Latest News

Renewable energy could render five of Australia’s remaining coal plants unviable by 2025

Up to five of Australia’s remaining 16 coal power plants could be financially unviable by 2025 due to a flood of cheap solar and wind energy entering the electricity grid, a new report suggests.

An analysis by two groups – the consultants Green Energy Markets and the Institute for Energy Economics and Financial Analysis (Ieefa) – found previous estimates had understated the amount of renewable energy likely to enter the national electricity market in the next five years, and its ramifications for the ageing coal fleet.

Their report said it underlined the need for a national transition plan to guide the inevitable shift away from coal-fired power, which could accelerate sooner than expected.

The two groups found solar and wind plants built between 2018 and 2025 would add 70,000 gigawatt hours of new electricity supply – equivalent to more than a third of what is currently used across the national grid each year.

They estimated renewable energy would make up 40% and 50% of electricity by 2025. It would force output from coal and gas-fired power stations to fall by 28% and 78% respectively over the seven years.

The report said at least one coal plant was likely to shut earlier than planned in addition to the scheduled closure of Liddell power station, in the Hunter Valley, in 2023.

Johanna Bowyer, from Ieefa, said coal and gas would be displaced because the fuel for wind and solar energy is free, and renewable energy farms could typically sell their electricity on the market at prices “close to zero”.

Tristan Edis, director with Green Energy Markets, said the “tidal wave” of new clean electricity was much greater than what government authorities or market analysts contemplated just two years ago.

It meant the “days of baseload electricity are over”, he said.

“It’s been cleared out of town by solar,” he said. “We need a different type of technology that can fill the gap, and duck and weave to give what we need around solar.”

The findings mirror those from other electricity market experts, including Kerry Schott, the chair of the Energy Security Board, who told Guardian Australia last year coal plants were making little money and were likely to shut sooner than planned.

Data last year showed there had been a fall in investment in new large-scale clean energy after the national renewable energy target was filled and not replaced in 2019. Experts had expected that would lead to a fall in solar and wind farms connecting to the grid from 2022, but Edis said that had changed due to substantial commitments by the Queensland and Victorian governments and large corporates including Amazon.

Bowyer said the new analysis found the shift by 2025 would be likely to push down the average wholesale electricity price to 2015 levels. It meant revenue at coal and gas-fired plants would be hit on two fronts – they would not be able to sell as much electricity and the price of the electricity would be lower.

The groups estimated revenue for individual coal plants on the wholesale spot market was likely to fall by between 44% and 67% between 2018 and 2025. Earnings before interest and tax would plummet up to 119%, they said.

The hardest hit generators were likely to be the Eraring, Mount Piper and Vales Point coal plants in New South Wales, Gladstone in Queensland and Yallourn in Victoria. The five plants are currently scheduled to shut between 2029 and 2043.

If one were to close early it would change the viability of those that remained as they would benefit from a short-term increase in electricity prices, but prices would be expected to reduce again – and the financial pressure to increase – as more renewable energy came online.

Dylan McConnell, a research fellow at the University of Melbourne’s Climate and Energy College, said the report’s findings were consistent with what he expected given the crash in wholesale electricity prices. They were so low it was hard to justify any investment in coal power, including on basic maintenance, he said.

“I think you could bring forward the closure dates of all coal plants five years [from their scheduled shut date] and it would be closer to the truth. But the specifics will be messy,” McConnell said.

Edis said new flexible generation needed to replace coal could come from a number of sources, as identified by the Australian Energy Market Operator (Aemo) in a blueprint for an optimal grid last year. They include batteries, pumped hydro, demand management (users being paid to reduce electricity use at peak times) and, potentially, gas.

Aemo found new gas-fired power was likely to be more expensive than other options, but the Morrison government argues the fossil fuel is essential and has promised a “gas-fired recovery” from recession. It is considering building a new gas plant with taxpayer’s money, and wants to underwrite several others by instructing the government green bank, the Clean Energy Finance Corporation, to support gas developments.

Edis said the solution would best be driven by either a carbon price signal or a model similar to the New South Wales clean energy legislation that is designed to underwrite 12 gigawatts of new solar and wind energy and 2GW of long-duration storage. The Green Energy Markets/Ieefa report did not include the NSW laws, which will largely take effect after 2025.

He urged the government not to repeat its campaign to pressure Liddell’s owner, AGL, to keep coal-fired generation open longer than necessary.

“Rather than propping up these plants which are getting very old, we need new government policies that support private-sector investment in dispatchable power plants that will be viable over the long term,” Edis said.

“To be viable they need to be highly flexible to work around changes in wind and solar output. And they need to be low emission if we are to deliver on our climate change obligations.”

Read More

Show More

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker