Victoria and coal

{{#badges:CoalVictoria|Navbar-Victoriaandcoal}}The use and mining of coal in Victoria is dominated by the power generation sector due to the low-quality brown coal resources located in the state. The Australian Bureau of Agricultural and Resource Economics estimated that in 2010 approximately 68.7 million tonnes of brown coal was produced in the state.

There are also a number of other coal projects which have been mooted, including coal export projects and associated port infrastructure, coal-to-liquids and gas-to fuel projects. There are also several Carbon Capture and Storage research projects currently underway or which have been proposed. In August 2012 the Victorian and federal governments announced the creation of a $90 million Advanced Lignite Demonstration Program "to develop and deploy emerging technology to reduce the greenhouse gas emissions intensity of lignite."

The politics of coal

During the 2010 Victorian election campaign the Ted Baillieu led Liberal Party devoted little attention to addressing climate policy. A search of its Victorian election website at the time yielded no results on the Hazelwood power station, climate change or coal mining. Its most specific commitment on renewable energy was a pledge to impose planning restrictions on the siting of wind farms and the promise of a minor grant to investigate the generation of electricity from green waste in the Ballarat area.

Ahead of the election, Baillieu was asked if he supported the Labor government's target of reducing greenhouse gases by 20 per cent. He said "Well we'd like to think that it was achievable. I'm not sure that it will be achieved. It's a target." He was also cited as telling MTR radio that that the Hazelwood powerstation would only be replaced is the federal government put a price on carbon.

Following the election Baillieu stated that his government would abandon Labor's plan to shutter one-quarter of the Hazelwood power station if International Power could agree on a compensation package.

In the run up to the 2010 election the then Brumby Labor government sought to blunt the rising voter support for the Greens by proposing the shut down of part of the Hazelwood power station and released Taking Action for Victoria's Future, a Climate Change White Paper. In its White Paper, Brumby's government committed to cut greenhouse gas emissions by 20% by 2020. "The most cost-effective way to clean up our environment and achieve this reduction in greenhouse gas over the next four years is to close two of the eight units at Hazelwood Power Station," Premier Brumby stated. However, the government's attempts to burnish its green credentials were undermined by the ongoing assessment of the proposal by Dual Gas Pty Ltd, a special purpose subsidiary of HRL, to build the 600 megawatt Dual Gas power station. Environmental groups objected to the proposal. In late July 2012 the Federal Minister for Resources and Energy, Martin Ferguson, announced that, after four extensions granted to HRL to comply with conditions of a $100 million funding agreement, the government had decided to withdraw funding as the company "did not meet the required conditions set out in the funding deed."

Background

The Victorian Department of Primary Industries estimates that the state contains approximately 430 billion tonnes of brown coal, four-fiths of which are located in the Gippsland Basin in South east Victoria. The Latrobe Valley -- where the vast majority of Victoria's brown coal mining and power generation is located -- contains approximately 65 billion tonnes of measured brown coal resource. However, of this, only half is estimated to be "potentially economic". Brown coal already allocated to private companies by the State Government is somewhere in the range of 15 billion tonnes to 25 billion tonnes. Estimates on the remaining unallocated reserves vary. The Department of Primary Industries estimate that 13 billion tonnes are as yet unallocated. Alternatively, based on the Firecone report estimates, as little as 8 billion tonnes remains unallocated.

With most of the brown coal deposits are within 10 to 20 metres of the surface and up to 100 metres thick, the current mines are large-scale open-cut operations. Victorian brown coal - while occurring in large volumes -- has moisture content in the range of 48-70%, which has precluded it from being exported. However, the Victorian government and various private companies agencies have invested considerable effort in researching technologies which would enable the commercial export of dried coal products or the conversion of the state's unallocated coal into fuel or other products.

Victoria currently has six brown coal fueled power stations which are supplied by four associated mines. 95 per cent of Victoria’s electricity generation currently comes from 6 brown coal power stations; 5 of these located in the Latrobe Valley region generating more than 90 per cent of the State’s electricity. Of the six power stations, two -- the 170 megawatt Energy Brix power station and the 150 megawatt Anglesea Power Station -- are privately owned and supply electricity to coal briquette plant and the Point Henry aluminium smelter respectively.

The remaining four power stations -- the the 1,675 megawatt Hazelwood power station, the 2210 megawatt Loy Yang A power station, the 1026 megawatt Loy Yang B power station and the 1480 megawatt Yallourn W power station -- supply electricity for domestic consumption and the national electricity market.

According to the Victorian government, the stationery energy sector -- which includes power stations and fuels burned in manufacturing, construction, commercial sectors and domestic heating -- contributed just over two-thirds of the states net greenhouse gas emissions in 2006. 79% of the stationery energy sector emissions in Victoria that year were from power stations.

