Coal accounted for half the growth in global power generation last year, and further increases are likely this year as European nations restart mothballed coal-fired power stations.

For the first time since 2013, the increase in demand for coal-fired power last year exceeded the growth in renewables.

The growth in demand for coal is detailed in two reports issued last week by the International Energy Agency and the consultancy BloombergNEF.

Half the countries that pledged at last November’s United Nations COP26 climate conference in Glasgow to phase out coal generation have in fact increased it.

The goal of achieving net-zero emissions by 2050 agreed at the COP26 climate summit last year assumed that unabated coal-fired power generation would fall by an average of 11% a year through to 2030 and would be completely phased out by 2040.

Instead, the increase in coal-fired power last year was 8.5%. Taking last year as an exception, the trend of the previous three years showed a small decline of less than 2% a year, though that was entirely obliterated by last year’s surge. It suggests that the political commitments to curb carbon emissions made at Glasgow are out of kilter with economic reality.

The growth in demand for coal-fired power has been driven by the speed of global economic recovery from Covid-19, the depletion of hydro-electric power by droughts across the northern hemisphere and soaring gas prices.

The world’s three biggest coal users each boosted their output: China’s coal-fired power rose by 9%, India’s by 16% and the United States’ by 14%.

In China and India, coal-fired generation remains the default option for baseload power. In the US, recently approved climate legislation has yet to shift the renewed emphasis on coal under Donald Trump’s administration.

Coal use grew because it could: coal-fired generators were operating at below their maximum capacity and had the ability to respond to unexpected growth in demand.

The reports show that construction of new coal-fired generators is overwhelmingly concentrated in the emerging world, led by China, India and Vietnam. In both advanced and emerging nations, there is greater investment in new renewable power sources than in fossil fuels.

In the advanced nations, a net 21 gigawatts of coal-fired generating capacity was retired in 2021 (roughly equivalent to Australia’s current coal generating capacity). In the emerging world, by contrast, a net 34 GW of new coal-fired power was added. The construction of new plants in the emerging world has slowed sharply: last year’s build was the lowest on record and down from 43 GW in 2020 and 61 GW in 2019.

The Ukraine war has forced a shift in the advanced world this year. Germany is bringing 7.2 GW of retired coal-fired capacity back on line to ensure continued power amid cuts to its gas supply from Russia. France and the Netherlands have both relaxed limits on coal use, while the United Kingdom, Italy, Austria and Greece are discussing or have already approved delays to phasing out coal-fired power and are temporarily reopening idled plants.

Wind and solar have received the lion’s share of fresh investment in the power sector, with a rise from 30% to 75% over the past decade. The share of fossil fuels globally shrank from 55% to 14% in the same period.

However, coal remains the biggest single source of electricity, accounting for 35% of global generation last year; fossil fuels, also including gas, oil and diesel, accounted for 61%. The major emerging economies remain heavily dependent on coal, which supplies 74% of power in India, 62% in both China and Indonesia, 86% in South Africa and 60% in the Philippines.

Despite the massive investment in renewables, which the International Energy Agency expects to reach US$472 billion this year, solar and wind still only account for 11% of global generation. Hydro-electricity is a further 16%, while nuclear is about 10%. Solar and wind power have a much higher share of total installed capacity—around 25%—but their use depends on weather.

Globally, the problem is that demand for electricity has been growing rapidly. Total generating capacity has almost doubled in the past 15 years, but investment in baseload power has failed to keep up, resulting in shortages and astronomic prices.

This has been made much worse by the Ukraine war and the sanctions on Russia, which previously provided 25% of the global gas trade, 18% of thermal coal exports, and 8% of oil.

Since the invasion, the thermal coal price has risen from US$170 a tonne to an average of close to US$350 a tonne as buyers tussle for available supplies.

Australian producers, which are the world’s biggest coal exporters, have had had no difficulty in replacing the Chinese market after Beijing imposed embargoes on Australia (before the ban, China took about 20% of Australia’s coal exports). Last year, Japan increased its coal purchases from Australia by 15%, India by a massive 38% and Korea by 33%.

However, Australia’s ability to do more is heavily constrained. Financial institutions will not support new coal projects, particularly for thermal coal. Coal projects for steelmaking may still be able to gain finance, though that is far from certain. Coal companies’ main option is to expand existing mines through their own cash flows.

The Labor government is expected to take a tougher stance on new coal project approvals than its predecessor, although both the New South Wales and Queensland governments have a strong incentive, in the form of coal royalties, to authorise expansions.

Prime Minister Anthony Albanese has said that coal mines that ‘stacked up’ environmentally could be approved and that Labor would welcome the jobs that would flow. He has rejected calls from the Greens to join the 40 nations who pledged at COP26 to phase out coal. However, Environment Minister Tanya Plibersek blocked a Clive Palmer-owner large open-cut coal project near Rockhampton in Queensland because of concerns it could affect the Great Barrier Reef.

The era of cheap oil and gas is over. Russia’s war in Ukraine—or, more specifically, Europe’s ambitious effort to wean itself off Russian fossil fuels at a time when international supplies are already tight—is driving up global energy prices and raising the spectre of a global energy crisis. Alternative sources of energy are looking more appealing by the day, as they should. But the embrace of hydropower, in particular, carries its own risks.

