Australia
Leader: Peter Morris, Minerals Council of Australia (Australia)
Contributor: Justin Flood, Delta Electricity (Australia)
1.
Structure of the energy supply by energy sources
1.1 Indigenous production by energy sources
Australia has extensive and diverse energy resources covering both renewable and nonrenewable energy sources. These include:




hard coal (also referred to as black coal) and brown coal
conventional and unconventional gas and oil
uranium, and
renewable energy resources (wind and solar). Australia also has some hydro, bioenergy,
geothermal, wave and tidal resources.
With the exception of oil, Australia’s non-renewable resources are expected to last for many
decades, even with increasing production.
Australia is the world’s eighth largest energy producer, accounting for 2.4% of world energy
production. On an energy content basis in 2013-14, this comprised:





Coal – 66%
Uranium – 14%
Natural gas – 13%
Oil – 4%
Renewable energy – 2%.
1.2 Definition of Coal Type and Quality
It is important to note that the definition of coal type and quality used in data collection for
energy statistics, resources and reserves collected at the country level varies. 1 Coal information
is often categorized based on the heating value of the fuel. For example, many private sector
analysts use the following categories, which are consistent with Australian coal industry
standards but broader than those used in Australia’s official statistics: 2
1
See, for example, IEA Statistics Coal Information Corrigendum, 2015.
Australia’s energy reporting guidelines are set out in Office of the Chief Economist, Department of Industry and
Science, Guide to the Australian Energy Statistics, 2015 available at www.industry.gov.au/oce
2





lower rank (lignite) coals (<4,500 kcal/kg GAR or <18.8 GJ/t);
sub-bituminous thermal coals (4,500 – 5,400 kcal/kg GAR or 18.8 GJ/t – 22.6 GJ/t);
lower-energy bituminous thermal coals (5,400 – 5,800 kcal/kg GAR or 22.6 GJ/t –
24.3 GJ/t);
higher-energy bituminous thermal coals (5,800 – 6,900 kcal/kg GAR or 24.3 GJ/t – 28.9
GJ/t);
anthracite (>6,900 kcal/kg GAR or >28.9 GJ/t)
In Australia, the term hard coal is often interchanged with black coal and lignite with brown coal.
The table below illustrates the differences in definitions of qualities between Australia and
Europe.
Figure 1: Terminology for Coal Rank and Definition Australia vs. Europe
Source: Australian Government Department of Industry, Geoscience Australia and Bureau of Resources and Energy
Economics, Australian Energy Resource Assessment, 2nd Edition, 2014, pg. 130.
For Australia, the authors have attempted to exclude sub-bituminous coal quantities where
possible from hard/black coal (black coal) information cited and include it in the brown coal data,
but variances due to data granularity are likely.
1.3 Import dependence by energy sources
Australia is self-sufficient in most energy resources except oil. Australia’s dependence on imports
of crude oil and other refinery feedstock has increased significantly over the past 30 years, in line
with increases in consumption and declining east coast production.
Australia has about 0.3% of the world oil reserves. Most of Australia’s known remaining oil
resources are condensate and liquefied petroleum gas (LPG).
1.4 Role of energy exports by energy sources
Australia’s net energy exports (exports minus imports) in 2013-14 were equivalent to 68% of
domestic production.3
3
Bureau of Resources and Energy Economics, Energy in Australia, 2014, page 1.
Energy exports accounted for 26% of the value of Australia’s total commodity exports in 2014,
and were valued at $69 billion. Coal was the largest energy export earner, with a value of around
$38 billion in 2014, followed by LNG ($18 billion) and crude oil ($10.6 billion). 4 Australia’s real
energy export earnings have increased by 8% a year on average over the past ten years. Coal is
projected to remain Australia’s most important energy export well into the future. 5
Australia has 6% of the world's black coal (also known as hard coal going forward) economic
demonstrated resources (EDR) and ranks sixth in the world. Queensland and New South Wales
are the largest energy producing states, with most of Australia’s hard coal production. For both
states, coal is the largest export activity. Australia with about 25% of the world’s recoverable
economic demonstrated resource (EDR) lignite is ranked first in the world. Production of lignite
is for domestic use and is currently confined to Victoria.
Conventional gas resources are widespread both on and offshore, occurring in fourteen different
basins with most of the resource off the north-west coast in the Bonaparte, Browse and
Carnarvon basins.
In Australia, coal seam gas (CSG) is the unconventional hydrocarbon resource that is most
developed. CSG reserves have grown significantly in Queensland since exploration activity began
in earnest in 2005 and three liquefied natural gas (LNG) export plants are being located at
Gladstone, Queensland.
Australia, already a significant LNG exporter, is forecast to become the world’s largest producer
of LNG later this decade. Australia is estimated to have produced 65.7 billion cubic metres of gas
in 2014–15 (equivalent to 48 million tonnes of LNG), a 4.4% increase on 2013–14. In 2015–16,
new LNG plants on the west and east coasts will be the predominant source of gas production
growth in Australia, driving a 30% rise in output to 85 billion cubic metres (62 million tonnes). 6
Figure 2: Australian LNG production capacity (Mt)
Department of Foreign Affairs & Trade, Composition of Trade Australia 2014, August 2015, pages 37, 39 and 40.
Bureau of Resources and Energy Economics, Australian Energy Projections to 2049-50, November 2014, Canberra,
page 9.
6
Department of Industry and Science, Resources and Energy Quarterly, June 2015, page 37.
4
5
Source: Department of Industry and Science, Resources and Energy Quarterly, June 2015, page 37
Australia currently is the world’s third largest producer of uranium and, with about one third of
the world’s economically recoverable resources, has the world’s largest uranium resources.