2002 coal allocation

In October 2001 the Victorian Government held a "brown coal tender" to allocate 15 billion tonnes of coal from four sites in the Latrobe Valley for so-called "clean coal" projects. These projects were supposed to demonstrate more sustainable ways to utilise brown coal in exchange for receiving billions of tonnes of coal. Three companies received coal allocations from the Victorian government in 2002 -- Australian Power and Energy Limited (APEL) and its later incarnation Monash Energy, HRL Developments Pty Ltd and Loy Yang Power. However, none of the projects have since been developed. In some cases the developers have sold their projects to others, making million of dollars out of coal allocations granted by the state government. Following the decision of the federal government to withdraw support for HRL's Dual Gas power station proposal, the company have made no public comment. The Victorian government have also cancelled the 2002 coal allocation to Monash Energy. (See 2002 Victorian coal allocation for further details.)

Climate strategy and coal policy

In 2006 the Victorian Government committed to a 60% reduction in greenhouse gas emissions by 2050 compared to 2000 levels. However, it has also signalled that it intends to rely heavily on “clean coal” and carbon capture and storage (CCS) (geo-sequestration) as the solution to reduce carbon emissions. According to the Victorian Department of Primary Industries:

”Clean coal technologies, in particular carbon capture and storage, are seen by the Government as the means to reduce greenhouse gas emissions and Government has actively funded there (sic) development through the Energy Technology Innovation Strategy”.

However, there are substantial doubts about CCS as it is not yet a commercially viable technology and may not be until 2030 or even later in the century. Confidential Victorian cabinet documents acknowledge that the ‘clean coal’ strategy may not work.

Since 2002 State Government assistance to the coal industry’s ‘clean coal’ projects has amounted to more than $244 million. plus a coal allocation of between 15 and 25 billion tonne. The money alone is near seven times the $36.1 million spent by the Australian Coal Association's Coal21 fund, the industries main vehicle for funding clean coal technologies.

Despite the failure of the 2002 coal allocation to translate into any real projects, in late 2009 the Victorian government was once again considering offering billions more tonnes of coal to industry through a tender process in 2010. It is however anticipated that this tender process with be preceded by an allocation to the company Exergen to mine, dry and export 12 million tonnes of brown coal a year to India, for forty years. At least another 2 companies are seeking access to coal , one in the hands of Allan Blood., ex chairman of APEL, who profited significantly from the 2002 allocation.

The consideration of a further coal allocation appears to be in contradiction with advice provided to the Brumby government by a consultant, which stated "a further allocation of coal should only be considered if there is evidence of credible, well resourced new investors who face difficulty in agreeing reasonable terms to access the coal resource that has already been allocated."

The then Brumby government aimed to "vigorously pursue" the wider exploitation of coal, opening it up to export for overseas power stations. The Government’s newly established organization, Clean Coal Victoria, is working on "identifying future coal resources" and "planning for long-term brown coal use". Since the 2002 coal allocation, with its conditional emissions targets, the Government has indicated in cabinet documents that it intends to not impose emissions limits on individual coal-fired plants.

Coal power stations and water

The coal-fired power stations in the Latrobe Valley are currently major water consumers which is likely to increase if CCS projects did proceed. Conservative estimates project a reduction in the average annual volume of water available through Melbourne’s water system of 8% in 2020 rising to 20% by 2050. Currently, the existing five power stations in Latrobe Valley use 125 billion litres of water, equivalent to a third of Melbourne’s water annually. The application of CCS technology to the existing plants, or the addition of any new CCS coal plants will greatly increase the volume of water used - because of the energy penalty, CCS uses up to one third more water than conventional coal-fired power. It is highly likely that this water consumption will be unsustainable. (See The Victorian coal-fired electricity industry and water).

Proposed brown coal fired power stations

• The Dual Gas power station is a proposed brown coal and gas-fired power station being mooted for construction on land adjoining Energy Brix Australia Corporation's power station and briquette plant in Morwell, Victoria. The proponent is Dual Gas Pty Ltd, a special purpose subsidiary of HRL. In May 2011 four major banks in Australia denied funding for the coal plant, raising doubts about its viability. The denial came weeks after the plant was initially approved by the country's Environmental Protection Authority. The EPA's decision would allow the first coal plant to be build in Melbourne in nearly 20 years.

Proposed brown coal mines

• 2010-2011 Mantle Mining have expressed interest in starting open cut coal mining in the Bacchus Marsh area. See Bacchus Marsh coal project

Proposed new brown coal allocations by the Victorian government

In December 2011 it was reported that Exergen was lobbying the state government for a billion tonne allocation of brown coal. Exergen's chief executive Jack Hamilton told the Latrobe Valley Express that the company, with support from Tata Power, could proceed with a demonstration plant but only if it gained secure access to a coal resource. "When we talk coal access, we’re talking commercial quantities that would support a project over a 30 year life span, through plant expansions and upgrades ... we need a billion tonnes of coal,” Mr Hamilton said.