Hydropower is currently the most widely used renewable form of energy, accounting for almost half of all low-carbon electricity generation worldwide. Its appeal is rooted in several factors. For decades, it was the most cost-competitive renewable, and many hydropower plants can increase or decrease their electricity generation much faster than nuclear, coal and natural-gas plants. And whereas wind and solar output can fluctuate significantly, hydropower can be dependably produced using reservoirs, making it a good complement to these more variable sources.

But there’s a hitch. The most common type of hydropower plant entails the damming of rivers and streams. And hydroelectric dams have a large and lasting ecological footprint.

For starters, while hydroelectric generation itself emits no greenhouse gases, dams and reservoirs emit significant amounts of methane, carbon dioxide, and nitrous oxide. Under some circumstances—such as in tropical zones—they can generate more greenhouse gases than fossil-fuel power plants. One study found that methane—a greenhouse gas that is at least 34 times more potent than CO₂—can make up some 80% of emissions from artificial reservoirs, though a wide variety of geographical, climatic, seasonal and vegetational factors affect reservoir emissions.

And while hydroelectric dams are often touted for delivering clean drinking water, controlling floods and supporting irrigation, they also change river temperatures and water quality and impede the flow of nutrient-rich sediment. Such sediment is essential to help re-fertilise degraded soils in downstream plains, prevent the erosion of the river channel and preserve biodiversity.

When dams trap the sediment flowing in from the mountains, deltas shrink and sink. This allows salt water to intrude inland, thereby disturbing the delicate balance between fresh water and salt water that is essential for the survival of critical species in coastal estuaries and lagoons. It also exposes deltas to the full force of storms and hurricanes. In Asia, heavily populated deltas—home to megacities like Tianjin, Shanghai, Guangzhou, Bangkok and Dhaka—are already retreating fast.

Dams also carry high social costs. In 2007, then-Chinese Premier Wen Jiabao revealed that China had relocated 22.9 million people to make way for water projects—a figure larger than the populations of more than 100 countries. The Three Gorges Dam, the world’s largest hydropower station, which became fully operational in 2012, displaced more than 1.4 million people.

To top it all off, there is good reason to doubt hydropower’s reliability. If mitigation measures prove unable to slow global warming adequately—an increasingly likely scenario—the frequency and intensity of droughts will continue to rise. As water levels in rivers and reservoirs drop—exacerbated by evaporation from open reservoirs—so will the water pressure needed to spin turbines, resulting in less electricity. And this is to say nothing of giant dams’ ability to compound downstream droughts, as has been seen in the Mekong River Basin.

Given that dams are expensive, years-long undertakings, the wisdom of investing in building more of them is questionable, to say the least. But the world’s love affair with dams continues. Almost two-thirds of the earth’s long rivers have already been modified by humans, with most of the world’s almost 60,000 large dams having been built over the last seven decades. And, global dam construction continues at a breakneck pace. In 2014, at least 3,700 significant dams were under construction or planned. Since then, the dam boom has become more apparent, with the developing world now a global hotspot of such construction.

While dam-building activity can be seen from the Balkans to South America, China leads the way as both the world’s most-dammed country and its largest exporter of dams. From 2001 to 2020, China lent more than US$44 billion for the Chinese construction of hydropower projects totalling over 27 gigawatts in 38 countries.

China is not hesitating to build dams even in seismically active areas, despite the risk of a devastating earthquake. And China really should know better: its own scientists linked the 2008 Wenchuan earthquake, which killed more than 87,000 people in the Tibetan Plateau’s eastern rim, to the new Zipingpu Dam, located near the quake’s epicentre.

There is no question that the world must cut its reliance on fossil fuels. But building more hydroelectric dams—especially in the earth’s most biodiverse river basins, such as the Amazon, the Brahmaputra, the Congo and the Mekong—is not the way to do it. On the contrary, the global dam frenzy amounts to a kind of a Faustian bargain, in which we trade our planet’s long-term health for a fleeting sense of energy security.

If elected to government, the Labor Party says it will enhance Australia’s economic sovereignty and national security by creating a strategic merchant shipping fleet. As a first step, it will appoint a taskforce to guide the establishment of the ‘strategic fleet’, which is likely to comprise up to a dozen vessels including oil tankers, container ships and gas carriers. The Australian-flagged and -crewed vessels will be privately owned and operate on a commercial basis, but could be requisitioned by government in times of need.

In addition to creating the strategic fleet, Labor plans to address skills shortages in the Australian maritime sector by re-establishing the Maritime Workforce Development Forum, which was abolished by the Coalition after it took office in 2013.

The arguments that Australia needs a merchant fleet for reasons of national security and to provide a domestic source of skilled Australian seafarers have some validity. Shipping is also economically efficient in terms of fuel costs, carbon emissions and reduced congestion on the roads.

