COAL V GAS CONFUSION in electricity generation

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COAL V GAS CONFUSION in electricity generation

Postby HVPA_research » Mon Jul 22, 2013 3:46 pm

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Archived from Business Spectator *

Here is a quoted from an interesting analysis of some economic theories presented by Mr. Grant King of Origin Energy a leading proponent of the coal seam gas mining in Queensland and NSW. There seems to be some distance between these theories and the stark reality of electricity production at the East Coast.

Origin's King RET confusion

In relation to carbon pricing, Mr King admits that under the current or his expected future carbon price, coal fired generation is what would be built to meet new baseload requirements. Many believe that low cost energy is the key to our nation’s competitiveness.

So here’s the conundrum we face. Our nation’s carbon policy is so weak that coal fired generation remains the economically rational choice of new generation, however, you won’t see too many financiers willing to take a punt on a new coal fired power station. As Mr King rightly points out, for gas fired power generation to compete you need carbon price of $40+ per tonne. As legacy coal contracts roll off and are repriced at export levels the underlying cost of electricity will increase.

Add to that $40 per tonne of carbon and guess what? Renewable energy become pretty competitive with traditional sources of generation. It’s what the renewables industry has been saying for years, and what fossil fuel generators have been trying to hide from consumers with misleading claims about the need for backup generation for renewables.
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Tim McArthur, reporting on the investment adviser website The Motley Fool, confirmed this analysis of Grant Kings interview.
In terms of the intent of the ETS, King made the point that at the current European market carbon price of $6/tonne, Origin would build coal-fired power stations, as that would be the most economic option. To invest in gas-fired power, Origin would need to see a carbon price closer to $40/tonne to make the economics swing in favour of gas rather than coal.

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