Uranium comprised about 20% of Australia’s energy exports on an energy content basis in 201314. With more economically recoverable uranium than any other country, Australia has the
potential to become an even more significant provider of energy to a world already reliant on
nuclear power to supply 12% of its electricity.
1.5 Primary energy consumption by energy sources
Fossil fuels including coal, oil and gas dominate Australia’s primary energy consumption. As
shown in Figure 2, oil is Australia’s largest source of energy, accounting for 38.4% of consumption
in 2013-14.
Figure 3: Primary energy consumption fuel mix: Figure 4: Australia’s electricity generation by
Australia and its six states, 2013-14
fuel type, 2002-03 to 2013-14
Source: Bureau of Resources and Energy Economics, Energy in Australia, 2014, pages 28 and Department of Industry
and Science, Australian Energy Statistics, Table O, 2015.
Coal is the second largest primary fuel consumed in Australia, but its share of total energy
consumption is falling. In 2013–14, hard and brown coal accounted for 31.7% of energy
consumption, the lowest share since the early 1970s. Coal consumption fell by 5% in that year,
underpinned by falling coal use in the electricity generation, iron and steel sectors.
The share of natural gas in Australia’s energy mix has increased in recent years. In 2013–14,
natural gas accounted for 24% of energy consumption. Gas consumption rose by 2.2% in 2013–
14, due to additional gas-fired electricity generation capacity.
Renewable energy sources accounted for the remaining 6% of Australia’s energy consumption in
2013–14. Renewable energy consumption rose by 4% in 2013–14, with growth in all renewable
energy sources with the exception of biogas and ethanol. Wind energy continued to be a
significant driver of growth in renewables increasing by 29% in 2013-14.
Since 2009-10, Australia’s electricity generation has been declining in response to falling
electricity demand (Figure 3). This reflects structural change (involving closure of energy
intensive manufacturing plant), slower population growth, the impact of government policy and
energy efficiency improvements.
Figure 5: Changes in NEM electricity generation by fuel type, Australia 2008 to 2015
Source: Consultants pitt&sherry, February 2016 based on NEM data.
Figure 5 shows trends in the mix of generation in the National Electricity Market (NEM). 7 In the
twelve months to June 2015, brown coal generation increased due to growth in exports from
Victoria to South Australia (where it is backing up wind intermittency in favour of higher cost gas
peaking plant) and to Tasmania (where since October 2015 it had been backing up hydro in the
face of low dam storage levels). A fault in the high-voltage direct current (HVDC) cable link
crossing Bass Strait (Basslink) from Victoria occurred in December 2015. Thus Tasmania could not
import coal fired electricity from Victoria. Generation from hard coal remained fairly constant
for the first half of 2015. This was due to increases in output from the six Queensland hard coal
power stations largely offsetting the fall in supply from the five NSW ones. Since the middle of
2015, Queensland production has grown more strongly.
The largest increase in coal generation since the middle of 2015 was in Queensland. This was due
in part to a dramatic fall in gas generation in the state, with gas being reserved for export market
contracts.8 It was also influenced by higher demand from large industrial users related to
construction of the three new LNG plants at Gladstone.
Looking at the five-year period since 2010:

Residential consumers have largely driven the absolute fall in demand in the NEM, falling
13% from 2010 to 2014
The NEM interconnects five regional market jurisdictions (Queensland, New South Wales – including the
Australian Capital Territory – Victoria, South Australia and Tasmania). It operates on one of the world’s longest
interconnected power systems, covering a distance of around 5,000 kilometres.
8
Queensland gas generation in the month of July was 36% below the June total and 58% below the record monthly
level, achieved in November 2014.
7
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Demand by large industrial consumers has also fallen, largely due to structural changes in
Australia’s energy-intensive industries. In 2011, major plant closures in New South Wales
included the Kurri Kurri aluminium smelter and BlueScope Steel’s No. 6 blast furnace. In
Victoria, there has been a further decrease in demand following Alcoa Australia’s closure
of its Point Henry aluminium facility and Yennora rolling mills in December 2014
Demand by general business consumers remained almost unchanged.
1.6 Energy mix in power generation
Figure 6: Australian electricity generation by fuel type, 2013-14 (GWh)
Black coal
7%
Brown coal
4%
43%
22%
19%
Gas (includes coal
seam gas)
Hydro
Wind
Oil (mainly remote
diesel generation)
Solar PV
Bioenergy
Source: Department of Industry and Science, Australian Energy Update 2015, Table 4.2, page 21.
Coal represented 44.7% of installed generation capacity and supplied 61% of Australia’s
electricity in 2013-14. This supply was made up of hard (black coal) (42.6%) and brown coal
(18.6%). This mix is largely determined by geographical resource allocations. The southern
states, Victoria and South Australia, have abundant brown coal resources, which sees most of
their generation coming from this source. New South Wales and Queensland have abundant
hard coal resources.
The above information illustrates the role of coal in the overall Australian electricity market.
However, it is worth considering the role of coal in the provision of grid electricity as opposed to
total electricity generation. This is because Australia is an island continent with around 10% of
electricity production occurring off the grid in remote and regional areas. This supports the
mining and mineral processing industry, agriculture and other industrial activities.
Based on grid electricity data, coal currently accounts for around 55.5% of principal electricity
generation capacity compared with 44.7% of total installed capacity. However, coal-fired base
load plants supply around 70.5% of the total output. New South Wales (with 87% of principal
electricity generation based on coal), Victoria (86%) and Queensland (75%) rely on coal more
heavily than do the other jurisdictions. This illustrates how coal provides industry and the
Australian community with secure, reliable and competitively priced energy.
