PERTH (miningweekly.com) – The Minerals Council of Australia (MCA) has rejected the notion that coal prices were contributing to higher electricity prices in Australia, noting that coal share of electricity generated had reduced as more renewables were introduced.

As a result, renewable and gas generation set the price in Australia’s electricity market, MCA CEO Tania Constable said on Wednesday.

The MCA’s response comes after calls from the Australian Worker’s Union that the government needed to introduce a price cap for coal used in the production of electricity.

“Coal is not the problem here and it is misleading to suggest otherwise. Over 85% of all saleable coal mined in Australia was exported in 2021/22. Australian coal generated A$112.8-billion in export revenue in 2021/22, up 188% on 2020/21, driven by ongoing tight global markets,” said Constable.

“At a price cap of A$70/t of coal the government is considering, as reported in the media, most mines dedicated to a power station will not be able to meet the costs of production. The vast majority of coal production for domestic use is mined at sites dedicated to the domestic power stations and serviced by dedicated supply infrastructure, such as conveyors from the run-of-mine plant to the power-station fuel stacks. Each generator also has specific needs around coal quality, ash and energy content and trace elements,” Constable said.

She noted that only one power station in New South Wales shared coal export infrastructure, with a rail siding enabling delivery of coal from the mine to the power station using common rail infrastructure.

“Pricing of coal for domestic power stations depends on the commercial relationship between the mine and the power station reflecting the cost of mining and transport. It is supplied under contracts with price, quality and volume conditions with terms measured in years.

“It is worth noting that the energy security issues that emerged in early June were as a consequence of mechanical failures in generation taking out almost half the available generation capacity in the market, not a shortage of coal.

“Specifically, the electricity price and supply security crisis in June was the result of a shortage of electricity generation when mechanical failures forced more than 10 generator units across Victoria, New South Wales and Queensland to shut down,” said Constable.

“This drove the electricity price escalation in Australia which resulted from a shortage of electricity supply, not a shortage of coal or high international coal prices as a result of the Ukraine-Russia conflict.”