This project is not yet fully funded, and is a no go for banks. It is closely tracked by BankTrack.
The burning of coal. source: www.castlemaineindependent.org
HRL group of companies through subsidiary "Dual Gas" proposes to
build a 600 Megawatt brown coal (lignite) power plant using
Integrated Drying Gasification and Combined Cycle technology (IDGCC)
technology. It would be built in the Latrobe Valley in Victoria, home
to Australia's most carbon pollution-intensive power stations.
are referring to this project as "clean coal" because its carbon
pollution intensity (0.8 tonnes/MWh of CO2)
is lower than standard brown coal power stations. However, this
carbon pollution intensity is similar to standard black coal power
stations and would result in the annual release of 3.2 million tonnes of CO2 into the atmosphere each year.
In 1994 HRL was issued a license to use and develop the State of Victoria's IDGCC technology. The intention was that HRL would bring the technology to commericial maturity and a debenture agreement was agreed that HRL would only be required to pay the State for the technology in the event of commercial success. In the late 1990s a 10 MW pilot plant was built in Victoria's Latrobe Valley.
In 2006 HRL was proposing to build a 400 MW plant that was intended to be operational by 2009. Despite an assessment by an expert panel raising concerns over the project's technical and economic risks, the then Howard Government awarded HRL a $100 million grant through the Low Emissions Technology Demonstration Fund. This was supplemented with $50 million from the Victorian Government, also awarded in 2006. At the time, HRL were in partnership on the project with Harbin, a
Chinese company who were providing $500 million for the project. Harbin's finance and the government grants left HRL having accounted for most of their project's capital costs which in 2006 were estimated at $750 million.
progress was made in the following two years and in 2009, Harbin
withdrew from the project. HRL's Managing Director, Gordon Carter,
had acknowledged the previous year that the project's costs had
risen to over $1 billion.
In 2010 HRL's project re-emerged but at an expanded 600 MW. A Project Review Committee began meeting regularly, convened between HRL, subsidiary Dual Gas, and the Victorian and Federal Governments.
In September 2010 HRL lodged an application with EPA-Vic for works
approval, which received almost 4000 objections from the public.
In May 2011 HRL was granted works approval from EPA-Vic but only for a 300 MW power station (i.e. half of what was applied for). In the same month the Federal Government revealed that HRL had until the end of the year to meet the conditions of its $100 million grant. These conditions include having all legal approvals, securing private finance and demonstrating a clear pathway for how the power plant would apply carbon capture and storage technology. Presently there is no evidence to suggest that any of these conditions have been met.
what must happen
Federal Government needs to withdraw the $100 million grant to HRL
and make it subject to a stringent emissions performance standard
that rules out coal-fired power stations.
need to avoid the economic and reputation risks associated with this
project and not invest in it.
retailers must not enter into any power purchase agreements with the
HRL proposal that serve to underwrite the plant and allow it to gain
claims it will generate 350 jobs in the construction phase. However,
most of these jobs would be located in China and provide little to no
social benefit for locals in the Latrobe Valley.
HRL attempts to pursue coal mining in Driffield, it will have a major
local social impact as it would displace local dairy farmers and
other members of the community, potentially leading to social
dislocation in the Gippsland region, depending on the significance of
Local dairy farmers have already voiced concerns about the uncertainty that HRL's mining license has had over their farm, as they have not known how long they have a future in the region.
There are various environmental concerns attached to this program, such as:
At full scale, this project would add at least another three million tonnes of CO2 per year into the
atmosphere. HRL is claiming to be "clean coal", however based
on calculations from HRL's works approval application to the EPA, the carbon pollution
from the gasified brown coal used in the plant may be as high as 0.91 tonnes
CO2/MWh, worse than some black coal plants.Read more.
power station would also use 2GL of water annually from the already stressed
and deteriorating Latrobe River and Gippsland
plant would put more dangerous pollutants into the air - including particulates
and other contaminants known to cause cancer and to affect the lung development
change is a major human right issue as it contributes to resource
scarcity and attacks many communities' rights to a happy life and
livelihood. In 2009, Australian climate scientists wrote to every
coal-fired power station owner in the country, putting them on notice
that their assets could be held directly responsible for climate
impacts in Australia and around the world. HRL's carbon pollution
will exacerbate these impacts.
are many reasons to suggest that the $100 million Federal Government
grant is illegitimate. The funding deed was signed on 9 May 2008 and
a condition of the deed was that the project commence within three
months of the deed being signed. There is no evidence of HRL's
proposal commencing by 9 August 2008. The grant itself was awarded to support a 400 MW power plant that was supposed to be delivering power by 2009. This clearly has not eventuated. The expert panel assessing HRL's application for the federal grant were also aware that the project would not be economically viable at less than 400 MW in size.