Although Australia has abundant gas resources, the fuel has not been developed as a power
generation source on a large scale due to the cost competitiveness of coal in Australia and its
predominantly remote Western Australian location until recent discoveries in Eastern Australia.
Hydro generation is sourced from the mountainous south east of NSW as well as from Tasmania.
Australia is the driest inhabited continent. It has made the most of its hydro potential and has
more than 100 operating hydroelectric power stations with total installed capacity of about 7800
megawatts (MW). These are located in the areas of highest rainfall and elevation and are mostly
in New South Wales (55%) and Tasmania (29%). The Snowy Mountains Hydroelectric Scheme,
with a capacity of 3800 MW, is Australia's largest hydro scheme.
The Australian continent has the highest solar radiation per square metre of any continent and
consequently some of the best solar energy resource in the world. However, Australia’s current
use of solar energy is low with solar energy accounting for only about 0.1% of Australia’s total
primary energy consumption. An important use of solar energy is solar thermal water heating.
Solar PV systems play an important role in off-grid electricity generation with high penetration in
Australia’s main cities.
Australia's wind energy resources are located mainly in the southern parts of the continent
(which lie in the path of the westerly wind flow known as the 'roaring 40s') and reach a maximum
around Bass Strait.
Wind and solar PV electricity generation is increasing in response to the federal government’s
Renewable Energy Target policy, which involves two schemes:
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
The Large-scale Renewable Energy Target, which encourages investment in renewable
power stations to achieve a mandatory 33,000 GWh of additional renewable electricity
generation by 2020 (with this level to be maintained until 2030)
The Small-scale Renewable Energy Scheme, which targets a theoretical 4,000 GWh
annually. Only small-scale or household installations (such as household solar panels and
solar hot water systems) are eligible.
There is no restriction on the additional renewable electricity generation supported under the
small-scale scheme. However, by design, the large-scale target delivers the bulk of the 2020
target. The target of 33,000 GWh in 2020 (which, once met, remains mandated to 2030) will
significantly increase the amount of large-scale renewable energy being delivered by the scheme
compared to current levels and means that about 23.5% of Australia’s electricity generation in
2020 will be from renewable sources. At the end of the chapter, there is a case study explaining
the impact of LRET on wind generation in South Australia.
2.
Coal supply in 2014
2.1 Hard coal and brown coal reserves
At the end of 2013, Australia’s recoverable economic demonstrated resource (EDR) of hard coal
(also referred to as black coal) was estimated at 62 Gt. This constitutes 9% of the world’s
recoverable EDR. In addition, it is estimated that there are a further 5.2 Gt of sub-economic
demonstrated resources (SDR) of hard coal in Australia.
Not all of the recoverable EDR is currently accessible.9 Taking this into account, at the 2013 rate
of production (430 Mt per year), Australia’s hard coal EDR will support 116 years of production.
In addition to EDR and SDR, it is estimated that there are 64 Gt of recoverable Inferred Resources
of hard coal in Australia. Further exploration is required to delineate these resources and to
determine their economic viability.
Most of Australia’s recoverable hard coal EDR is located in Queensland (61%) and New South
Wales (36%). In New South Wales, the coal is predominantly located in the Sydney Basin (30%)
and in Queensland, it is in the Bowen Basin (31%).
Figure 7: Hard (Black) coal resources in Australia, at December 2012
Source: Department of Industry, Geoscience Australia & Bureau of Resources and Energy Economics, Australian
energy resource assessment, Second Edition, 2014, page 138.
This is due to government policies or various environmental and land access restrictions such as location within
national and state parks and conservation zones, military training areas or environmental protection areas, as well
as areas over which mining approval has not been granted by traditional owners.
9
At the end of 2013, Australia’s recoverable lignite coal EDR was estimated at 44.2 Gt. That
represents approximately 22% of the world’s recoverable brown coal EDR. All of Australia’s
recoverable lignite EDR is located in Victoria with approximately 93% in the Latrobe Valley.
Australia is estimated to hold a further 48.6 Gt of lignite SDR and 103 Gt of Inferred lignite
resources. At 2013 rates of production (of 58 Mt), accessible lignite EDR will support over 500
years of production.
Figure 8: Lignite coal resources in Australia, at December 2012
Source: Department of Industry, Geoscience Australia & Bureau of Resources and Energy Economics, Australian
energy resource assessment, Second Edition, 2014, page 141.
Table 1: Australia’s recoverable hard (black) and brown coal resources
at 31 December 2013
Recoverable
Hard/Black coal Hard/Black coal JORC reserves
a (Mt)
b (EJ)
resources
(Mt)
Economic
62 095
1 670
20 657
Sub-economic
5 224
140
Inferred
64 041
1 617
Hard coal total
131 360
3 427
20 657
b
Brown coal (Mt) Brown coal (EJ)
Economic
44 164
435
Sub-economic
48 587
490
Inferred
103 052
1 022
Brown coal total 195 803
1 947
Coal total
234 412
5 374
c
Source: Britt, A F, Whitaker, A, Cadman, S, Summerfield, D, Kay, P, Champion, D C, McKay, A, Miezitis, Y,
Porritt, K, Schofield, A & Jaireth, S, 2014. Australia's Identified Mineral Resources 2014. Geoscience Australia,
Canberra, Table 1, page 2.
Notes:
(a) A small portion of the reported black coal information is sub-bituminous. This is defined in Australia as
black coal but in Europe it is included with lignite and defined as brown coal.
(b) Estimated by Minerals Council of Australia.
(c) JORC reserves are defined by the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (‘the JORC Code’) available at: http://www.jorc.org/
Australia cannot take its comparative advantage in coal reserves and resources for granted. The
international coal market is highly competitive and Australia has lost significant market share
over the past decade. Additionally, the price of electricity has been rising in Australia adding to
pressures on domestic energy-intensive industries, which have long been a source of Australian
comparative advantage and job creation.