Environment Victoria’s Mark Wakeham said Exergen's bid should be rejected. "Exergen has been spruiking this project for years; there’s been nothing to stop them from doing an agreement with someone commercial to get their project off the ground," Mr Wakeman said. "If they’ve got this product which they think is fantastic, then why aren’t they commercially developing it privately already? This would suggest it is economically unviable." Hamilton acknowledged that Loy Yang Power would have sufficient reserves but that negotiations on that front had stalled. "We’ve been in discussions on and off with Loy Yang, but haven’t been able to find a way to move forward; that doesn’t close the door as things progress,” he said. For further details see Proposed new brown coal allocations by the Victorian government.

Existing brown coal fired power stations

The brown coal fired power stations in Victoria are:

• the 1,675 megawatt Hazelwood power station, which is owned by International Power Australia, a subsidiary of the UK headquartered International Power. The power station is located near Morwell and, in 2009, was estimated to have emitted 16.25 million tonnes of carbon dioxide equivalent (Mt CO2e).

• the 2210 megawatt Loy Yang A power station is owned by Loy Yang Power, which in turn is owned by Great Energy Alliance Corporation (GEAC). (The two largest shareholders in GEAC are AGL and Tokyo Electric Power Company). The power station is located near Traralgon and, in 2009, was estimated to have emitted 18.81 million tonnes of carbon dioxide equivalent (Mt CO2e);

• the 1026 megawatt Loy Yang B power station is jointly owned by a consortium of International Power plc (70%) and Mitsui & Co. Ltd (30%) which trades as International Power Mitsui (IPM). The power station is located near Traralgon and, in 2009, was estimated to have emitted 9.8 million tonnes of carbon dioxide equivalent (Mt CO2e);

• the 1480 megawatt Yallourn W power station, which is owned by TRUenergy, a subsidiary of the CLP Group. The power station is located near Yallourn West and, in 2009, was estimated to have emitted 15 million tonnes of carbon dioxide equivalent (Mt CO2e);

• the 170 megawatt Energy Brix power station, which is owned by Energy Brix Australia Corporation, a subsidiary of HRL Limited Group. The power station is located near Morwell and, in 2009, was estimated to have emitted 1.59 million tonnes of carbon dioxide equivalent (Mt CO2e); and

• the 150 megawatt Anglesea Power Station, which is owned by Alcoa of Australia. The power station is located near Anglesea and, in 2009, was estimated to have emitted 1.42 million tonnes of carbon dioxide equivalent (Mt CO2e.) In February 2014 Alcoa announced that they intended to close the smelter in 2014 and the power station and associated mine put up for sale.

Brown coal mines

The operating brown coal mines in Victoria are:

• the Hazelwood mine, which is owned by International Power Australia and supplies coal to the adjoining Hazelwood power station. The mine is located near Morwell and produces approximately 19 million tonnes of coal a year;
• the Loy Yang mine, which is owned by Great Energy Alliance Corporation. The mine is located near Traralgon and produces approximately 30 million tonnes of coal a year. The coal is supplied to the adjoining Loy Yang A and Loy Yang B power stations;
• the Yallourn mine, which is owned by TRUenergy, a subsidiary of the CLP Group. The Yallourn West mine produces approximately 18 million tonnes of coal a year which is supplied to the adjoining Yallourn W power station; and
• the Anglesea mine, which is owned by Alcoa of Australia. The Anglesea mine produces approximately 1 million tonnes of coal a year which is supplied to the adjoining Anglesea power station. In February 2014 Alcoa announced that they intended to close the smelter in late 2014 and that the power station and associated mine would be put up for sale.

Carbon capture and storage

Proposed Carbon Capture and Storage (CCS) projects in Victoria are:

• Latrobe Valley Post Combustion, a joint venture project located near Loy Yang.
• CO2CRC, a joint venture project located near Warnambool.
• an unnamed JCOAL CCS Project. In September 2009 the Victorian government announced that it had signed a Memorandum of Understanding with the Japan Coal Energy Centre (JCOAL) to research "high-efficiency next-generation power plants, coal gasification, carbon capture and storage (CCS), efficiency improvements for existing coal-fired power stations and coal to liquids." The project location is unknown;
• an unnamed KEPCO CCS Project. In September 2009 the Victorian government also announced that it had signed a Letter Of Intent with Kyushu Electric Power Company (KEPCO) to collaborate on research and development "of high-efficiency power generation technologies using Victorian brown coal" including CCS.
• CarbonNet is a Victorian Government project located near Gippsland.
• the Latrobe Fertiliser Project is a proposal by Latrobe Fertilisers Pty Ltd for a coal to urea export project located near Loy Yang. Latrobe Fertilisers was a subsidiary of Australian Energy Company Limited project until, as a result of a demerger, Latrobe Fertiliser Holdings Limited was incorporated in June 2009.
• Monash Energy was a project proposed by Shell and Anglo American. The proposalwas for a gas-to-liquid fuel project with CCS. It was proposed to be located near Loy Yang. The project was described in several media reports in 2008 as being 'on hold'. In late 2011 the Victorian government quietly cancelled the company's 50 year coal mining licence for failure to reach agreed milestones."
• the Loy Yang A Bio Carbon Capture and Storage project is a proposal by MBD Energy, a private equity project, to build a pilot coal-to-algae project located at the Loy Yang A power station.

