Could a coal exit commission work in Australia?

A German coal exit commission (1) made up of representatives from government, industry, consumers and environmental groups has just completed its final report. The report which was supported by 37 of the 38 representatives produced a road map for German coal use to be eliminated by 2038. The road map which still needs to be ratified by the German parliament includes the concept of financial compensation for regions, companies and employees involved with coal mining and consumption. The single vote against the agreement was from a coal mining district which did not agree with the level of compensation while Greenpeace, who did support the final proposal, issued a statement calling for a faster timetable.

So what can countries like Australia and the USA learn for the German process? What similarities and differences need to be considered in translating this outcome into an Australian or US context?

The obvious point of comparison is that Germany was actually able to put together a widely disparate group and have this group reach something close to a compromise decision. Unfortunately, it is very hard to see that happening in either Australia or the US where vested interests are still opposed to any thought of concessions or compromise.

But lets pretend that either Australia or the US had the political will to put together their own commission with a similar brief to develop a coal elimination pathway.

A US group would find itself faced with a situation not grossly dissimilar to Germany and with some of the key differences that actually make a coal exit pathway an easier task. The key similarity is that both nations currently produce about 35% of their electricity from domestically sourced coal while the differences lie with the potential for alternative generation from nuclear, gas and renewables.

While Germany has pledged to shut its nuclear fleet eliminating the source of ~12% of its generation last year, the 20% of US generation from nuclear is much more secure. Likewise the US is in a much more secure position with regard to natural gas supply. The advent of fracking means the US has an apparently abundant and cheap domestic source of gas while Germany needs to import natural gas at much higher prices and potentially with the added risk of providing Russia with geopolitical leverage. Germany currently has a proportionally larger renewable sector than the US but this gap is closing and the US has plenty of untapped, high quality wind and solar potential that will allow its renewable fleet to continue to grow.

The only disadvantage facing the US is that unlike Germany, which is part of a much larger European grid (Germany has ~60 interconnects with neighbouring countries meaning that its ~200GW of generation is actually part of an ~800GW European grid), the US grid is highly dependant on domestically produced power. Germany has a far greater ability to buy (and sell) power from its neighbours as it moves through a transition away from coal (and nuclear) generation.

Does that mean the US should follow Germany’s lead and put together a coal exit plan? In a world of co-operative bipartisan politics in which there was a desire to identify and assist the losers in a major energy transformation that would be a valuable outcome. In reality the US is exiting coal in a more brutal fashion. Cheap gas and continuing support for renewables (mostly at a state level under the Trump administration) has decimated the US coal industry in the last 10 years. The outlook for the next 10 looks even more bleak – many coal plants that are currently running at reduced usage rates have been scheduled to shut completely as the 63 GW of new gas generation and 1000 GW of renewables added since 2007 takes up the slack. It is possible that the US will effectively exit coal before Germany, replacing it with a combination of gas and renewables, and with little thought to compensating states and employees who will lose out as this happens.

The situation in Australia is different – Australia is much more reliant on coal for power generation than either Germany or the US. It has no nuclear capability and it probably unlikely to go down this path in the near future. Unlike the US natural gas is expensive – in part because a significant portion of domestic production is exported and in part due to greater political opposition to unconventional extraction methods such as fracking. Unlike Germany it has no neighbours to rely on as it replaces coal with renewables. While renewable generation is increasing strongly and like the US there is obviously plenty of high quality wind and particularly solar potential that will be tapped into in coming years, there are concerns about grid inertia and stability as the amount of renewable generation increases. A collaborative team of stakeholders probably makes more sense in an Australian context – there have been a number of expert led reports including, for example, the recent Finkel report but without being critical of these analyses they suffer from the lack of involvement from utility representatives, consumer and customer groups, fossil fuel extraction companies and environmental NGO’s. If a team drawn from a wide range of stakeholders could be assembled and asked to set a plan that addresses some of key questions for Australia – what are roles for nuclear, CCS and enhanced gas extraction, maximised renewable output, funding strategies and compensation schemes – it may provide something to coalesce around rather than argue against and act as a circuit breaker for the current political impasse