Is it crunch time for coal?

• Chris Hammer and Adam Morton
• The Age, June 14, 2008

TERRY Anders turned up for his first day of work as the glory days of Victoria's brown coal industry were coming to an end. It was the early 1990s, and the industry was heading towards privatisation. Roughly 10,000 workers were thrown out of work over a handful of years as international companies first swallowed, then broke up, the old State Electricity Commission.

"It was a very good job to get into at a young age, but it very quickly went from being a comfortable, secure job to quite a bit of uncertainty," Anders says.

He was one of the last hired before the door slammed shut. At 39, he is the youngest worker in an ageing team of about 100 that keeps the giant Loy Yang power station ticking over.

Now the Latrobe Valley's brown-coal-fired power station faces an even greater challenge — global warming. In two years' time, Australia will get an emissions trading system — a system environmentalists say should close down brown-coal-fired power stations forever. Anders, a second-generation coal industry worker, has no illusions about the threat to his job and those of his colleagues.

"I work in an industry that really would be better off shut down. I don't think it will happen, and for my own financial good I hope it doesn't happen," he says.

"There's a lot of talk in the media, and in society generally, about how evil coal-fired electricity is, and it does generate a lot of carbon emissions, but I don't think people actually realise the consequences if it shuts down."

Where Anders differs from his employers, and from the state and federal governments, is in his lack of confidence in what some see as the solution — a range of technologies known as "clean coal". It is a term that has been much mocked as an oxymoron. But while coal can never be clean, can it be cleaned up enough to give it a future?

Can it save the Latrobe Valley, or should the Government cut its losses and move on to alternatives for the region?

Decisions now being taken in Canberra will provide some of the answers within months.

"It's a blessing and a curse," John Boshier of the National Generators Forum says of brown coal. "It's plentiful, it's cheap, it's available. The fact that it can be converted into electricity is a miracle: it's 63% water."

The Climate Institute's John Connor puts it more succinctly: "Burning brown coal is like burning mud."

Brown coal is so sodden with water, it produces up to half as much heat as black coal but pumps out around a third more carbon dioxide. It is two to three times more polluting than natural gas.

"Brown coal, with its current high level of emissions, will not have a future. It's just too polluting," says the Australian Conservation Foundation's Don Henry.

But close down brown coal and you close down Victoria's electricity grid.

The state is hooked on brown coal; it generates 95% of the state's electricity. As a result, Victorians are among the world's worst greenhouse polluters.

It is a political nightmare for Labor, federal and state. Both governments are committed to reducing greenhouse gas emissions by 60% by 2050, but neither wants to throw workers out of a job or drive a regional economy into reverse.

And so government and industry alike are pinning their hopes on clean coal technology — essentially catching carbon dioxide before it's released into the atmosphere and burying it kilometres underground. It's a technique known as carbon capture and storage.

The Victorian Government has pledged almost $130 million for research; the Federal Government has a $500 million clean coal fund.

"Our absolute priority as a nation — economically, socially, and environmentally — is to get a solution to carbon capture and storage. Otherwise we have a very challenged future as a nation," federal Energy Minister Martin Ferguson, a champion of the coal industry and the Latrobe Valley, says.

Carbon capture and storage would need to integrate at least four stages — all of them unproven on a commercial scale — if it is to work.

First, more efficient technology is needed to dry out the coal before it's burnt. Second, and perhaps most difficult, is to capture the carbon dioxide given off when the coal is burnt. There are competing technologies being developed, none of them cheap.

Third, the carbon dioxide would need to be compressed and transported through a large, expensive pipeline network.

Fourth, the compressed carbon dioxide would be injected into huge, naturally occurring underground storage chambers, typically the same geological formations from which oil and gas have been extracted. The Federal Government is rushing through legislation to enable this to happen off the Victorian coast.

THERE are about a dozen carbon capture and storage projects under way around Australia, but no one can say for certain that it will work. Even if it is technically feasible on the huge scale required, the massive infrastructure involved could negate brown coal's greatest advantage — its low cost.

And then there is the biggest problem of all — time. Emissions trading starts in 2010, climate scientists say global emissions must be trending downwards by 2015, yet even the most heroic predictions say commercial-scale capture and storage won't be ready until between 2015 and 2020. A recent report by Washington-based environmental think tank the World Resources Institute says a 20-to-50-year time scale is more realistic.

Even the most optimistic projections — with the method commercially deployed by 2020 — would leave a decade-long hole after the introduction of emissions trading during which the Latrobe Valley power stations would run at a loss.

