Extract from ABC News
Analysis
By business editor Ian Verrender
Good news and bad luck have at least one thing in common. They both run in threes.
Last week, three entirely separate but vitally connected events sent shockwaves in quick succession through the fossil fuel industry that are likely to have a lasting long-term impact.
Two were international. One was local.
On Tuesday, one of four generating units at the Callide C power station, near Biloela in Central Queensland, exploded and caught fire, damaging the other three units and plunging much of Queensland and almost half a million customers into a blackout.
Then, on Thursday night, monumental rulings – one by a Dutch court, the other by global investors – threatened to change the course of three of the world's biggest fossil fuel suppliers.
A court in The Hague ordered Royal Dutch Shell to drastically cut its emission reduction targets. It also held the company responsible for the emissions of its consumers.
The ruling, which Shell plans to appeal, was unprecedented with the judge dismissing Shell's argument that governments alone were responsible for meeting the Paris Agreement targets.
Across the Atlantic later that very same night, shareholders in two of the world's biggest petroleum groups forced management to step up action on climate change.
Exxon Mobil was stunned when investors voted two representatives of a small activist hedge fund to the board of the energy giant, vowing to force the company to diversify away from fossil fuels. In a separate move, an overwhelming majority of Chevron investors voted in favour of setting emissions reductions targets for the company.
Just a fortnight after the federal government strengthened its resolve for a "gas powered" recovery by committing $600 million to a gas-fired electricity generator in the NSW Hunter Valley, the global case for investment in hydrocarbons and fossil fuels has lurched into reverse.
How reliable is coal?
The Callide C explosion was an accident. There were unconfirmed reports that a rotor blade broke through its casing, which caused the explosion and the subsequent fire. But no findings have been made and human error and other causes are being explored.
Built at the turn of the century, the plant, which uses a more efficient "supercritical boiler technology" is relatively new and in the normal course of events should have at least another three decades of life.
But these times are far from normal. With most of the ageing east coast fleet of coal-fired generators becoming increasingly prone to breakdowns, shutdowns and forced maintenance, outages are likely to become common unless they are quickly replaced.
Until now, politics and ideology have overwhelmed the science of climate change and, until recently, battled with the economics. While renewables are demonstrably cheaper to build and operate than starting from scratch with a coal-fired generator, governments have been loath to formulate a sensible energy policy and stuck with coal.
As a result, fossil fuels will remain in the mix for the medium term until battery storage becomes cheaper.
Below
is the scheduled shutdown of our coal-fired fleet. Many, however, are
being retired early as energy companies see no future in the vast outlay
to keep them operational, let alone investing $5 billion-plus in
coal-fired plants that are likely to be obsolete within a decade.
It's interesting to contrast the reaction from our leaders last week with the 2016 blackouts across South Australia when a fierce storm took out towers, forcing most windfarms shut down and an outcry from coal lobbyists.
Oddly, there's been little if any talk this time of the unreliability of coal-fired generation.
Instead, there have been calls for more of what is known as "baseload" power.
Baseload, however, is not a virtue. Contrary to popular belief, it is not the minimum required amount of electricity to keep the lights on.
It's the opposite. It instead describes one of the fundamental shortcomings of coal-fired electricity generators and the inflexibility of steam engines. You can only turn them down to a certain point – the baseload – beyond which, you have to shut them down. They then take weeks to fire back up.
As a result, you had to build enough coal-fired generators to supply just enough electricity, usually at night, when they were powered right down to baseload.
Bear that in mind the next time you hear a politician extol the need for more baseload power.
What is required is dispatchable energy, that can easily be switched on and off. Renewables fit that bill. So too does gas. But it has become too expensive. And even though it has less emissions than coal, the shift towards an accelerated reduction in emissions is likely to leave it with little future.
You can no longer be sure of Shell
The landmark case against Royal Dutch Shell, brought by Friends of the Earth Netherlands, could have a lasting impact on Australia and our gas export industry.
It holds large interests in some of our biggest natural gas projects off the coast of Western Australia including the North West Shelf (16.7 per cent), Gorgon (25 per cent), Browse (27 per cent) and the southern Queensland development Arrow (50 per cent).
The latest ruling adds to a trend from courts in developed nations to switch the onus for action on climate change to corporations. Last week's decision compels Shell to cut emissions by 45 per cent by 2030, almost double the company's plans.
While Dutch law doesn't extend to Australia, the size of Shell's Australian interests virtually guarantee that it will be closely examining its operations. Even if the ruling is overturned on appeal, actions of this kind are likely to ramp up, ensuring most major corporations either accelerate their exit from fossil fuels or, at the very least, deploy future investment funds in clean energy.
Global leaders may have turned climate change from a scientific study into a political issue for their own ends. But courts, shareholders and insurance companies are now in the ascendancy, transforming the crisis into a legal and financial issue.
Exxon and Chevron out of gas
Few had ever heard of Engine No 1 until last week. But the tiny hedge fund has been waging a battle against the chief executive of ExxonMobil, Darren Woods, and the board for most of this year.
Formed late last year by tech investor Chris James, its interests primarily are focussed on improving returns for its investors while trying to save the planet. Unlike the altruistic motives of Friends of the Earth, however, Engine No 1 is fighting climate change on behalf of capitalists.
Its successful attack against Exxon was focussed on the company's poor financial performance and its failure to adapt to a decarbonised world.
Last week, it managed to gain two board seats and, with the battle ongoing, could end up with as many as four in a humiliating defeat for Mr Woods.
It began the fight with just 0.02 per cent of the shares in Exxon last December. But its arguments about performance and Exxon's sad history of misinformation and lobbying when it comes to climate change, clearly resonated with shareholders.
Meanwhile, more than 60 per cent of Chevron investors voted to set targets to reducing emissions, including those of customers.
Like Shell, ExxonMobil has an interest in the massive Gorgon gas project off the coast of Western Australia while Chevron has interests in Gorgon and the North West Shelf. Each company ranks among our biggest gas exporters.
Gas always was considered a transition fuel; the short stop between coal and renewables.
With three major multinationals now under pressure to exit or at least scale back, the transition may have become far more transitory. And the gas-fired recovery may well run out of steam before it even starts.
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