2.2 Indigenous production of hard coal and brown coal
Australia’s coal production and exports including forecasts/projections for black coal are
provided in Table 2. Sub-bituminous coal was mined in South Australia at Leigh Creek until
November 2015. The mine closure followed Alinta Energy’s decision to close its power stations
at Port Augusta and the associated coal mine at Leigh Creek.
Lignite production is dominated by mining at three mines in the Latrobe Valley – Hazelwood, Loy
Yang and Yallourn. In May 2015, Alcoa announced it would close its small lignite coal mine and
associated power station at Anglesea in Victoria on 31 August 2015. Total lignite production in
2013-14 in Victoria amounted to 57.8 Mt.
Table 2: Australian brown coal production (Mt), 2012-13 and 2013-14
production and exports (Mt), 2012-13 to 2019-20
Black
coal 2012- 2013- 2014201520162017production & 13
14
15
16f
17f
18p
exports
Saleable
398.4 430.9
production
194.6
197
200
 Metallurgical 159.5 183.1 192.8
238.9 247.8 248.8
252.8
260
269
 Thermal
Raw production 533.2 562.0
Exports
336
375
387
394
412
424
180
188
193
197
200
 Metallurgical 154
182
195
205
207
216
224
 Thermal
Brown
coal
production
60
57.8
60
 Lignite
2
2
1
 Subbituminous
and black (hard) coal
201819p
201920p
204
270
208
278
430
204
226
442
208
234
Sources: Black coal: Department of Industry and Science, Resources and Energy Quarterly, March 2015 statistical
data, Table 13(1) and June 2015, Tables 4.2 & 5.1; and Department of Industry, Innovation and Science, Resources
and Energy Quarterly, December 2015, Tables 4.2 and 5.1; Lignite: Victorian Department of Economic Development,
Jobs, Transport and Resources – Energy and Earth Resources website; Department of Industry and Science, Resources
and Energy Statistics 2014, Table 43, page 44; and Department of Industry, Innovation and Science, Energy in
Australia 2015, page 69 . Sub-bituminous production, Alinta Energy (whose mine closed in November 2015).
While the medium term outlook for coal is generally positive, in the short term the operating
environment of low prices and high costs will be a challenge for Australian producers.
Accordingly, Australian producers are working to improve productivity, reduce costs and remain
internationally competitive to be in a position to take advantage of the projected growth in coal
consumption in Asia.
Over the medium term the Department of Industry, Innovation and Science expects to see the
results of investment in new capacity translate into higher production volumes, particularly in
thermal coal.
Australia’s thermal coal production is forecast to increase at a moderate pace over 2014-15 and
2015-16 as announced mine closures are more than offset by increased output from projects
completed in previous years. From 2016-17, growth in production is projected to accelerate as
several projects completed during 2015 and 2016 like Maules Creek approach full capacity.
Towards the end of the projection period shown in Table 2, production is expected to be
influenced by the start of production from a large-scale project being developed in the Galilee
Basin in Queensland. This is Adani’s Carmichael mine (60 million tonnes a year).
Australia’s exports of metallurgical coal are projected to rise to 208 million tonnes over the period
to 2019-20. Australia’s exports of thermal coal are projected to increase to 234 million tonnes in
2019-20. This indicates that additions to capacity will offset the closure of mines that are no
longer economic or have exhausted their resources. Since these forecasts were made a number
of mines have already been placed on care and maintenance or are expected to be placed in the
near future. This may impact the official forecasts.
The development of new coal mines, expansions to mines and related infrastructure
developments are governed by a comprehensive planning and approvals regimes at the State
level. Commonwealth Government approval is also required where there exists a specific
connection to an existing Matter of National Environmental Significance.
2.3 Coal imports by origin
Australia is self-sufficient in coal with vast resources. There are some small imports of coke for
the domestic steel industry, amounting to an estimated 60,000 tonnes in 2014-15.
2.4 Security of coal supply
Australia is the fourth largest producer, the second largest exporter, and has the fourth largest
reserves of coal in the world.10
Coal-bearing sediments extend across vast areas of the continent. This broad geographic
distribution reflects the variety of geological settings under which the coal was formed. These
range from tectonically active basin margins and troughs (such as the Bowen and Sydney basins),
to the more stable intra-cratonic areas (such as the Galilee and Cooper basins). Future additions
to Australia’s identified coal resource base are likely to result from new discoveries both in
established coal-producing basins and underexplored frontier basins. Most producing coal basins
have potential for resource growth. Producing coal basins with the greatest potential for growth
are the Sydney and Gunnedah basins.
In export markets, coal remains the fastest growing fuel, driven by strong investment in coalfired power stations, particularly in Asian developing economies. Australia is well placed to help
meet this increasing demand because of its large reserves and geographic location. Moreover,
Australian coal is well regarded internationally because of its thermal characteristics, low sulphur
and low impurities and Australia’s long-history as a stable and reliable supplier.
Department of Industry, Geoscience Australia & Bureau of Resources and Energy Economics, Australian energy
resource assessment, Second Edition, 2014, page 127.
10
3. Role of coal in the energy supply markets
3.1 Power generation
The National Electricity Market (NEM) provides a framework for competition in the electricity
supply industry. The NEM is a gross pool, energy only market. Generators submit bids for the
dispatch of their capacity for each 30-minute trading period throughout the day. The Australian
Energy Market Operator (AEMO) stacks the bids in order of increasing price and the wholesale
pool price is then set at the level where demand is met.
