Dreams of creating an “Elysian fields of a renewable economy” have created a potential energy shortfall in New South Wales (NSW) which has forced the government to limit how much coal miners can send overseas, says leading miner Whitehaven Coal.
The government is set to impose a quota on mining firms to reserve 10 percent of their output for domestic use, a move Whitehaven CEO Paul Flynn says is a problem created entirely by poor government decision-making.
He wrote in The Australian newspaper that despite “populist rhetoric,” coal was an economic lifeblood to Australia—supplying two-thirds of the electricity on the east coast and worth $141 billion to the economy.
“The NSW government doesn’t like to acknowledge this and has constrained investment in coal and the supply chains that deliver this energy while quietly pocketing the windfall royalties they generate,” he said.
“Now, faced with the consequences of its own mismanagement—tighter supply and rising prices—it has hastily diverted coal bound for export markets.”
Coal Reservation Scheme Draws the Ire of Japan
In January, Energy Minister Matt Kean (also the treasurer) announced the plan that would compel coal miners to reserve 10 percent of their output for domestic use as a hedge against soaring international commodity prices and supply disruptions.“This coal cap scheme will see NSW doing our part at the request of the Albanese government to contribute to the national solution of this national problem,” Kean said in a statement.
“I know those currently providing coal for the local market will appreciate that companies enjoying super profits on the back of the war in Ukraine will now do their part for the domestic market. Of course, they should provide Australian production for Australian consumers,” he added.
“These new arrangements will help even the playing field among coal producers.”
Premier Dominic Perrottet also framed the issue along sovereignty lines—a politically popular tactic—similar to when the Queensland government increased its mining tax to cover its burgeoning budget deficit.
“I’ll stand with families and small businesses across NSW, not with major coal companies who are earning super profits at a time when people are struggling,” the NSW premier said.
The move has drawn criticism from NSW’s major export destination Japan with energy giant Idemitsu objecting to the scheme.
“Large-scale, long-term investments in major energy and resources projects require long-term fiscal stability, mutual trust and ongoing consultation between all parties,” CEO Steve Kovac told the Sydney Morning Herald.
“There are simpler ways for the government to achieve its desired outcomes, which will not negatively impact exports and customer relationships, particularly in Japan and other key export markets.”
Last year, the Queensland government drew the ire of the Japanese ambassador after it increased its mining royalties—along with a host of other new taxes—to deal with its ballooning debt problem.
NSW Left Exposed to Global Energy Volatility
Meanwhile, Flynn said the NSW government was “dismantling the architecture of our existing energy system before figuring out how to reliably replace the capacity it delivers.”“For a government that has indulged rhetoric about the Elysian fields of a renewable economy lying just around the corner, it’s ironic the treasurer’s emergency powers are being used to nationalise a component of domestic coal production,” he wrote. “How on Earth did we get here?”
He said despite the state having large coal and gas reserves, long-term selloffs of state-owned generating assets, as well as embargoes on new mining approvals, have left the state—and its residents—exposed to global export prices.
“Domestic coal supply has tightened, and prices have nudged higher as older mines contracted to supply power stations are exhausted and not replaced.
“Even still, coal is a relatively cheap fuel source and reliable as ever. The energy density of coal (and other fossil fuels) means that absent nuclear energy, its replacement will take decades.”
