It’s been widely reported that the Federal Government’s decision to delay an emissions trading scheme (ETS) will stall up to $2 billion of investment in new power stations.
Listed renewable energy companies experienced a significant price drop in response to ETS delays.
Some of you are understandably concerned about the impact this may have on our company.
Let me reassure you ECT is well positioned regardless of what becomes of the ETS. Here are some key points:
- We’re aware of the risks around uncertainty of public policy and have planned accordingly
- Our business case modeling is not dependent on a carbon price, but does benefit from a carbon price where it applies
- Coldry can deliver a competitive Black Coal Equivalent (BCE) energy feedstock to an expanding thermal coal market
- Coldry can cost-effectively mitigate emissions to brown coal fired power stations required to do so
- Coldry can be used in new black coal fired power stations located next to brown coal resources
ETS uncertainty not a problem for Coldry viability
While many power generation projects are unable to reach financial close the advancement of Coldry facilities in Victoria is not effected by ETS uncertainty for the following reasons:
- Our Loy Yang based project is export focused and therefore not reliant on a domestic ETS
- The Coldry business case was built conservatively and prudently, anticipating that an ETS may be delayed or stalled
- We have a cost effective, immediately deployable solution even WITHOUT an ETS
What about brown coal-based power generation markets like Victoria?
Without an ETS, there is no driver for brown coal-based power stations to change from burning cheaper lignite.
However when the Asian market is hungry for thermal (black) coal, it makes economic sense to dry Victorian lignite for export, rather than ship water logged lignite with very low energy value; hence the advancement of our Loy Yang-based export plant project.
We remain confident that as the market for lower rank coals is already expanding, so too will the market for upgraded black coal equivalent (BCE) products like Coldry.
Energy security (including security of supply) will help drive the adoption of Coldry in markets where under utilised brown coal resources exist, such as China, India, Indonesia and Eastern Europe. Recent reports indicated some Asian power stations have only a weeks’ coal supply as a buffer and India’s coal imports are tipped to rise to 50 million tonnes a year within 12 months.
In essence, this means that with or without an ETS, ECT is well placed, as Coldry does not rely on a carbon price to cost-effectively sell into the thermal coal market.
What if an ETS is introduced in the future?
Prime Minister Kevin Rudd has promised to reconsider an Emissions Trading Scheme in 2013.
Our Coldry export business case is good now, but if and when this scheme takes effect, we believe Coldry is the most cost effective option available to local brown coal-based power stations looking to reduce emissions without stranding or abandoning the lignite resource or the multi-billion dollar assets it fuels.
Even now, a 10 per cent blend of Coldry into the Victorian power stations would meet the previously proposed 5 per cent cut in emissions by 2020 – without the need to modify the power stations boilers.
We look forward to bringing you more updates as our business progresses.
For Further Information Contact:
Kos Galtos – Chief Executive +61 3 9909 7684 or [email protected]