Generators typically submit cost-reflective bids with a tendency towards short run marginal cost
during periods when there is excess generating capacity. At peak times, pool prices are limited
to $12,900/MWh. This high price ceiling has produced significant volatility during high demand
periods which supported returns to generators much closer to average cost. However with
demand growth turning negative, excess supply has reduced volatility and returns to generators
are falling.
The NEM pool price is supported by a financial hedging market that provides derivatives via overthe-counter and futures contracts. All long term contracts for the supply of electricity at the
wholesale level are financial derivatives with the NEM pool price as the underlying commodity.
The utilisation factor of a generating plant in Australia varies by ownership and plant type.
However, utilisation factors typically range between 80-95% for lignite generators and 50-85%
for hard coal generators. Gas plants operate at much lower utilisation levels than this. This aligns
with the position of the plant in the merit order of the NEM, which is largely determined by fuel
cost.
Prior to the downturn in demand, gas and hydro plant set the price during the peak. However,
the demand downturn has resulted in an increase in excess capacity. Peak period price setting is
now dominated by the relatively higher cost hard coal plants, with off-peak period pricing coming
from lignite or (other) hard coal plant with lower cost fuel supplies.
Australia has a mix of power station fuel supply arrangements. A number of hard coal power
stations in Queensland and all brown coal stations in Victoria are supplied by captive mines.
These mines supply coal to the power stations at, or near, the production cost of fuel. The
remaining hard coal power stations in Australia are predominantly supplied by rail or by conveyor
from independent coal mining operations. This introduces competitive supply arrangements,
although some have long term contracts in place out to the 2020s, and in one case to 2032, and
have limited options to export coal due to infrastructure or regulatory constraints and are
therefore considered ‘captive’.
Hard coal generators in NSW and Queensland are located in close proximity to export-oriented
mines and infrastructure. Most coal that is supplied to domestic power stations via rail is
therefore exposed to an export opportunity cost. This has meant that new domestic coal supply
contracts are negotiated around the net-back export parity price. As export prices rise (fall)
domestic coal prices increase (decrease). While this dynamic affects marginal cost, the average
fuel cost to generators is often lower due to long-term contracts.
3.2 Other domestic uses of coal
The main uses of coal in Australia are as a fuel in electricity generation (black and brown coal)
and in iron and steel making (hard coking coal and PCI coals). Other uses of black coal include
cement production and for process steam used in manufacturing, and making plastics and
chemicals. Brown coal is also used to make briquettes for domestic heating.
3.3 Export markets
Successive Australian governments have widened and deepened Australia’s economic
integration with Asia. The strong demand outlook for coal is underpinned by Asian
industrialisation and the role of coal in both power generation and as a key input for iron, steel
and cement manufacture. Australia, with a substantial surplus of coal compared to its needs, has
an important role to play in supplying long-established trading partners, including Japan, South
Korea and Taiwan, as well as China and India and other industrialising economies.
In April 2015, the Australian Government released its Energy White Paper. The White Paper
identifies significant opportunities for Australia to meet the energy needs of developing
economies in Asia with energy demand expected to increase by one-third by 2040. It highlights
the need for continuing reforms to streamline project approvals and other regulatory barriers to
mining. It also provides a timely reminder of the critical role played by low cost energy, built on
coal-fired power, which has long been an essential element of Australia’s competitive advantage.
Australia’s major coal export markets in 2014-15 by value are shown below.
Figure 9: Thermal and metallurgical coal exports by destination
Source: Department of Industry, Innovation and Science, Resources and Energy Quarterly, December 2015, page 68.
4. Infrastructure for the coal supply
The transportation of coal for domestic and export markets is achieved through a multimodal
network of roads, railways and ports. This includes the Hunter Valley Coal Chain, the largest coal
export operation in the world linked to the port of Newcastle, the largest coal exporting harbour.
Continuing investment in infrastructure is necessary to enable Australia to remain a major player
in the world coal market. Port and rail operators work closely with mine operations to ensure the
adequacy of both below- and above-ground rail services for domestic clients through:


Day to Day Planning and Scheduling: to maximise coal transport volumes every day and
coordinate planning for the provision of future coal chain infrastructure. For example, in
the Hunter Valley, the Hunter Valley Coal Chain Coordinator coordinates vessel berthing,
stockpile layouts and train sequencing so as to fulfil customers’ orders in the shortest
possible timeframe; and
Long Term Capacity Planning: Over the longer, 10-year horizon the rail and port providers
use sophisticated simulation and optimisation modelling tools to assess continuously the
adequacy of the existing coal chain infrastructure to fulfil future export demand. By
identifying future coal infrastructure and working to develop an integrated capital
investment plan, service providers work with coal miners to optimise their investment
decisions and focus capital expenditure on infrastructure required to meet the future
transport task (particularly for coal export growth).
State and federal governments also monitor port and rail systems against their maximum
capacities. Working with industry, they have undertaken regular reviews given the robust growth
in export volumes in recent years.
Most of Queensland’s coal exports are from ports located in the Great Barrier Reef Marine Park.
The Australian and Queensland Governments are also implementing actions of the Reef 2050
Long Term Sustainability Plan (Reef 2050), the most comprehensive plan ever developed to
secure the health and resilience of the Great Barrier Reef for generations to come.
Maps
showing
Australian
coal
mines
www.minerals.org.au/resources/coal/coal_mines_by_state
are
available
here:
A map of major ports is available here:
http://www.minerals.org.au/file_upload/images/coal/coal_maps/13-7856-2_large.jpg
5.
Relationship between technology and security of supply
5.1 Characteristics of the coal based power fleet
The table in Appendix A includes information on Australian coal fleet plant units, their age,
thermal efficiency and steam cycle conditions (subcritical and supercritical).
