The threat to local steel production from spiralling electricity costs was placed on the national stage recently when the Opposition Leader and his accompanying media show rolled into town. Steel, which is critical to the Illawarra economy, is one of the most energy intensive activities in Australia. The cost of electricity constituents anywhere from 20 to 40% of the cost of local steel production. As important as cost to the manufacturing process is energy reliability. That is, being able to access electricity 24 hours a day, 365 days a year.
When the power went out in South Australia for several hours last September, BHP’s Olympic Dam mine took 2 weeks to resume full power at a cost to the business of $137 million.
So it’s no wonder that BlueScope CEO Paul O’Malley is forecasting a national “energy catastrophe”, one that could even close the Port Kembla facility.
NSW is a state that relies on coal which from a manufacturing perspective, is ideal given it delivers reliable power. Coal isn’t subject to the vagaries of mother-nature who without notice, turns off the wind or blocks out the sun. But coal is also a high emitter of carbon, a greenhouse gas that is contributing to a gradual warming of the planet.
Unfortunately much of the conversation about coal and renewables has been a binary debate that expects our political leaders to choose one or the other. Yet if we accept that we have international obligations to reduce our carbon emissions via the 2015 Paris Agreement and domestic obligations to provide reliable and affordable energy, then any solution is going to require a mix of energy sources.
While the NSW Government has been happy to watch the energy debate play out in Canberra, it will soon have to make significant decisions that will affect the Illawarra’s steel industry. I write this because four of the five coal fired power stations in New South Wales will be closing in the next 20 years, all of them contributing to the power that feeds Illawarra steel mills.
With baseload power so critical to steel production in the Illawarra, new reliable and affordable energy must be identified quickly. For the steel industry to have the confidence to invest in the Illawarra it needs certainty that baseload power will continue to exist in NSW. Gas fired stations are a possible solution but as the Australian Electricity Market Operator has recently warned, gas supply shortages are forecast to occur in NSW as soon as 2018.
That, much to the chagrin of the renewable energy industry, means coal fired power must continue to exist in NSW for the long term.
A compromise that would ensure this reliable baseload power continues for steel-making while also addressing the need to reduce our carbon emissions, may lay with technology known as high efficiency low emission coal. First developed in Japan more than 20 years ago, HELE plants burn coal at a far higher temperature than ‘traditional’ coal plants, which has the effect of reducing carbon emissions by between 30 and 40%.
More than 1,000 HELE power plants exist around the world. Their sin is that that they still omit some level of carbon. But that crime also applies to steel and cement production, to the ships that export our goods to the world, to our cars and trucks, and even to the beef cattle that live on the Southern Highlands.
We expect our politicians to make pragmatic decisions. Surely the need to foster a mix of energy sources that reduce our carbon emissions while also ensuring energy is reliable and affordable, is the sensible outcome to ensure the long term survival of the Illawarra steelmaking industry.
Two years ago the member for Shellharbour stood up in the NSW Parliament to declare that she strongly supports the coal industry in the Illawarra. Now is the time for her and her colleagues to reiterate their support for an energy mix that recognises for the Illawarra, we need new investment in coal fired power to replace the existing coal stations that are approaching their end of life. Without it, predictions of the closure of the local steel industry are likely to prove true.