Reading holimagimon's spost on the CXY thread, there is going to be a huge difference in terms of the 'cost' of emisons between gas and coal as a fuel source for power.
How is this going to effect BLK given their resource is all lignite?
If they can't use CTL, BLKs resource is much much less valuable right?
"Australia's energy sector accounts for 35 per cent of total emissions. The power sector will be turned on its head.
Brown coal, now the cheapest source of power generation, will become the most expensive and value of brown coal-fired power plants is expected to fall by up to 80 per cent.
Gas, which is about 50 per cent more efficient than coal in terms of its emissions, will become more competitive. And the wind, solar and hydro sector, helped along by the Government's proposed 20 per cent mandatory renewable energy target, is expected to attract billion of dollars in new money.
Investors are already circling. British gas giant BG Group tried - and failed - to get Origin's blessing for a $13.6 billion takeover last month. Royal Dutch Shell and Petronas of Malaysia both bought into the Queensland coal-seam gas industry, taking up stakes in Arrow Energy and Santos projects, respectively. And this month a Japanese company, Mitsui, bought the Bald Hills windfarm project in South Gippsland.
Still, Mr Molitor says the market is underestimating the change.
"If you look at the scale of reductions required in Australia and the timing of those reductions and you look at the fact that gas is now being priced upwards, I would argue that there is still a dramatic mismatch between the scale of the problem and the size of the response."
Companies like Origin, AGL and Truenergy have diversified away from coal-fired generators into gas and renewable energy. In fact, Citibank analysts estimate that AGL and Origin, which are both listed, will be net beneficiaries from the new scheme, adding up to 36c a share for Origin and 55c for AGL.
Richard McIndoe, managing director of Truenergy, which owns brown coal-fired power stations in Victoria, says the industry needs compensation and incentives to invest in cleaner technologies, such as carbon capture and storage.
"Industry and government modelling has shown that some sectors of the generation industry here in Australia will have value erosion of up to 80 per cent plus of their net present value," he told the Herald. "That isn't just an issue for equity, it becomes an issue for the banks lending to that sector as well.
"And it certainly raises a major concern over how the Government will attract future investment in the low emissions technology."
Truenergy, which is owned by Hong Kong company CLP Power, has pledged not to build any more coal-fired power stations and has invested in gas, solar and windfarms.
Black coal-fired plants are less emissions-intensive. Even so, their value is expected to drop between 30 and 40 per cent under a carbon trading scheme, enough to potentially derail the sale of NSW's electricity assets.
The Australia Institute estimates the carbon liability of the NSW-owned black coal-fired generators between 2010 and 2030 is just over $15 billion. That's more than some analysts' valuations of the state's generation and retail assets combined.
Origin, AGL and Truenergy are all expected to look at the assets. But Mr McIndoe says "without some clarity on [carbon liability], it's very difficult to assess valuation either on the generation assets or the retail assets."
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