Australia’s energy market operator is preparing for more coal-fired power stations to close down many years earlier than planned and expects all of Victoria’s coal plants to be shut by 2032, demanding a massive expansion of renewable energy and 10,000 extra kilometres of power lines to connect the grid.
In its official 30-year road map released on Thursday, the Australian Energy Market Operator (AEMO) said it expected 60 per cent of the eastern seaboard’s coal fleet to exit the electricity grid within the next decade by 2030 while the last remaining plant will shut by 2042.
AEMO, which manages the electricity system across the country, has spent the past two years consulting 1500 stakeholders to deliver its Integrated System Plan to show what it expects the energy grid will look like out to 2050.
In order to maintain reliable and affordable power during the transition to clean energy, AEMO chief executive Daniel Westerman said that by 2050, wind and solar farms must grow ninefold and the amount of backup supply for renewables must triple, while 10,000 kilometres of new power lines is needed – enough to link Sydney to Mumbai.
“It is urgent but it is achievable. And we need to act now,” Westerman said.
Dispatchable power projects include fast-start gas plants, big batteries and pumped hydro that would be on standby to supply power to back up renewables when the wind isn’t blowing and the sun isn’t shining.
“We’re calling for these transmission projects to be progressed as urgently as possible, both because they deliver significant benefits to consumers as well as protect consumers against the potential for sooner-than-expected coal closures,” Westerman said.
AEMO did not model offshore wind power because it was “currently a higher-cost solution than on-shore options” and government had not finalised industry regulations.
The strain on the eastern seaboard’s coal fleet was highlighted when AEMO shutdown the electricity market two weeks ago as coal plants across the grid withdrew large amounts power supply, following technical failures at a number of ageing plants, while others were powered down as their profitability crumbled due to the skyrocketing price of coal.
Power bills for hundreds of thousands of households will rise sharply next month, driven upwards by spiking fossil fuel prices following international bans on Russian energy exports. The costs of multiple coal plant failures have also contributed to bill shock.
“I think what recent events have showed us is the need to really accelerate this investment into renewables and decouple ourselves from international markets and international price shocks and deliver the lowest cost, most reliable and secure energy from Australian homes and businesses,” Westerman said.
While Australia presently relies on burning coal to supply two-thirds of electricity in the nation’s main grid, the accelerating roll-out of cheaper-to-run wind and solar farms and booming uptake of rooftop solar panels have been pummelling coal plants’ profits and squeezing them further out of the market.
At the same time, investors, consumers and governments are increasingly shunning planet-heating fossil fuels because of concerns about climate change, making it more difficult for power companies to continue investing in their ageing, expensive plants.
“The economics of investment are pointing investors towards renewables and policymakers are encouraging investment in renewables … and consumers are choosing. A third of all homes now have rooftop solar on them,” Westerman said.
In the past 18 months, EnergyAustralia has announced it will bring forward the closure of its Yallourn coal-fired power station in Victoria’s Latrobe Valley by four years to 2028, while Origin Energy has notified the market it will accelerate the closure of Eraring, the nation’s largest coal-fired generator, from 2032 to as early as 2025.
Victoria’s brown coal plants supply the bulk of the state’s power and are all located in the Latrobe Valley. They are currently scheduled to be the last to shut down, with closure dates running to 2045. AEMO’s projection of their closure by 2032 suggests the operators AGL and Alinta will accelerate their plans by more than a decade.
AEMO’s report warned soaring fossil fuel prices amid the international energy crunch may cause coal plants to close even earlier than its current modelling anticipates.
“The gas and coal price volatility hitting global energy markets from the first half of 2022 places additional pressure on the profitability of Australia’s generators, raising uncertainty – and the possibility of unexpected early closures,” the road map said.
Under its “Rewiring the Nation” policy the federal government has committed to upgrade electricity transmission lines, according to the plans outlined in AEMO’s road map, and harness booming solar and wind farms.
The government will invest $20 billion in government-funded loans to transmission companies, at a lower cost than private finance, to reduce the cost of network expansion.
Federal Climate Change and Energy Minister Chris Bowen said on Wednesday he welcomed the upcoming release of AEMO’s plan as he laid out the government’s plans to enshrine its goal to achieve 43 per cent emissions reduction by 2030.
“Let me say this is a world-class document. It is a road map for the transmission revolution the country needs,” Bowen said.
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