New South Wales

In terms of the energy industry, the Hunter Valley of New South Wales has it all: sun, geothermal, brains and proximity to the nation’s largest electricity consumption market: the Newcastle-Sydney-Wollongong urban corridor.

What it also has is an obsolete coal industry deadset on its own interests, and a state-controlled generation industry that's long-past its 'use by' date and that has become a millstone to progress.

The good news here is that there's an excellent solution all around: keep existing generation capacity in state hands during the transition to cleaner energy sources. Everyone comes out ahead.

First, consider the Hunter's positives. It's home to the largest grid-connected solar photovoltaic farm in the southern hemisphere. Prospecting for hot dry rock geothermal resources is actively underway. The CSIRO's renewable energy laboratory is based in Newcastle, and is developing exciting new uses for concentrating solar power. Meanwhile, Sydney University is using concentrating solar power to increase energy efficiency at the Liddell coal-fired power plant.

All this is promising enough. But perhaps most intriguing of all is the large percentage of state ownership of energy generation assets for the state. Traditionally, state ownership has been a millstone to innovation. But with foresight, it can become a catalyst.

That's because state-owned energy assets can be politically-directed in ways beneficial to the state. For instance, investments in renewable energy could be incorporated into the future investment planning of state-owned corporations without the financial market strictures that bind private companies. This would open up particularly attractive opportunities for concentrating solar power, which is already being used in the Hunter to provide supplemental power for the region's coal-fired power stations.


At the Liddell coal fired power plant, concentrating solar power preheats water to reduce coal usage	Aerial view of the Liddell solar field

The way it would work is like this. Instead of taking a moribund, fully depreciated, obsolete industry and attempt to flog it off to private buyers (which is what NSW is trying to do, even though no one in their right mind would be interested), the state could keep existing electricity generation capacity in the state portfolio as a hedge against future demand while encouraging greenfield development of renewable energy to progressively supplant the Hunter's huge coal-fired power capacity.

The beauty of this is that it can occur in a measured, with only small disruption to end users and no worker layoffs. The Liddell plant is the perfect example. Concentrating solar power now preheats boiler water at the plant, reducing the coal that must be burned to turn that water into steam to drive turbines. Thus, concentrating solar power provides immediate efficiency gains to existing coal fired power stations. As more concentrating solar power stations are built in and around existing coal-fired power capacity to take advantage of existing power lines, concentrating solar power can supplant coal-fired power altogether. This provides an elegant, measured path toward retirement of dirty coal-fired capacity and its replacement with cleaner renewables.

Best of all, the progressively idled coal-fired power plants could serve as reserve capacity and be brought back on line in summer to handle increasing peak loads caused by air conditioner usage. This strategy will both reduce greenhouse gas emissions and extend the life of aging coal fired power plants such as Munmorah, Liddell and Wallerang.

The alternative plan would be to rip these old plants down and replace them on the same sites with new, unproven carbon capture and storage. At best, that strategy would result in a zero sum. At worst, that would reduce the amount of power available to New South Wales energy consumers if carbon capture doesn't work. An alternative plan would be to build new carbon capture and storage electricity generating capacity on greenfield sites, but that would DOUBLE the footprint of coal-fired power in the state -- which is precisely what we're trying to get away from. How much sense is there in that?

Economically, the case stacks up quite nicely. If we assume coal-fired power generation in the Hunter Valley costs 3.5c/kwh, to that needs to be added 3.75-4.25c/kwh of associated environmental and health costs. That's 7.25-8.7c/kwh, roughly the same price as concentrating solar power will achieve in 2015 or so, and well above the costs of geothermal and biomass. When lead times of infrastructure planning are taken into account, 2015 may as well be today. So, why not roll out competitive, proven renewables instead of unproven, overly expensive coal? What would the economic rationalists say? Go with renewables.

Coal fired power imposes huge hidden costs

Source: "Introducing Nuclear Power To Australia: An Economic Comparison," ANSTO, 2006

As the nation's largest, most populous state and economic powerhouse, blackouts are simply not an option. By holding on to the state's coal-fired assets, NSW places a carpet of confidence over future investment in the state. Businesses can be sure the lights will stay on. Of course, using coal for peaking power is very greenhouse-gas intensive. It's a third-best solution. But given that blackouts will always been a worst-case solution, having an expensive, transitory insurance policy in the form of progressively-mothballed coal-fired power capacity makes economic, environmental and long-term planning sense for the state. This would then in turn be reflected in economic risk premia of investment in the state. New South Wales will gain. It will also provide an medium-ground to overcome opposition to a selloff. Under this plan, the state could keep the electricity generation in state hands, and constructively fund the ongoing presence of the coal electricity-generation industry's workforce during the long and potentially fruitless wait for carbon capture and storage sometime in the 2015-2020 period, if then.

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