Domestic freight in Australia (other than some bulk cargoes) mainly goes by road and rail—except across Bass Strait, and in northern Australia, where most freight goes by sea because of a lack of land transport infrastructure. According to data from the Bureau of Infrastructure, Transport and Resource Economics (BITRE), rail transport accounts for approximately 49% of total domestic freight by volume (iron ore and coal moving from mines to a port constitutes about 80% of this), road freight makes up about 35% of total freight, and coastal sea freight 17%. Over the 13 years from 2000–2001 to 2011–12, coastal sea freight actually declined, while road freight increased by nearly 50%. Most coastal sea freight is carried by foreign-flagged ships operating with coastal trading licences issued by the Australian government.

Trying to get more interstate and intrastate cargo back to sea is sensible, but that hasn’t happened for several reasons: road transport provides better door-to-door movement; road transport doesn’t pay its true costs of using the roads; large integrated transport companies have a lot of government influence; and Australian industry has argued strongly against the risks of increased costs.

Europe has faced a similar dilemma but, with increased road congestion and high highway tolls that put more of the true costs onto road trucking, a trend has emerged of more trucks and containers being moved by sea (‘short sea shipping’) where sea transport is an alternative to land transport. Special types of dedicated truck ferries and container or ro-ro (roll-on/roll-off) ships have emerged for this trade.

There could be scope for a similar move back to sea transport in Australia, particularly if the true costs of road transport were factored in. Also, the type of container/ro-ro ship that’s used might be suitable for the defence force’s transport requirements in an emergency situation.

The debate over the need for Australian-flagged merchant ships has a long history running right back to federation. Over the years, there have been many government inquiries and much research into the issue, most notably the comprehensive Crawford report on the revitalisation of Australian shipping  in the early 1980s.

These inquiries have invariably come back to the simple fact that Australian-flagged ships with Australian crews cost more than foreign-crewed vessels. Even when reviews have recommended new financial incentives or regulation changes to help build an Australian merchant navy, successive governments haven’t followed through on those proposals.

The two large container/ro-ro ships, Tasmanian Achiever II and Victorian Reliance II, currently entering service with Toll Shipping for the Bass Strait trade are the largest cargo ships on the Australian ship registers. They are broadly similar to the container/ro-ro ships employed around Europe. Such vessels would also be suitable for moving freight by sea elsewhere around Australia, especially over longer routes such as Perth to Sydney or Melbourne to North Queensland.

The only other large vessels on the Australian ship registers are the four LNG carriers employed on the gas trade between northwest Australia and Asia, some floating protection and storage operations vessels employed in the offshore oil and gas industry, and a few other special-purpose vessels, such as the Aurora Australis, the Antarctic research and supply ship.

The Australian ship registers currently comprise the general register and the Australian international shipping register (AISR). The latter was established about six years ago to provide a competitive registration alternative for Australian ship owners and operators that engage primarily in international trade. Registration on the AISR provides access to income tax exemptions and other tax incentives and allows the use of mixed Australian and foreign crews.

Oil tankers and gas carriers are basic national security requirements for the assured movement of fuels around the coast in times of national emergency. There’s little ability to transfer fuel around Australia other than by ship. It would take over 1,000 truck movements to shift the same volume of fuel carried by one medium-sized tanker. In addition to several foreign-flagged oil tankers, two small foreign-flagged gas carriers are currently employed on the Australian coast.

Our military bases and airfields in northern Australia would be heavily dependent on fuel imports by sea in any conflict situation. All fuel for the country’s north is currently imported from Asia, and that itself is a major strategic vulnerability for Australia.

There are no oil tankers (except for small in-port bunkering tankers) currently on the Australian registers. In comparison, New Zealand has two large coastal tankers for moving oil around the country. A sound national security argument can be made for moving some tankers and coastal gas carriers onto the Australian register—something which could be encouraged through the use of government subsidies.

Bringing some oil tankers and gas carriers back onto the Australian register with Australian crews could be the first move in Labor’s plan to establish a strategic fleet. The proposed taskforce could then investigate the feasibility of using Australian-flagged and -crewed container/ro-ro ships to move more domestic freight back to sea. Using Australian-flagged and -crewed ships for general international trade, as opposed to those on the AISR, would likely remain economically unattractive.

Some analysts have recently observed that Australia isn’t complying with its International Energy Agency obligations—it’s the only member of the International Energy Agency (IEA) that doesn’t have a 90-day supply of strategic petroleum reserves. But aside from the fact that Australia isn’t living up to an international agreement, just how vulnerable does that lack of reserves make Australia? Coming up with an answer isn’t easy—assessments are mixed, and the data contested. Still, overall, Australia’s energy vulnerability seems to be getting worse, not better.

When Andrew Davies and Edward Mortimer assessed this issue back in 2011, they concluded that Australia’s vulnerability in the next five years would be low, even without a strategic reserve, largely because of a diversity of suppliers in the market. Further, they demonstrated that strategic reserves held by other countries had a marginal impact on helping to sort out shocks in in the system, again, largely because of the diversity in suppliers. They did, however, predict that in the medium term (5 to 25 years), things weren’t so rosy—because of a gradually increasing concentration of suppliers. Just four years later, their predictions about increasing vulnerability appear to be coming true. Read more