5.2 Carbon capture, usage and storage (CC(U)S)
The prospects for CCUS in Australia are limited. Thus the focus has been more on geological
storage, demonstration of capture technologies and related R&D work. CCUS may become
feasible in the future in areas such as offshore Victoria. However, the Bass Strait oil wells do not
require enhanced oil recovery at this point.
Successive Australian governments – state and federal – have helped the international
community progress CCS technology research, development and demonstration. Since 2004 the
Australian government has provided more than $400m in support for CCS and the coal industry,
through its voluntary COAL21 Fund, has committed over $300m. The Queensland, Victorian and
Western Australian state governments are also providing funding.
Australia is contributing to the global effort through projects such as the Gorgon Carbon Dioxide
Injection Project (on track to be the largest CO2 geological storage project in the world) and South
West Hub (both in Western Australia) and CarbonNet (in Victoria). In addition:



CO2 has been successfully captured at Queensland’s Callide coal-fired power plant
65,000 tonnes of CO2 have been successfully sequestered in a depleted gas field in Victoria’s
Otway Basin
The search for storage sites in Queensland, NSW, Victoria and WA has been intensified.
Other Australian initiatives include the Cooperative Research Centre for Greenhouse Gas
Technologies (CO2CRC), Geoscience Australia’s National CO 2 Infrastructure Plan, CSIRO’s Low
Emission Coal Technology R&D program, CSIRO’s National Geosequestration Laboratory, Brown
Coal Innovation Australia, Coal Innovation NSW and the Global CCS Institute. Australia has also
led the world in developing legal and regulatory frameworks for the permanent underground
storage of CO2.
The Australian Government’s 2015 Energy White Paper provides a commitment to an ongoing
partnership with the coal industry to develop low emissions coal technologies. It also recognises
that increased use of high efficiency low emissions (HELE) coal combustion technology will be
important in making fossil fuels more sustainable. For this reason, it warns (page 57):
It is critical that developing countries have access to finance options that encourage the
uptake of world best coal-fired power stations. Recent decisions by the World Bank,
European Investment Bank and the European Bank for Reconstruction and Development to
limit investment in coal-fired power plants limit the ability of countries to access finance for
least cost and low emissions energy technologies.
6. Governmental energy and climate policy and intergovernmental treaties – expected effects
on coal
6.1
Australia’s energy supply market
Australia’s electricity market operates under a mix of regulation, mandated fuel targets and
market-driven approaches. The policy framework is overseen by a Council of Australian
Government’s (COAG’s) energy committee, which is chaired by the federal minister responsible
for energy with representation from all state and territory energy ministers.
The National Electricity Market (NEM) is a wholesale electricity market in which generators sell
electricity to retailers who on-sell it to customers. The NEM is overseen by three related bodies:



The Australian Energy Market Operator is responsible for monitoring the electricity
consumption and across the power system and utilise the spot price for settling the
financial transactions for electricity traded in the NEM. AEMO monitors system voltage
and frequency to ensure the system is able to supply energy reliably at all times across
the network. AEMO also operates the retail electricity markets across the NEM which
underpin the wholesale market by facilitating retail competition and enabling customers
to purchase energy from a retailer of their choice.
The Australian Energy Market Commission is responsible for the continuous
development of the Rules and responding to requests for rule changes and providing both
operational and strategic advice to COAG.
The Australian Energy Regulator is charged with the economic regulation of electricity
transmission and responsibility for enforcing and monitoring compliance of market
participants with the Rules.
The Western Australian system operates under the rules of the South West Interconnected
System.
6.2
Australia’s climate change policy
At the federal level, legislation to implement the Australian Government’s Emissions Reduction
Fund (ERF) came into effect on December 13, 2014. This is the centrepiece of the Government's
suite of policies to reduce greenhouse gas emissions. Other elements include the mandatory
Renewable Energy Target (discussed in section 1.5 and A), fuel standards and energy efficiency
standards on appliances, equipment and buildings.
The ERF is a market based mechanism that provides incentives for emissions reduction activities
across the Australian economy. This is achieved via a taxpayer-funded reverse auction to
purchase the lowest-cost abatement from eligible projects, which must use an approved
methodology for measuring and verifying abatement.
A methodology for new coal waste gas projects – using methane for power generation or flaring
– has been approved. The methodology is generally suited to new mines or for significant
expansions. Further methodologies for coal mine abatement are under consideration.
The first ERF auction was held on April 15, 2015 at which the federal Government purchased over
47 million tonnes of abatement at an average price per tonne of CO2e of $13.95.
The Government is now working with businesses and the community to finalise the design of the
safeguard mechanism, the final element of the Fund. The safeguard mechanism will ensure that
emissions reductions purchased by the Government are not offset by significant rises in
emissions elsewhere in the economy. The safeguard mechanism will commence on July 1, 2016.
The Government’s general proposal is to set an emissions baseline at the highpoint over the five
years to 2013-14 and then to require a company to make good – by buying credits – if it exceeds
this. In its draft proposal, the Government recognised the need for the mechanism to take
account of unique circumstances in the coal sector because coal mine fugitive emissions rise over
time with expanded production, changing coal seam gassiness, depth of coal deposits and other
factors beyond the operator’s control. The Government has also recognised that the scheme
should not place an artificial constraint on growth in production.
On August 11th, the Australian Government announced an emissions reduction target range of
26 to 28% below 2005 levels as Australia’s Indicative Nationally Determined Contribution. The
26% offer is a minimum while the 28% would be met if circumstances allow.
