With the Federal Government indicating that 5GW of coal will exit earlier than expected by AEMO's schedule, it is key that the Government starts planning for these exits.
Governments and the energy industry need to have an honest conversation with communities and workers about the coal closure schedule.
The Australian Government's Emissions Projections show that 5 gigawatts (GW) of coal-fired generation capacity will close earlier than indicated by the current official schedule published by the Australian Energy Market Operator (AEMO).
The Australian Government’s Emissions Projections show there will be 14 gigawatts (GW) of coal capacity in Australia in 2030. This indicates that 5GW of coal capacity will close earlier than expected in the current official schedule published by the Australian Energy Market Operator (AEMO). This is in addition to 6GW of coal capacity that is already scheduled to close. This represents a 44% drop in Australia’s total coal fleet over the next ten years, based on the current Morrison Government’s own statements to the Glasgow Climate Conference.
This represents a 44% drop in Australia’s total coal fleet over the next ten years
IEEFA analysis found that the Australian Government Department of Industry, Science, Energy and Resources’ (DISER) Emissions Projections imply that open coal generators would run at only 80% of their 2019 levels in 2030 on average. Further, if the coal generators that have the earliest closure dates were assumed to be brought forward to meet the Federal Government’s projections, that would mean that by 2030, Eraring would close (rather than exiting over 2030-2032), half of Bayswater would close (2 of 4 units) and half of Gladstone would close (3 of 6 units).
It should be noted that the Federal Opposition’s Powering Australia plan indicates that renewable energy penetration would grow to 82% by 2030.
This surpasses AEMO’s ISP 2020 Step Change Scenario – the fastest renewables uptake scenario in the 2020 ISP – which found renewables would provide 63% of generation in 2030, and the coal capacity would be 12GW in 2030.
Thus, the Opposition’s plan, like the current Australian Government’s plan, implies that coal capacity will exit sooner than expected by AEMO’s official schedule. Governments and the energy industry need to have an honest conversation with communities and workers about the coal closure schedule.
Delay tactics, such as introducing a capacity payment to be given to coal generators, will extend the lifetime of ageing coal generators, hurt investors in new low emissions plant and undermine the ability of the federal government to meet their own Emissions Projections which they have taken to Glasgow.
Further, delaying the inevitable coal generator closure through a capacity payment will not provide any certainty about when they will exit, and will instead confuse the situation for investors, the energy industry and affected communities. The capacity payment could also cost consumers billions each year.
The capacity payment could cost consumers billions each year.
The Opposition plans to continue the development of a capacity payment. The Powering Australia plan states: “Labor will work cooperatively with the States and Territories following the Energy Security Board’s proposed reforms.” Labor has included design principles, such as that it “must encourage investment in renewable energy” and “be a bridge to dispatchable technologies like pumped hydro, hydrogen and batteries.”
However, given the dramatic pace of change in energy transition, IEEFA recommends a more targeted approach with a clear plan to transition to renewables and storage.
A clear, realistic, enforceable schedule setting out the closure dates of each coal generator is needed, as is a just transition plan to support the affected communities and workers. This will be better for power system reliability and provide greater certainty for communities to prepare and plan for their future.