date, none of the $100 million grant has been provided because HRL
have, after more than four years, still not met the milestones to
access these funds. In a recent hearing of the Australian Senate Economics Committee, officials from the Department of Energy said that HRL would be given until the end of 2011 to meet the grant's milestones (which include reaching full financial closure and demonstrating a pathway to how the power plant would operate with carbon capture and storage).
have repeatedly failed to meet deadlines for project milestones to
access the $100 million federal grant and have been given at least
three extensions from the Federal Government.
costs of the project may officially be $1.3 billion, but a
concultancy who conduct economic modelling on energy (ACIL Tasman)
place the cost per kilowatt of IDGCC at $3227, suggesting project
costs may ultimately be $1.9 billion.
According to documents released under Freedom of Information laws and available here and here, an expert panel reviewing HRL's application for funding in 2006 were concerned of numerous technical and financial risks that the project carried. The panel were well aware that HRL's project would need to proceed at at least 400 MW in scale in order to be economically viable. After receiving approval from the Victorian EPA to proceed at only 300 MW, Energy Minister Martin Ferguson announced a review of the Government's invovlement in the project, describing the funding as a "legacy grant".
Legal - on 20 May 2011 the
Victorian Environmental Protection Authority (EPA-Vic) granted Dual Gas works approval to develop their project but at only half the scale proposed (i.e. 300 MW). This raises numerous economic and legal issues for HRL, including the status of their Engineering Procurement Contract with the China National Electric Equipment Corporation, signed in September 2010. Appeals have been made to the EPA-Vic decision from both environmental groups and HRL themselves, with a hearing due to commence on 24 October 2011.
Technical/logistical - the project has been sited and an engineering procurement contract
has been agreed with the China National Electric Equipment
Corporation. Coal and gas supply contracts have been agreed, but coal
supply is only secured until 2016. HRL has bought a mining licence
over the nearby dairy-farming region of Driffield and may seek to turn
this agricultural land into a new mine. In that event, HRL can expect
environmental groups and locals to challenge their attempts to open
up Driffield as a lignite mine.
Financial - project costs have recently increased from $750 million to $1.13 billion.
HRL has been awarded a grant of $100 million from the Federal
Government and $50 million from the Victorian Government. HRL has begun to draw down the Victorian Government grant but still has not met the conditions precedent to the federal grant. On 31 May 2011 the Federal Department of Energy stated (on p13) that HRL has been given until the end of 2011 to meet the conditions precedent to the Federal grant. These conditions include but may not be limited to:
reaching financial close
obtaining all legal approvals
developing a plan for implementation of carbon capture and storage
A recent survey found that two-thirds of people from Victoria wanted the federal government to withdraw HRL's $100 million grant and redirect it towards renewable energy. The federal Greens party have lodged a motion with the federal parliament to achieve this outcome and environmental groups are leading a petition that calls on the parliament to redirect HRL's grant to renewable energy.
Losing access to the federal grant will likely result in any remaining funds from the Victorian grant being cancelled. HRL had
previously partnered with Chinese company Harbin, who were providing
$500 million for the project. However, Harbin pulled out of the
project in 2009 and there is currently no evidence of private finance
invested in this project. Recently all four major Australian banks have declared they have no intention of funding the project.
were in 2006 looking at investing in the HRL project but have
subsequently withdrawn their interest. Documents obtained under
Freedom of Information laws show that HRL is currently talking to
several other potential investors but the names of those prospective
investors have been redacted - Greenpeace is appealing these
redactions. A recent newspaper report has revealed that none of Australia's "big four" banks are looking to fund the project.
The single largest piece of finance for HRL is a $100 million federal grant, awarded by the Howard government in 2007. Despite the project going nowhere in four years, this money still remains available to HRL and, together with $50 million provided by the Victorian Government, comprises all of the known finance for the project. It has emerged that in late 2010, HRL requested an additional $600 million of public funding This includes a request to the Victorian Government for a power purchase agreement worth $384 million over 15 years and a direct request to the Federal Government for $200 million. Both requests are understood to have been refused.
As long as the $100 million federal grant remains available, the Gillard government has Australians' money invested in exactly the kind of project she promised would no longer be built in Australia. Withdrawing the grant would not just mean the removal of the largest piece of finance for the project - it would be a withdrawal of political support and a statement from the Prime Minister that she means business on climate change. Read more.