Australia Sees Renewables Boom Forcing Earlier Coal Plant Closures

(Bloomberg) -- Australia’s biggest grid has slashed its forecast for the end of coal-fired power by five years, as the nation’s households drive a world-leading transition away from the dirtiest fossil fuel.

The last coal plant will retire in 2037-2038 under the most likely scenario, the Australian Energy Market Operator said in its draft biennial Integrated System Plan for the National Electricity Market, compared with 2042-2043 under the plan published in June 2022. Replacing the generators and meeting increasing demand means capacity will need to almost triple by 2050 with the capital cost of all required generation, storage, firming and transmission infrastructure seen at A$121 billion ($81 billion) a year, it said. 

Australia has become a test case for the global energy transition, with an aging coal fleet and huge deployments of rooftop solar helping make it the world’s most volatile power market, according to Rystad Energy. Households are continuing to install panels at a staggering pace, which will reduce their demand but also lead to surging supply and increase the need for backup generation and storage, Thursday’s report showed. 

“The lowest-cost pathway for secure and reliable electricity is from renewable energy, connected by transmission, supported by batteries and pumped hydro, and backed up by gas-powered generation,” AEMO Chief Executive Officer Daniel Westerman said. “The transition is urgent and faces significant risks if market and policy settings, social license and supply chain issues are not addressed.” 

Other Key Points 

• Grid-scale renewable generation needs to triple to 57 gigawatts by 2030 and rise to 126GW by 2050
• Firming capacity from batteries, hydro and gas-fired generation needs to almost quadruple by 2050 to 74GW
• Support is needed for a quadrupling of rooftop solar capacity by 2050 to 72GW

Apart from reducing demand, rooftop solar contributed about 12% of the electricity to the grid in the first quarter of this year — more than grid-scale solar, wind, hydro or gas, the report said. Renewables accounted for almost 40% of total energy delivered through the NEM in the first half, and peaked at a 72.1% share in October.

Coal remained Australia’s largest power source in the third quarter, at 56.3% of the total, according to the latest AEMO data, down from 58.6% a year earlier. Consultations on the draft plan will continue until February, and the AEMO will publish a final plan in June. 

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