Chill winter winds arrive in the Hunter's thermal coal heartland

It isn't like our community hasn't been through this all before, as low thermal coal prices sent the industry into hibernation during 2014-16.

Mines shut, significant job losses occurred and miners including Glencore cut their production in an effort to remain profitable.

The story of the highs and lows in commodities is nothing new for coal as it isn't either for cereals, beef and look at wool prices from a record high two years ago to pretty average today.

In fact woolgrowers and coal producers now have one thing in common the buying power of China.

China pulls back and wow do we feel the pain.

But in the case of coal there are other concerns just as problematic as China when it comes to the viability and future of the industry.

At present the COVID-19 virus lockdown has hit the coal industry with the International Energy Agency (IEA) reporting an eight per cent drop in demand for thermal coal this year due in part to a drop of 20 per cent in global electricity demand.

Big users like China and India aren't buying as much coal as their manufacturing sector has been hit by the pandemic.

China is preferring to support their domestic coal producers, and if they are importing coal, market analysts report, it is not coming from Australia because at the moment we are not their favourite country.

Last week Peabody announced to their Wambo workers that they would be partially shutting down their underground mining complex at Warkworth for 59 days from June 19.

Commenting on the decision the company said:

Like many other Australian mining operators, our company has been affected by incredibly challenging global economic conditions caused by the COVID-19 pandemic and, as a result, we are taking steps to align our production with current coal demand.

We have made the very difficult decision to temporarily suspend production in a part of the mine while maintaining essential development work to support future production.

Could we be witnessing the start of a serious longterm decline in demand for thermal coal and if so, what impacts will this have on our region as coal mining accounts for nearly 70 per cent of economic activity in the Singleton Local Government Area.

Apart from the COVID-19 impacts Tristan Edis, an energy expert and analyst with Green Energy Markets, says coal is now in serious competition with wind and solar in the domestic market.

 Bayswater Power Station. Picture: Nick Moir

Bayswater Power Station. Picture: Nick Moir

The big three export markets for the Hunter's coal: Japan, Korea and Taiwan want to decarbonise their economy but they have no sites for large scale solar and wind farms like Australia, he said.

But technology coming online for floating solar farms and marine based wind turbines will be a game changer in those markets, he suggested.

"Offshore wind turbines with blades 220 metres in length are being developed by GE and Siemens and this type of technology poses a real threat to the region's major coal markets," he said.

"The other source of energy will be hydrogen produced with renewable energy and put onto ships and exported to these countries again posing a real risk to the future for coal in those markets."

Commenting on the technology roadmap for Australia's future energy supply Mr Edis was critical of the push to use gas as a transition fuel.

In comments that may please coal producers he said we should use existing coal fired plants like those in our region to transition to renewable energy with battery and hydro storage.

Bayswater Power Station. Picture: Nick Moir

Bayswater Power Station. Picture: Nick Moir

"We have those existing plants and they have been working extremely hard to make them more efficient and flexible to power demands," he said.

"Why develop a new fossil fuel alternative and spend vast sums of money developing an industry and building infrastructure when coal fired energy exists and can be used while we develop battery and hydro storage for wind and solar power generation.

"It appears to be a vast waste of time and gas is not a cheap option. Wind and solar cost $45/megawatt hour whereas gas is more than twice that and in some cases three times as expensive. We should be using what we have already to enable a transition to renewables."

In addition to gas there has been discussion recently about carbon capture and storage (CCS) the much hyped technology solution to fossil fuel extraction in the era of climate change.

Billions has been spent on CCS technology but to date no commercial operations exist.

According to Mr Edis CCS is used by politicians so they do not have to front up to the reality of the need to transition to renewable energy.

"Its way too expensive given the cost of renewables today and the falling costs of battery storage, CCS isn't commercially developed and cannot be used in countries like Japan, Korea, Taiwan due to land restrictions," he said.

Continued cost reductions in the use of solar, wind and batteries mean we have to wean our economy off coal, forget about gas and transition regions like the Hunter, he said.

"Industry is moving, look at the use of electric vehicles in Europe and China as bus fleets are going all electric - we have to stop sinking our money into fossil fuels and make the change."