Speeches

Address to the Hunter Business Chamber Mining Lunch

November 02, 2018

Good afternoon –

I’d like to acknowledge the traditional owners of the land on which we meet and pay my respects to the elders past and present.

I’d also like to acknowledge special guests in the room today including

  • Bob Hawes – Hunter Business Chamber CEO
  • Jonathan Vandervoort – Hunter Business Chamber President
  • Bertus De Villiers from Orica, a major sponsor for this event

In July this year, I spent three days in Tokyo as a guest of the Minerals Council to look at the use of Australian coal in Japan.

Japan is a remarkable country that manages to combine history and tradition with technology and innovation - although it’s difficult to judge an entire culture within three days, especially in a nation made up of several islands.

Despite delirium-inducing humidity and Japanese stoicism to run air-conditioning at 28 degrees Celsius, I was incredibly impressed by what I saw.

If necessity is the mother of invention when it comes to energy the Japanese have been forced to be masters of their destiny. With no natural resources to speak of, they have taken a two pronged approach.

Firstly, they are frugal with electricity. I wasn’t joking about the air-con – you don’t walk into a shopping centre and feel the frigid relief you would here in Australia in the middle of summer. It’s a far more subtle and probably healthier temperature differential, and the use of a wet face washer placed on the nape of the neck and a shade producing parasol are a must for many Japanese.

The adoption of cool bis attire as a substitute for a suit and tie is taking hold, especially among younger Japanese people. While these things may seem like small personal details, they reflect a broader cultural imperative to be energy aware in a country that imports most of its energy inputs.

The other prong is a solid set of policies that ensure a secure supply of electricity to power the world’s fifth largest economy. In meeting with the Ministry of Economy, Trade and Industry of Japan, it’s obvious there is a clear policy directive.

The Japanese government set out Japan’s energy mix toward 2030 in July 2015.

The basic principles of 3 E+S equates to: Energy Security, Economic Efficiency, Environment and Safety.

On 11 March 2011, an earthquake reaching magnitude 9 resulted in a tsunami with an estimated World Bank cost of $US 325 Billion. It was the world’s costliest natural disaster and resulted in the reduction of nuclear power in Japan to 1%. This was the most profound contributor to the change in the Japanese energy mix.

Consequently, it is the ambition of the Japanese Government to restore nuclear generation to approximately 20 per cent in total. It was clear in my meetings with the Ministry of Economy, Trade and Industry of Japan that in light of the Fukushima meltdown, social licence would need to be won so safety is the underlying principle of energy policy.

Coal is positioned as an important energy source to be used while reducing the environmental burden. A reduction target (26% compared to 2013 levels) of greenhouse gas emissions equalling that of Europe and the United States is also highlighted in the policy.

The dependency on thermal coal will still see it provide generation – which the Japanese describe as ‘baseload’ - of 26 per cent in 2030.

The other important factor of Japanese energy is the doubling of renewables from 11 per cent in 2013, to 22 – 24 per cent in 2030. This is referred to as the Self Sufficiency Rate.

Essentially, it is a four pillared energy proposal. By 2030, the Japanese energy generation mix is planned to look like this:

  • Renewables 22-24%
    • Geothermal 1.0 - 1.1%
    • Bioenergy 3.7 - 4.6%
    • Wind 1.7%
    • Solar 7.9%
    • Hydro 8.8 - 9.2%
  • Nuclear 22 – 24%
  • LNG – 27%
  • Coal – 26%
  • Oil – 3%

The Japanese Government has a clear, pragmatic approach. It was described by one participant as Japan Inc. at its best – inferring that all interested political parties pull together when it comes to energy.

The contrast is stunning and fascinating to experience, and it is the polar opposite to our own politically charged energy climate here in Australia.

Perhaps this was my most critical take out from Japan – clear policy direction is vital. Unlike the policy vacuum we have seen in Canberra for the past five years, Japan has a clear direction and requisite organisations to oversee implementation.

