay. That puts all the risk on taxpayers if the project fails to perform as promised or Adani’s labyrinthine company structure for the mine collapses. With some companies registered in the Cayman Islands the existence of a lucrative escape hatch for Adani cannot be ruled out.
Ominously, Indian newspapers are reporting Adani is under pressure to sell its Australian assets. The Reserve Bank of India is worried about a looming debt crisis and is pressuring banks to demand repayment of loans worth billions of dollars. The influential Hindu newspaper noted that the Standard Chartered Bank recalled loans of $2.5 billion from Adani and that “global lenders have backed out from funding the $US10 billion coalmine development project. State Bank of India also declined to offer a loan despite signing an MoU [memorandum of understanding] to fund the group with $1 billion”. What all of this means for Adani’s bid to get a concessional billion-dollar loan from the federal government’s Northern Australia Infrastructure Facility is not yet known. It should make it highly unlikely, but given the zealotry of Canavan and his leader Barnaby Joyce for the project such concerns are a mere bagatelle.
Federal Labor’s stand is in line with the GetUp! research, maintaining that no taxpayer dollars should be thrown at the Carmichael mine. In that Shorten has the support of Adani’s commercial rivals such as BHP, the Hunter Valley miners and the huge coal port of Newcastle. They all say the project should stand or fall on its merits and that it’s not the role of government to use public money to undercut them.
Again we have seen Turnbull’s need for pragmatic appeasement of the conservatives in his ranks undermine his brand on the environment and climate change. It probably goes a long way to explain why again in this week’s opinion polls he is still deep in negative territory for approval of his performance and Labor’s lead looks entrenched.
The resignation of Dr Peter Hendy from the inner sanctum of the prime minister’s offices is being read by some in the Liberal Party as a sign the government’s days are numbered. The economist, long-time Liberal apparatchik and former MP is planning to hang up his shingle as a consultant. “He wants to cash in on his contacts while they are still in power,” was one explanation. Another was: “Peter’s been around a long time and knows when a vote is cemented in.”
On that view Hendy is not waiting to see if the handful of pro-Adani seats in Queensland will be enough to save the federal government. Its chances are up in smoke and out the chimney – like the Beijing carbon capture pilot project.
This article was first published in the print edition of The Saturday Paper on Jun 3, 2017 as "Frydenberg’s pipe dream". Subscribe here.