The Australian government continues to claim that coal will play a vital role in bringing cheap energy to developing nations. In particular, it’s claimed India’s poor will benefit from the development of coal reserves in Queensland’s Galilee Basin. But is that really the case?
In our recent research, my colleagues and I tested claims that coal will help India’s poor, relative to the impact of alternative, renewable energy sources. We found that when you add up all the costs and benefits of coal – including positives such as jobs, and adverse impacts such as those on health – renewable energy is cheaper.
The cost of coal
We calculated the cost of delivering coal-powered electricity from Australia’s Galilee Basin to the Indian state of Bihar. It’s a poor, farming-dependent state with annual gross domestic product of about US$565 per person. It has India’s highest proportion of households without access to electricity – roughly 75 million people without power.
In our analysis, we added proportionate costs for: developing the Galilee Basin; expanding the coal terminal at Abbot Point on the Great Barrier Reef; shipping the coal to India; developing infrastructure to transport it to Bihar; building coal-fired power stations; and improving the electricity network.
The infrastructure required to produce a modest amount of electricity for each household for a 20-year period amounted to a staggering US$29 billion. We assumed that every household would initially demand a maximum of 0.3 kilowatts, rising to 0.675 kW in a decade. This means every household would initially at least be able to have a couple of lights and a fan on, charge mobile phones and power a computer or a small television for four to six hours a night.
By comparison, Queensland average residential demand every hour of the year is similar at 0.6 kW, but varies over the year and during the day. For instance, the average maximum demand can rise to 1.9 kW on very hot or very cold days. Demand depends on the energy efficiency and size of appliances, but speaking in averages, if the household is running an air conditioner, a fridge, a television, a computer and a few halogen downlights, this adds up to about 1.9 kW.
A kettle alone can draw 1.8 kW, an iron 1 kW and an oven 2.4 kW, so you can see how quickly household power demand can ramp up.
The investment required for coal-fired electrification in Bihar worked out to a cost of 13.6 cents per kilowatt-hour, about half what we pay in Australia for the electricity we get from (largely) coal-fired generation.
The major reason for this difference is that network costs are high in Australia. Australia’s grid is widely dispersed and network companies have sought to add infrastructure to cope with those few (very hot) hours a year when all air conditioners are turned on at once.
The residents of Bihar would not be using air conditioners, heaters or stoves because, with an average daily income of US$3 per person, they cannot afford expensive appliances or, for that matter, large electricity bills. Using electricity for only four hours a night would cost each household in Bihar US$130 per year, a sizeable proportion of annual household income.
Coal would replace kerosene and animal dung, which are associated with burns, poisonings and respiratory problems.
Nitrogen oxide, sulphur dioxide and particulate matter form when coal is burned at high temperatures and are associated with respiratory problems. China’s health minister from 2007-13, Dr Chen Zhu, a professor of medicine and molecular biologist, estimates that lung cancer is now the leading cause of death in China and that between 350,000 and 500,000 people die prematurely each year as a result of pollution. Much of this can be attributed to burning coal.
Based on Indian and other studies on health costs, we estimated that attempting to control pollution and health costs would increase the total cost of electrification using coal to US$40 billion, adding another 11c per kWh to the cost of electricity. Coal-fired electricity for Bihar would not improve health outcomes, nor provide cheap electricity for the rural poor.
There are, of course, benefits associated with a large electrification program for Bihar. We estimated, based on current project plans, that the building of coal-fired power stations and network infrastructure would provide around 8,500 jobs. While 8,500 jobs is a sizeable employment number, it is modest when considered in the context of a population of 104 million people who live in Bihar.
With the level of investment and the costs associated with coal-fired electricity for the rural poor, it is easy to feel daunted by the staggering scale of the challenge. We found, however, that there are alternatives.
Bihar does have potential for hydro, biomass, solar and combined solar-battery electrification options. We estimate the investment cost of using the local renewable resources to implement village-level micro-grid electrification at US$27 billion. That is less than the cost of the Galilee Basin coal-fired option and translates to a cost of 13.5c per kWh.
Importantly, there are no additional health costs associated with pollution.
In addition to the benefit of electrification, project estimates for solar electrification in Bihar point to significant employment potential for locals. As Germany and Australia have found, the development and installation of rooftop solar have resulted in employment growth.
It is estimated that the solar home system program in Bangladesh has reduced the use of noxious fuels and provided employment for 114,000 people. Based on current project plans in Bihar, we estimate that developing the local resources for electrification in Bihar will provide around 79,000 jobs for locals.
That would be nearly 10 times as many jobs as would eventuate from coal-fired electrification. Job creation on that scale is likely to provide a significant stimulus to economic development in the state.
Lack of industry
The elephant in the room for proponents of coal-fired power for the rural, agrarian poor is that remote rural locations have no or little energy-intensive industry.
Industry is necessary to underwrite the costs of electrification for residential consumers. Coal-fired power stations must run constantly; they cannot just run for a few hours a night when a few lights and mobile phone charging is required for 15.8 million households (as in Bihar). A few hours a night is all that they can afford.
If the needs of the rural poor are to be matched to the supply of affordable and benign electricity, then the best option for rural electrification is local renewable micro-grids, implemented by local workers, to develop their economy from within.
The poor will benefit from coal-fired power generation only if you ignore the costs of pollution and if industries can be attracted to rural areas. Without industry, though, electrification for the world’s rural poor requires a different model to that offered by coal-fired power.
This may be why there is speculation that the Carmichael coal project is now on hold.
Researcher, Energy Economics and Management Group, Global Change Institute, The University of Queensland
Professor of Economics , The University of Queensland
Lecturer in Economics, Griffith University