Essentially, the policy is enacted by the Government of Japan by the Ministry of Economy, Trade and Industry, also known as METI.

METI supervises JCoal – which act as a one stop shop for energy and coal development and utilisation. They then work with other government affiliated organisation such as:

  • JOGMEC – Japan Oil Gas and Metals Organisation
  • NEDO – New energy and industrial Technology Development Organisation &
  • JICA – Japan International Cooperation Agency

Like us, there is no shortage of acronyms in the Japanese energy world. But there is also a willingness to work together for the benefit of all.

Australian coal plays a remarkable role in this process.

99.3% of Japan’s coal, both thermal and coking, is imported. In 2017, Australia provided 73% of Japan’s thermal coal and 47% of its coking coal[1].

There is also strong attention to what the Japanese describe as Clean Coal Technology – broadly this includes:

  • burning pulverised coal at high temperature – referred to as Ultra Super Critical or *SLIDE 6* Advanced Ultra Super Critical
  • gasifying coal, known as - integrated Coal Gasification Combined Cycle – CO2 capture and storage is also identified with technology
  • combined fuel cell technology – Integrated Coal Gasification Fuel Cell Combined cycle.

As part of the environmental considerations, there is a push to improve both thermal coal plants and LNG thermal power plants efficiency.

In addition, we looked at the oxides of nitrogen and sulphur and particulate matter reduction at the Isogo plant. Over all Coal ash is treated as a by-product for cement reinforcement and fertiliser.

Air quality is a very important consideration for us here in Australia, particularly in the Hunter.

So upon returning I have had many questions and read broadly about energy. Firstly, the elephant in the room - why aren’t we investing in clean coal namely HELE in Australia?

The answer is – there is no appetite to invest in this technology here because renewables are becoming so much cheaper and most of our high quality coal goes Japan and we receive good prices for it. And even if a HELE plant was ticked off tomorrow, it would be at least four years in construction and to receive a return on investment would take decades, and by then it is predicted other technologies will have overtaken coal.

Since 2013, Japan has been investing in these technologies – both to produce energy more efficiently and to reduce pollution.

Since 2013, Australia has not done this. We removed the price on carbon, but didn’t do a whole lot more to secure our energy future.

And in the past five years, Japan has gone ahead and we have not.

The simple fact is, unlike Japan, Australia is a superpower in terms of renewable resources and renewable technologies; the University of Newcastle is just one example of the world beating solar technology Australians have developed, and we all know there’s nothing like the Australian sun. This means the relative costs of renewables vs HELE in Australia, especially going forward with continued expected renewable cost falls; mean coal simply isn’t competitive as a source of new generation capacity in Australia.

So, where to from here?

Mark Butler and Pat Conroy, as the Shadow and Assistant Shadow Energy Ministers have charge of this in our party, and I have been engaging with Mark and Pat in order to make a contribution to the work that is being done too.

Labor’s Shadow Assistant Minister for Climate Change and Energy, Pat Conroy, recently spoke at the All Energy conference in Melbourne and firstly, I recommend his speech to anyone who is interested in how this may play out. You can find it on his website.

Broadly, Pat indicated that Labor will tackle the policy chaos in Canberra. We will look at the operation of the National Energy Market – in this light we are closely examining the Australian Energy Market Operators Integrated Plan.

We are developing our policies in consultation with industry, following the best advice of regulators and experts. 

I’d like to share with you part of Pat’s thoughts on this topic –

It’s clear that the industry and the general public are crying out for a vision for our energy sector. 

The Lowy Institute found 84 per cent of people want the Government to focus on renewables even if it means more infrastructure is needed to make the system more reliable. 

Australia was regarded as an energy powerhouse and energy should be our economic advantage but as the Japanese example teaches us – policy and political will are imperative for success.

