Preparing for the end of coal from Newcastle

Climate Energy

Preparing for the end of coal from Newcastle

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The world’s largest coal port prepares to be Australia’s $100 billion green hydrogen hub and deep-sea terminal.

An Australian version of this story first appeared in The Fifth Estate

The website for the Port of Newcastle (PoN) on Australia’s east coast, north of Sydney, boldly states it is, “More Than a Port. Australia’s Deepwater Global Gateway. Diversifying for the Future.” 

This is an ambitious and forward-thinking purpose statement by a port that is currently the world’s biggest coal shipping terminal. PoN shipped out 159 million tonnes of coal worth $13.5 billion in 2020, roughly 123 large container ships a month, shipping coal to importing countries such as China, Japan and South Korea. 

Faced with the complete transformation of the global energy sector in the wake of the Paris climate agreement, the Port of Newcastle is facing an existential challenge. How to get ahead of the transition from coal to renewable energy and be ready for the emerging fossil-free world? And how can the port help ensure that the city of Newcastle, including its business sector and local community, are included in transition planning?

As Russia’s use of gas as a weapon in its effort to take over Ukraine makes energy security a more urgent issue, it’s clear that the move to locally-sourced renewable energy is now a priority the world over. Elsewhere around the world, thousands of port cities and communities that depend on extracting and exporting coal, oil and gas; from West Virginia and Port Arthur in Texas to Kalimantan in Indonesia and the Port of Vancouver, they all face the same massive transition challenge. 

Done well, [our region] could quickly become the exemplar for the entire nation,” PoN Chair Roy Green said at the time of his appointment to the role in 2017. “As before with the transition out of steelmaking, it will call upon the leadership and vision in local communities and business, including by the resources sector and related industries.

With that in mind, port executives have developed a two-pronged transition strategy and Plan for 2040 that includes a new Port of Newcastle Hydrogen Hub in partnership with Macquarie Group’s Green Investment Group and backing from the Australian federal government. The project has the potential to see 1 gigawatt of hydrogen capacity by 2030. The port is also planning for a $2.4 billion multi-purpose deepwater container terminal to diversify import and export shipping in the region beyond Sydney and, ironically, announced plans to move to 100% renewable energy by 2040 early this year. 

A green hydrogen hub in [the Newcastle region], underpinned by a 40MW electrolyzer, would support the development of new industries and contribute to Australia’s long-term economic and energy security,” Green said when the project was launched. The potential for new jobs – green jobs, long-term jobs, jobs in a coal-diminished world – is also important for the city and the region. 

Newcastle’s diversification plan for the port, city and the Hunter Valley region, home to 41 coal mines, doesn’t stop there. A newly launched regional renewable energy zone saw interest to the value of $73 billion in February in solar, wind, battery and pumped hydro projects. The city is also planning to extend its small airport to be ready for international flights with tourism growth in mind. 

“The diversification of the [region’s] economy from coal is the question that everything we do needs to answer,” said Alice Thompson, CEO, the Committee for the Hunter said. “Meanwhile Australia’s productivity has stalled and is behind global competitors. It is time for parties to work strategically and collaboratively to unlock the Port of Newcastle and the smart, modern and diverse industry it will catalyze and support.”

Newcastle’s diverse transition group has helped the region prepare for the changes ahead without the divisiveness seen in other parts of the world.

“To maximize our ability to get new opportunities like green hydrogen and large-scale renewable energy going in the region, we need to be able to start building for those opportunities now. The port is central to that,” said Warrick Jordan, coordinator of the Hunter Jobs Alliance. 

The Alliance is a union and community environment alliance focused on supporting the region through the structural change in energy and related industries in the region. Warrick and Thompson, along with local and state government representatives, businesses, unions and even local environmental organizations, are all involved in the effort to diversify. This regional collaboration has helped Newcastle prepare for the massive changes ahead without the divisiveness seen in other parts of Australia and the world.  

Currently shipping through the Newcastle Port is made up of about 90% coal. “The port and its shareholders have been pushing for four or five years now for a plan to get that down to 50% over the decade. They aren’t doing that for fun,” he said. “They are ready to invest in that so that we can be competitive in the long run.” 

“With the port, we have such a great physical transport asset and it is a competitive advantage, along with our rail and transmission infrastructure, that many of the regions we are competing with for new opportunities don’t have,” Jordan said. 

A major hiccup in June last year was an Australian Federal Court found, in a case brought by the national consumer and competition commission, that the two major ports in and near Sydney could, in effect, maintain their monopoly on shipping containers for 50 years. The ruling stated that the PoN would have to pay significant and commercially unviable compensation to Port Botany and Port Kembla operators if its traffic exceeds 30,000, 20-foot equivalent units (TEUs) a year if it develops a rival terminal. Port Botany is the biggest container port in its state of New South Wales by far, handling 2.5 million TEUs a year. This is despite the two ports being hampered by congestion issues that add delays and costs to shipments. Newcastle’s development plan would allow the port to increase its container handling from 10,000 TEUs currently to up to 2 million TEUs a year.

At the time of the decision, commission Chair Rod Sims said, “It’s a real setback for competition, it’s a setback for productivity, it’s a setback for the [state’s] economy.” 

An appeal has been lodged and there are hopes that a financial solution may be found, possibly within months. Right now, Newcastle is ready to spend almost $1.5 billion of its own money to develop its port to become an efficient, automated and competitive second container terminal area that could service not only Sydney and the Hunter region but the whole of the country’s east coast. 

With the green hydrogen hub and the potential for $100 billion in 80 renewable energy and battery storage projects, the state’s Treasurer Matt Kean said this would allow the region to continue to be the state’s “energy powerhouse,” it is likely there is significant interest in finding a solution to the state’s port standoff. 

“Being able to reconfigure Newcastle port’s operations to access new opportunities with a container terminal is really important because the future of the region is probably going to revolve around it in terms of our economic base,” Jordan said.

You’ve just gotta get on with it.

Jordan said the region isn’t putting its diversification plans on hold while it waits for a port’s resolution. 

“One of the biggest lessons we’ve learned in the region is, you’ve just gotta get on with it,” Jordan said. “I think people are just trying to do that in whatever way they can, whether it’s attracting green hydrogen or making use of renewable energy zones or building the capacity of SMEs, tourism, the defense industry, whatever it might be. When we get the green light, we have to be ready to go.”

Newcastle isn’t the first port to face the transition from fossil fuel exports. In the 1930s, Port Blythe in the U.K. was the largest coal port in Europe. In 2021, the port, after massive changes to its economic focus and some forward-thinking by port authorities and the local government, planned ahead to diversify. It is now a major clean energy terminal among other things. Other visionary ports, according to Green, include Gdańsk in Poland, Tauranga in New Zealand and Shenzhen in China. 

So what can other ports and cities facing the transition learn from Newcastle? 

“The key is to plan ahead,” Green said. “Undertake a forward-thinking analysis of the region including current and future competitive advantages and what will be superseded, then invest in future capabilities. Don’t get trapped in path dependency. If you are going to succeed, coordinated collaboration with stakeholders and central governments is essential. It’s complex and challenging and it won’t happen overnight.” 

Written by

Blair Palese

Blair Palese is co-founder and managing editor at Climate & Capital Media. She is also director of philanthropy at Australia's oldest ethical financial adviser. Previously she co-founded Australia and was CEO for ten years. She was head of PR for The Body Shop and communications director at Greenpeace internationally and in the US. Blair has worked for media outlets including Greenpages Magazine, the Washington Monthly and ABC in the U.S.