Why We Shouldn't Bankroll Coal


On 1 February, Victorians will turn out in their hundreds to call for the cancellation of a federal taxpayer-funded grant allocated to a new brown coal power station in Victoria. It’s a call that may soon be answered. One of the federal Energy Department’s first tasks of the year is to decide whether or not to cancel this grant, or be the biggest financiers of Australia’s next dirty coal-fired power station.

In case they need any more convincing, here’s the case for cancelling the grant.

A company called HRL want to build a commercial-scale coal-fired power station at Morwell, Victoria, using their coal-gasification technology which makes a brown coal power station as clean as black coal (that is, dirty). In 2006 they were awarded a $100 million grant by the Howard government but in over five years have failed to meet the conditions of the grant. That means so far, none of this money has been given to HRL by the Commonwealth.

In comes Prime Minister Gillard in 2010, committing that "no more dirty coal-fired power stations will be built in this country". Then the Clean Energy Future legislation passes, finally invoking the principle that generating carbon pollution is wrong and should be penalised. The Prime Minister issues a deadline to HRL, giving them until 31 December 2011 to meet the conditions of the grant. That deadline has now passed and HRL have still failed to satisfy their conditions.

Those conditions included locking in private funding, developing a plan for how they would achieve carbon capture and storage, and obtaining all legal approvals. With no evidence of the first two being presented and HRL’s partial EPA approval being contested in court (by various parties including HRL themselves), it is safe to say that HRL have failed to meet their deadline and their grant must now be cancelled.

If that’s not compelling enough, there’s a swag of other great reasons why HRL should not retain its $100 million grant.

Firstly, HRL wasn’t supposed to be awarded the grant in the first place! An expert panel reviewing HRL’s application back in 2006 found that due to technical and financial risks the project was not recommended for funding.

Furthermore, HRL’s works approval from the EPA is for a 300 Megawatt plant (i.e. half of what was applied for). The expert panel assessing HRL’s application in 2006 knew that it would not be economically viable at a scale less than 400 Megawatts.

When the grant was awarded it was for a 400 Megawatt power station that was due to be operating in 2009. The current proposal is for a 600 Megawatts — and clearly we weren’t able to rely on HRL delivering their project by 2009.

And even if HRL built their plant at full scale, EPA advice is that it still would not be economically viable.

The funding deed for HRL’s grant was signed on 9 May 2008. It was a condition of the deed that the project commence within three months of the funding deed being executed. However, by 9 August 2008 there was no evidence to suggest that the project had commenced. HRL have failed to meet deadlines for their project milestones in the past, relying on extensions directly from the Minister.

While the project costs have ballooned in recent years, out from $750 million to $1.3 billion, financial support for HRL has dried up. The most significant financial development over the past four years is HRL’s joint venture partner, Harbin, pulling out of the project and taking $500 million with them. A number of domestic and international banks have gone on record as stating they have no interest in the project, including the big four of ANZ, Westpac, Commonwealth and National Bank.

Finally, there’s considerable opposition to the project. Last September, a poll of 600 Victorians showed that 67 per cent supported the government removing the grant and redirecting it towards renewable energy. Over 6000 people have so far signed a petition to Parliament calling for the grant to be withdrawn and invested instead in a clean, renewable energy future for Victoria.

There’s no shortage of substantial reasons to cancel HRL’s grant in other words.

And here’s one more: it’s 2012. We’re supposed to be moving towards a clean energy future. We’re not supposed to be allowing — let alone making the Australian taxpayer pay for — a project that would be both economically and environmentally disastrous. Retaining HRL’s grant would be wrong, pure and simple.

Over to you, Energy Department.

Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.