In addition the Victorian government is funding the Victorian Geological Carbon Storage project to research the potential carbon dioxide storage capacity of the Gippsland Basin. The four-year, $5.2 million project is being undertaken by GeoScience Victoria, a part of the Victorian Department of Primary Industries. The project is scheduled to be completed in June 2012.

Coal drying

The high water content of brown coal limits its use to domestic power stations. However, there are a number of proposals for the drying and other treatment of brown coal to expand its domestic market and open the door to potential export markets. These include:

• the LV-NG Project which is proposed by Latrobe Valley Next Generation (LV-NG), a consortium of companies led by Exergen. The consortium is proposing a 12 million tonne per annum "$1bn plus coal export business" in the Latrobe Valley based on the use of a brown coal de-watering process. Environment Victoria estimated that "it would produce about 11 million tonnes of greenhouse gases in Indian coal-fired power plants annually";
• the Coldry Project is a proposal by Environmental Clean Technologies to establish a brown coal drying and pelletising plant using ECT's Coldry technology. The company is proposing to undertake a feasibility study on a 2 million tonnes per annum project located at a site adjacent to the Loy Yang power station in the Latrobe Valley. The greenhouse gas emissions of the project are not known;
• the Australian Lignite Export Project has been touted by DX Coal, a small Victorian company. The project is a notional brown coal export business located near Yallourn West based on exporting a treated brown coal product through Port Anthony. The greenhouse gas emissions of the project are not known.

Coal/Gas to Fuel

• Monash Energy is a project of Shell and Anglo American located near Loy Yang. The project is a proposed gas-to-liquid fuel project with CCS. The project is currently on hold;
• Loy Yang A Bio Carbon Capture and Storage project is a proposal by MBD Energy, a private equity project, to build a pilot coal-to-algae project located at the Loy Yang A power station;
• Regal Resources and Greenpower Energy Limited have an agreement to investigate whether there is a sufficient brown coal resource to support an Underground Coal to Liquids project. The project is located near Traralgon; and
• Yallourn coal-to-oil project is a proposal by Ignite Energy Resources and TRUenergy. The two companies have entered into a Memorandum of Understanding (MoU) to develop a commercial coal to liquid fuel, chemical coal drying and fertiliser proposal demonstration plant at TRUenergy’s Yallourn mine.

Infrastructure

• Port Anthony was developed by Ancon Pty Ltd.
• Port of Hastings expansion. Following the announcement by Environmental Clean Technologies that it would proceed with a feasibility study for its Coldry Project, the company called for fast track planning of an upgrade of the port facilities at Hastings.

Articles and resources

Related SourceWatch articles

• Coal seam gas in Victoria
• Fracking in Victoria
• Hazelwood mine fire 2014
• 2002 Victorian coal allocation
• 2010 Victorian election and coal
• Quotable quotes on Victorian coal issues
• Researching coal in Victoria

• Australia and coal
• Carbon Capture and Storage in Australia
• New South Wales and coal
• Queensland and coal
• South Australia and coal
• Western Australia and coal
• Coal terminals

External resources

• J. Nunn, A. Cottrell, A. Urfer, L. Wibberley and P. Scaife, "A Lifecycle Assessment of the Victorian Energy Grid", Cooperative Research Centre for Coal in Sustainable Development, February 2003. (Pdf).
• The Climate Group (Australia), "This Week’s Emissions: Victoria", The Climate Group website, accessed August 2010. (This webpage provides an estimate of total greenhouse gas emissions over the previous week and preceding year. It account for nearly all emissions from power generation).
• Firecone Ventures Pty Ltd, Near Zero Emissions from Latrobe Valley Brown Coal, Final Report, November 2007. (Pdf)(This report was obtained by Environment Victoria via a freedom of information request.)
• Green Energy Markets, "Victoria’s Energy Mix 2000 ‐ 2009", Environment Victoria, March 2010. (Pdf) (This report has a useful overview of coal's share of power generation and greenhouse gas emissions between 2000 and 2009.)

External articles

• Cam Walker, " Victoria takes leading steps on climate change", National Times, September 1, 2010. (Cam Walker is campaigns co-ordinator for Friends of the Earth.)