Energy Transition Australia: A “Rising Tide” of RE


Australia’s energy transition to renewable energy will disrupt the national energy market. One report states that five of the remaining 16 coal-fired power stations in Australia may no longer be financially viable by 2025. This would be due, in large part, to the massive influx of cheapsolar and windpower onto the electrical grid.

Speed of Australia’s energy transition underestimated

Australia’s energy transition and the disruption of the domestic energy market has been the subject of a new report. Jointly supported by Green Energy Markets (GEM) and the Institute for Energy Economics and Financial Analysis (IEEFA). This is a comprehensive analysis, taking into account existing projects and those that have been initiated. This report allows clients to assess the current state of the market.

Tristan Edis, director of GEM, called it a “tidal wave” of new clean electricity. According to him, this very strong development of renewable energies (RE) had been largely underestimated by the political and economic authorities. The report shows that the consequences of this development on the coal-fired power plant fleet had also been underestimated.

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RE forces the hand of Australian coal

The massive advent of renewable energy in the Australian market will therefore have a significant impact on the coal fleet.

The advent of renewable energy: 70 GWh between 2018 and 2025

The report highlights that a huge amount of renewable energy is being added to the Australian electricity market. The two groups found that solar and wind plants built between 2018 and 2025 would add 70 GWh to the new electricity supply. This corresponds to more than a third of what is currently used on the national network each year.

By 2025, the report projects that RE capacity will include 8 GW of utility-scale solar and 12 GW of wind. But also 22 GW of rooftop solar energy.

The 16 national coal-fired power plants threatened with closure

The development of RE will have a strong impact on coal. Several coal-fired power plants in the national electricity market may not be financially viable by 2025. At least one of the country’s 16 power plants is at risk of premature closure due to their low flexibilities.

If one of them were to close prematurely, it would change the viability of the remaining ones. If the price of electricity would increase in the very short term, it would decrease again as soon as RE installations would be developed. Indeed, the report estimated that revenues from individual coal-fired power plants would likely decline. Thus increase in 2025 from 44 to 67% of what they were in 2018.

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Complementing RE and the decline of coal with natural gas?

78% decline in gas production by 2025

The report highlights the need for a national transition plan to guide the inevitable phase-out of coal-fired power plants, which may accelerate sooner than expected. Indeed, the report projects that gas-fired generation will decline by 78% and coal by 28% by 2025 compared to 2018 levels. But then, what energy would complement solar and wind power?

Indeed, solar and wind alone cannot provide the entire national electricity market, as these sources are constrained by their environments. Another source of energy, currently coal, must be added. However, coal-fired power plants are old, environmentally unfriendly, and investment in them may be counterproductive, according to the report.

According to Mr. Edis, this complementary energy source must be sustainable, i.e. “flexible, to adapt to changes in wind and solar production”. This new, more flexible generation could come from several elements: batteries, pumped hydro, demand side management (users being paid to reduce their electricity consumption at peak times) and, potentially, gas.

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But the government promises a resumption of gas activity

New gas-fired plants would probably be the most expensive option. Nevertheless, the government maintains that fossil fuel is essential and has promised a “gas recovery” after the recession. The construction of new gas-fired power plants is therefore possible.

In short, the massive growth of RE is drastically changing the Australian electricity market. These major changes must be complemented by accompanying policies. On the one hand, the development of renewable energy, and on the other, the decline of coal.

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