The announcement noted that the commitment represents a reduction of 50–52% of per capita
emissions – one of the highest cuts in the developed world – and a reduction of emissions per
unit of GDP of 64–65%. On that basis, Australia’s target ‘will exceed those of the United States,
Japan, the European Union, Korea, and Canada’.11 It is also proportionate because of Australia’s
higher population growth and the higher economic costs of global climate action given Australia’s
different role in the global economy than other developed nations as a provider of food, energy
and resource security for dozens of nations around the world.
6.3
Australia’s expected future energy mix
According to the Bureau of Resources and Energy Economics:12



Australian total primary energy consumption is projected to grow by nearly 42% between
2014-15 to 2049-50
Electricity generation is projected to grow by nearly 30% between 2014-15 to 2049-50
Coal is expected to remain the dominant source of electricity generation. The share of
coal in electricity generation is projected to remain broadly constant through to 2049-50
11 Australian Government,
Australia’s 2030 climate change target, Factsheet, August 2015, page 2 available at:
http://www.environment.gov.au/climate-change/publications/factsheet-australias-2030-climate-change-target
12
Bureau of Resources and Energy Economics, Australian Energy Projections to 2049-50, November 2014,
Canberra, pages 8-9.





Coal and gas will continue to supply Australia’s energy needs, although their share in the
energy mix is expected to decline
The use of gas (conventional and unconventional natural gas) in industries is expected to
grow over the outlook period with projected reduction in gas-fired electricity generation
offset by growth in the consumption of gas in LNG production
Renewable energy consumption is projected to increase moderately at the rate of 0.9% a
year over the projection period. The growth in renewable energy is mainly driven by
strong growth in wind and solar energy, at 2% and 1.7%, respectively
Black coal is projected to remain Australia’s dominant energy export. The projected
average annual growth rate of 1.2% is based on expectations that global demand for coal
will continue to increase in the period to 2049-50 as a result of increased demand for
electricity and steel-making raw materials, particularly in emerging market economies in
Asia
LNG exports are projected to increase significantly.
7. Conclusion
Australia is the second largest exporter and has the fourth largest reserves of coal in the world.
Coal also accounts for 62% of Australia’s total electricity generation, with coal-fired power
stations located in every mainland state. Excluding generation used in remote and regional
Australia and other non-grid sources, this figure rises to around 70%.
Australia is well placed to take advantage of the ongoing global demand for coal because of its
large, high-quality reserves. It does not take this position for granted and recognises the highly
competitive nature of global energy markets.
Coal provides access to secure, affordable and reliable energy and is a critical input for steelmaking and cement. Coal is therefore a nation-building material that is indispensable for the
provision of essential infrastructure.
The global use of coal, which increased 72% between 1999 and 2013, is probably the single most
important contributor to poverty alleviation that the world has seen.
Australia has a long established reputation as the main supplier of high quality metallurgical and
thermal coals to Asian customers. Taking into account established and planned rail and port
infrastructure capacities, Australia will continue to be a reliable source of export supply for the
foreseeable future.
Coal is also projected to remain Australia’s main single source of affordable, reliable, base load
power underpinning energy security domestically. Currently there is no other fuel – fossil or
renewable – that can perform this competitive role in the power generation mix.
Fact Sheets Australia
Energy Production in Mtce in 2013-14
Hard coal
Brown coal
Crude Oil and natural gas liquids
Natural Gas
Renewable energies
Other energies
 Uranium
 LPG
Total
PJ
11 807
625
745
2 479
346
2 608
106
18 715
Mtce (divide by
29.3)
403.0
21.3
25.4
84.6
11.8
89.0
3.6
638.7
Source: Department of Industry, Innovation and Science, Energy in Australia 2016, Table 1.2, page 4.
Energy Imports in Mtce in 2013-14
Hard coal
Brown coal
Crude oil and LPG
Refined products
Natural gas
Other energies (Coke)
Total
PJ
0
0
1 116
897
260
2
2 275
Mtce (divide by
29.3)
0
0
38.1
30.6
8.9
0
77.6
Source: Department of Industry, Innovation and Science, Energy in Australia 2016, Figure 1.9, page 12.
Energy Exports in Mtce in 2013-14
Hard coal
Brown coal
Crude oil and condensate
Natural gas
Other energies
 Uranium
 LPG
 Refined products
Total
PJ
10 605
0
548
1 265
3 150
66
25
15 658
Mtce (divide by
29.3)
361.9
0
18.7
43.2
107.5
2.3
0.9
534.4
Source: Department of Industry, Innovation and Science, Energy in Australia 2016, Figure 1.9, page 12.
Primary energy consumption in Mtce in 2013-14
Hard coal (incl coke and coal by-products)
Brown coal
Oil and petroleum products
PJ
1 234
612
2 238
Mtce (divide by
29.3)
42.1
20.9
76.4
Natural gas
Nuclear energy
Hydro Power
Other renewable energies
Other energies
Total
1 402
0
66
279
0
5 831
47.8
0
2.3
9.5
0
199
Source: Department of Industry, Innovation and Science, Energy in Australia 2016, Table 1.3, page 7.
Hard coal in Mt in 2014-15 (saleable production)
Thermal production
Metallurgical production
Imports (Coke)
Exports
Total supply
Domestic consumption
 Power generation
 Steel industry
 Cement industry
 Chemical industry
 Fertilizer industry
 Households and other consumers
 Others
Total consumption
248.8
192.8
0.02
392
441.6
Note: Surface mining accounts for about
80% of production in Australia.
44
2.4
1.1
na
na
na
1
49.6
Sources: Department of Industry, Innovation and Science, Resources and Energy Quarterly, December 2015, tables
4.2 and 5.1 on pages 26 and 32; and Energy in Australia 2016, Table 6.1, page 72.