Whether it’s direct export of electricity as the Pilbara to Indonesia project proposes, or the Hydrogen economy we can develop to support the switch to hydrogen in our major trading partners like Japan, we can still be an energy export superpower, it just won’t be fossilised carbon, instead it will be wind and solar power. The shift to renewables also offers Australia the opportunity to revitalise the manufacturing sector.

As the world decarbonises its electricity supply, the nations that can transform into manufacturing powerhouses are those with the cheapest energy, which will be the nations with the best renewable energy resources.

Australia has the highest average solar radiation per square metre of any continent in the world. We also have some of the best wind and wave resources, which often complement solar resources in when they provide the most potential power.

Our geographical diversity north-south and east-west means that renewable energy generation can be established in separate regions to capture different periods of windiness and sunniness. This power can be made reliable when coupled with gas peaking plants initially and then pumped hydro and battery storage as the AEMO ISP proposes.

Under Labor’s vision, Australia can be the land of cheap and endless energy which could power generations of metal manufacturing and other energy intensive manufacturing industries.

We have already announced that a future Labor Government would create Renewable Energy Zones – geographic areas with the right resources, topography and developer interest to drive cost-effective renewable projects. This is an early instalment of our plan and will not only ensure that we develop cheap renewable energy for the grid and improve reliability by introducing geographic diversity, but the zones will also be central to developing new industries such as Hydrogen, direct electricity export and new energy intensive manufacturing facilities.

We are also well poised to be the capital of mining and processing of key inputs for the renewables revolution. We are the second largest producer of rare earths, we supply 41 per cent of the world’s lithium and we have 12.4 per cent of global copper reserves. These are all crucial materials for clean energy and battery manufacture.

More traditional industries also stand to benefit from the renewables boom.

It takes over 200 tonnes of metallurgical coal to produce one wind turbine. Using moderate projections for global growth in wind power capacity to 2030 and the fact that Australia has 17 per cent of the global coking coal market, Australia will have to export 15.5 million tonnes of coking coal to build these turbines. This is the equivalent of three years output from the Moranbah North coking coal mine in Queensland for example.

In a similar vein, if we source local steel for the wind farms that will be built to meet Labor’s 50 per cent renewable energy commitment; this would need 423,000 tonnes of Australian steel. This is around 10 per cent of Australia’s annual steel production. This transition will produce tens, if not hundreds, of thousands of clean energy jobs

Mark, Pat and I want to see energy intensive industries in my electorate and across the country thrive. We want to see places like Tomago Aluminium continue to produce aluminium well into the future and the associated jobs that come with that production continue too and I don’t want phone calls like the one I received last summer telling me that production was to be curtailed to keep the lights and air-conditioners on in NSW.

We want to see new industries begin, particularly those associated with renewables and manufacturing.

We want to stop hearing about small business going to the wall because of ridiculous power costs and I don’t want consumers to have to seek assistance to pay their electricity bills.

We are going through the process of updating the policy we took to the last election. In that vein, Shadow Minister for Climate Change and Energy, Mark Butler, and I are holding a roundtable in the next fortnight to seek input from some of our key local energy stakeholders. There are people in this room who are involved in that conversation, and others are welcome.  If you would like to contribute, please let me know or speak with my adviser, Arley Black.

In conclusion, to again quote Pat –

“Nations that develop and harness new technologies are ones that benefit the most. This opportunity presented itself twenty years ago with our dominance of solar power research. Over 60 per cent of the world’s solar cells use technology developed by Australian researchers, yet we failed to create a sizable industry.

 A significant factor was the hostility of the Howard government – cutting research and development.

 We have an opportunity and obligation to reverse this.”

Australia was regarded as an energy powerhouse and energy should be our economic advantage but as the Japanese example teaches us – policy and political will are imperative for success.

 

South Newcastle Leagues Club

2 November 2018

 

 

 

[1] Japanese Ministry of Finance trade figures 2017

 

STAY UP TO DATE.