Economist Danny Price copped a fair bit of flak and “plenty of hate mail” on Monday for an opinion piece in the Australian Financial Review headlined ‘Against Adani? You’re against lifting the world’s poorest out of poverty’.
Mr Price doesn’t actually make that argument in the article – the headline was written by the paper’s editors – but he does argue that Australian coal is the cheapest way to cater to energy-hungry Indians in the province of Gujarat.
The multinational Adani Group has existing coal power generators in Gujarat that burn just the kind of low-grade coal found in Queensland’s Galilee Basin.
It owns a port facility at Abbot Point, midway between Townsville and Mackay and wants to build a railway to get the Galilee coal to that port.
The problem is that dozens of banks have refused to help finance the project, which they see as too risky.
That has led the federal government to consider advancing around $1 billion in concessional loans to build the railway and to make the Adani project, and others in the basin, viable – a plan ruled out, for now at least, by the Queensland government.
So there are lots of environmental, economic and social arguments to be had, but let’s today focus on Mr Price’s argument.
He told me on Tuesday his key concern is that Australia has to decide whether or not it will help meet the “suppressed demand” in India by helping to open up the Galilee basin.
That’s a political question, because just about every industry would like $1 billion in concessional loans – and Mr Price concedes that if a full list of projects were drawn up for such loans, there’s no guarantee a new coal basin would be at the top.
But he also sticks by his claim that coal is the best way forward for impoverished Gujarat.
His article stated that “[Adani’s] power plant generates electricity for some of the poorest people in the world so they can have lighting to study at night and power for clean water”.
“Reliable power is also crucial to attract industry so that people can have jobs to lift themselves out of poverty.”
He adds: “… there will be those Australians who say that instead of selling coal to Gujarat, the Indians should use renewable energy instead.
“Unfortunately, renewables are still not as cheap as burning coal in an existing power station and the population of Gujarat, whose income is one tenth of an average Australian, cannot afford the extra costs.”
But Mr Price is rolling two issues into one, according to University of Queensland’s emeritus professor of economics John Foster.
Professor Foster co-authored a detailed study of energy supply in India in 2015 entitled Rural electrification in India: Galilee Basin coal versus decentralised renewable energy micro grids.
‘Micro-grids’ are small-scale installations of solar, wind and storage technologies providing basic power needs in off-grid communities.
That paper found that for the rural poor in Bihar state – another very impoverished region – renewable power micro-grids were a cheaper and quicker way to provide basic services – lighting, refrigeration, water pumps and sewage pumps for basic sanitation.
Professor Foster says that Mr Price is probably correct from a macro-economic view that building factories and creating jobs would be more cheaply done by coal.
But on the question of whether coal is best for lifting people out of poverty, his study reached a very clear conclusion:
“Centralised provision of electricity from coal equates to a cost of 13.6c/kWh compared to 13.5c/kWh for the combined investment required for 20 years of electricity from decentralised rural electrification … provision of power from central sources are assumed to be 20 per cent of energy sent out, which is considerably lower than current losses. This suggests that 13.6c/kWh [for coal] could be understated.”
The technology that makes up micro-grids is not only cheap, and getting cheaper, but they are technologies that can be controlled by villagers themselves.
The paper’s authors note: “The decentralised model encourages rural development through local investment and employment as opposed to the centralised model which concentrates financial returns and employment benefits in urban centres and other states and countries.”
So Professor Foster’s argument is compelling. If you really want to help India’s poor, help them get hold of the micro-grid technologies that will put the lights on next week and pump drinking water next month.
And by the time the coal power grid is rolled out to their village, they may just decide to stick with what they’ve got.
No wonder the banks see Adani’s approach to poverty alleviation as too risky to touch.