Brown coal in Mt in 2014-15 (saleable production)
Surface production (Victoria & South Aust)
Underground production
Imports
Exports
Total supply
Domestic consumption
 Power generation
 Steel industry
 Cement industry
 Chemical industry
 Fertilizer industry
 Households and other consumers
 Others
Total consumption
61
0
0
0
61
60.7
0
0
0
0
0
0.3 (households and industry)
61
Sources: Victoria – Department of Economic Development, Jobs, Transport and Resources - Earth Resources
Regulation; South Australia – Leigh Creek Mine website.
Power capacity (net) in GW at 30 June 2014
Principal grid
generation plant
installed (a)
Hard coal
21.4
Brown coal
7.6
Natural gas (incl. reciprocating
12.9
engines)
Oil
0.7
Nuclear energy
0
Hydro Power (incl. pump storage)
7.7
Wind
Solar PV(
2.7
Geothermal
0
Bioenergy
Others (coal seam methane &
0
multifuels)
0
3.2
Total
56.2
All generation
plants
22.1
7.6
15.9
1.4 (b)
0
8.0
3.8
4.0 (c)
0
0
3.6
66.4
Source: Energy Supply Association of Australia, Electricity Gas Australia 2015, table 2.1, 2.2 and 2.4 pages 18 - 20.
Notes: (a) Does not include capacity of embedded and non-grid generation (6.8 GW) and non-renewable cogeneration (3.4 GW)
(b) Includes remote diesel generation
(c) Includes household solar PV (source: Clean Energy Council, Clean Energy Australia Report 2014, 2015, page 44).
Power generation (net) in TWh in 2013-14
Principal grid
electricity
generation (a)
Hard coal
104.7
Brown coal
46.6
Natural gas
27.4
Oil
0.1
Nuclear energy
0
Hydro power
17.7
Wind
10.2
Solar PV
0
Geothermal
0
Bioenergy
0
Others (coal seam gas)
7.8
Total
214.6
All generation
105.8
46.1
54.4 (b)
5.0
0
18.4
10.2
4.9
0
3.5
248.3
Sources: ‘Principal grid electricity generation”: Energy Supply Association of Australia, Electricity Gas Australia
2015, table 2.6, page 22; and ‘All generation’: Department of Industry and Science, Australian Energy Update 2015,
Table 4.2, page 21.
Note: (a) Does not include generation by embedded and non-grid generators or non-renewable co-generation.
(b) Includes coal seam methane (7.8 MWh) and coal waste gas generation (1.8 MWh) as well as gas generation in
remote Australia for the iron ore, gold and base metal mining and processing industries.
Appendix A
Table A1: Coal-fired power stations in Australia as at August 2015
Principal power
stations (a) (b)
Steam cycle
condition
Year
commissioned
Unit
details
New South
Wales
Eraring
Bayswater
Liddell
Mt Piper
Vales Point B
Subcritical
Subcritical
Subcritical
Subcritical
Subcritical
1982-84
1982-84
1971-73
1993
1978
4x750
4x660
4x500
2x700
2x660
Subtotal
Loy Yang A
Subcritical
1984-87
Yallourn W
Subcritical
1975, 1982
Victoria
Hazelwood
Loy Yang B
Subcritical
Subcritical
1964-71
1993-96
1x530,
3x560
8x220
2x360,
2x380
2x513
Subtotal
Queensland
Gladstone
Stanwell
Tarong
Millmerran
Callide B
Callide C
Kogan Creek
Tarong North
Subcritical
Subcritical
Subcritical
Supercritical
Subcritical
Supercritical
Supercritical
Supercritical
1976-82
1993-96
1984-86
2002
1989
2001
2007
2002
South Australia
Northern
Playford
6x280
4x365
4x350
2x425.5
2x350
2x405
1x750
1x443
Subtotal
Subcritical
Subcritical
1985
1960
2x272
4x60
Subtotal
Subcritical
1981, 1986
Western
Australia
Muja C, D
Collie
Subcritical
1999
1x206,
1x211,
2x227
1x340
Thermal
efficiency%
(HHV sent
out)
Age
3,000
2,640
2,000
1,400
1,320
35.4
35.9
33.8
37.0
34.1
32
32
43
22
37
2,210
27.2
29
1,480
23.5
35
Capacity
(MW)
10,360
1,760
1,026
6,476
22.0
26.6
47
20
1,680
1,460
1,400
851
700
810
750
443
31.7
36.4
36.2
37.5
34.1
38.0
34.9
39.2
35
20
30
13
26
14
8
13
544
240
34.9
21.9
30
55
871
35
49
8,094
784
340
37.1
16
Bluewaters 1
Bluewaters 2
Worsley
(Alumina)
Subcritical
Subcritical
Subcritical
2009
2010
1982-00
1x208
1x208
208
208
Subtotal
Grand
Total
1,762
3x45
135
36.4
36.4
..
6
5
25
27,476
Sources: first five columns, Energy Supply Association of Australia, Electricity Gas Australia 2015, Appendix 1
Other two columns, Australian Energy Market Operator, Existing Generation Data, Planning Assumptions 2014 and,
for Western Australia, Environmental Protection Authority Western Australia, Bluewaters Power Station, Griffin
Energy Pty Ltd, Bulletin 1160, January 2005 and Griffin Power Pty Ltd, Greenhouse gas abatement programme
bluewaters project, April 2008, page 20.
Notes
(a) For all but Western Australia, generating plant classified as market scheduled, market semi-scheduled, nonmarket scheduled or non-market semi-scheduled by the Australian Energy Market Operator
(b) For Western Australia, market generators operating within the South West Interconnected System (SWIS) with
a capacity greater than 10 MW.