MASSIVE volatility in carbon prices in Europe and rising gas prices have cast doubt on whether Julia Gillard’s carbon package will be enough to force power stations to switch from coal to gas, Standard & Poor’s will warn today, delivering another blow to the federal government’s clean energy plans.
A report to be released today by the credit ratings agency, obtained by The Australian, suggests that at the end of this decade coal will still be dominant – despite expectations gas will be a transitional fuel to a low-carbon economy under the Gillard government’s carbon scheme.
After the situation in Europe – where carbon prices have fallen to about $10 a tonne, down from between $20 and $33 in past years – Australia’s carbon price could fail to make gas competitive enough to overtake the coal-power stations that produce more than 70 per cent of the nation’s power, the report finds.
On top of this, the competitiveness of coal would be entrenched as gas prices rise because of the boom in liquefied natural gas exports from Australia’s east coast.
“Potentially higher gas prices and carbon price volatility throw some doubt on the competitiveness of gas to challenge the dominance of coal-fired generation,” the report states.
“And the recent volatility in carbon prices in the European markets demonstrates the jury is still out as to whether the carbon tax is enough to offset coal’s cost advantage.”
The findings are significant, as the government expects Australia to become increasingly reliant on gas – which produces about half the emissions of similar coal-fired power stations.
The Greens, who had hopes the nation could abandon non-renewable energy sources within a decade, are likely to be aghast at the prospect that coal could retain its cost advantage.