Ferguson refuses to canvass possible Government assistance, such as free pollution permits, before the release of the Federal Government's green paper due next month. "The last thing we can do is start trading sectors in and out on the way through. We'll end up with a dog's breakfast, and an incapacity to manage the outcome," he says.

But that's not to say the Government won't lend a helping hand when push comes to shove — it's understood that money may become available for structural adjustment, but not to prop up existing power stations.

A fallback option being discreetly discussed in Canberra and within the industry is a gradual conversion of the Latrobe power stations from coal to gas. This would help preserve jobs while giving Victoria the baseload power it needs.

The environmental movement is divided on clean coal. At one end of the spectrum, WWF supports a central role for government; at the other end, Greenpeace says carbon capture and storage is a dangerous diversion.

"The Government should see the writing on the wall. If they introduce a robust emissions trading system, then it will be pricing out coal. And brown coal will be the first to go," says Julien Vincent from Greenpeace.

The Australian Conservation Foundation takes a middle road. It says the method should be given a chance, but that government shouldn't be funding it. Executive director Don Henry says the hundreds of millions, perhaps billions, of dollars that's required should come from the hugely profitable multinationals that dominate Victoria's power sector.

"You've got to ask why they're so slow in investing on the scale that's needed to clean up their act. You've got to worry that they want to ride on the public purse. I think they're being slack," says Henry.

The response from Ian Nethercote, the Latrobe Valley-based chief executive of Loy Yang Power, is that climate change is a problem facing the entire community, and government cannot avoid its responsibility. Not compensating, Nethercote warns, would potentially endanger the state's continuous electricity supply as power generators were forced to cut corners on things such as maintenance.

He says China is building a coal-fired power station every week, and that we would be inflicting pain on ourselves for no reward if Australia introduced an aggressive carbon-trading scheme before an international climate deal is brokered.

"I think there is concern that some people in government and the public don't yet understand the potential ramifications of this," he says.

Victorian Energy Minister Peter Batchelor, the architect of the state's support for clean coal, is optimistic. He says work on capture and storage is well advanced in Victoria, and the state's 500-year reserves of buried energy have a future. "We've got a huge resource of coal in the Latrobe Valley, and the challenge for us in a carbon-constrained world is to continue to use coal, but in a more environmentally sustainable way."

Power generation isn't the only possible use for brown coal. One company says it intends building a $2 billion plant to make the agricultural fertiliser urea in the Latrobe Valley, another aims to turn brown coal into diesel fuel. That's an old idea, but rising world fuel prices could finally make it a commercial winner.

Martin Ferguson, for one, is convinced the era of brown coal in the Latrobe Valley isn't coming to an end. "We are not out there, like some, saying the coal industry is doomed. We're actually saying if you get it right, the coal industry has a bright future and so does the Latrobe Valley and so does Victoria and so does Australia," he says.

Chris Howe has spent three decades at the dirty end of the power industry. His job is to monitor and remove ash from the coal. At 61, Howe is just years away from retirement. He says the "nightmare" of uncertainty of the past 20 years has been replaced by a new type of insecurity.

Last week he was called into a meeting to be told that half the Yallourn W station could be shut down within 10 years if the carbon price is deemed too high.

He suspects clean coal is "some sort of ploy the Government and industry are playing". He believes the future is more likely to lie in converting Latrobe Valley electricity generation from coal to gas — a more immediate alternative to renewable energy, and a cleaner option than coal, but one that would come at enormous cost.

"People thought by 2026 or thereabouts it would probably close because of the age of the station, but 2018 came as a surprise to people because at their age they might not be getting another job. If that is the situation with Yallourn, Hazelwood would probably be in the same boat," he says.

"It won't impact on me so much, but the young people with young families, it impacts on them — will the kids have to leave the valley if the power industry ceases to operate with the brown coal? Because if they bring in gas turbines, one man 100 miles away can start 'em up."

JULY 4 Economist Ross Garnaut to release draft report on climate change.

JULY 7-9 G8 meeting in Japan to consider a target of halving greenhouse emissions by 2050.

JULY Federal Climate Change Minister Penny Wong to unveil Government's emissions trading scheme, which will force businesses to pay to emit greenhouse gas.

AUGUST Treasury modelling on the impact of climate change on the economy due.

SEPTEMBER Garnaut to release final report.

DECEMBER Government to release details of emissions trading laws.

DECEMBER 2009 World's leaders meet in Copenhagen to sign a new global treaty on climate change to replace the terms of the Kyoto agreement.

2010 Emissions trading starts in Australia.

Chris Hammer is a Canberra correspondent who writes on the environment. Adam Morton is environment reporter.