The international climate summit in Glasgow aimed to “consign coal power to history”. However, several major coal-consuming nations have already committed to phaseout fossil fuels in the 2030s. Australia is not one of them.
Its. recently released plan to reach net-zero emissions by 2050, the federal government modelled a scenario where the electricity sector still burns coal in 2050 – but only a very small amount.
Despite the federal government’s insistence on keeping coal alive, the states are making progress phasing it out. A state-by–state approach is more costly for consumers than a national, credible climate and energy policy.
Recent developments Grattan Institute analysisIt was found that if we manage the coal phase out well, we can keep the lights on while reducing emissions at low costs.
Coal economics don’t suit today’s grid
Australia exports far more coalWe consume more than we produce. We still have 25 gigawatts worth of coal-fired power plants, 23 of which provide power for the National Electricity Market (the NEM). These coal-fired power stations are ageing – two-thirds of this capacity is scheduled to close by 2040.
These plants are finding it difficult to stay profitable due to changing market conditions. Renewable energy has flooded into NEM in recent decades. Rooftop solar has dramatically cut demand for grid-electricity in the middle of the day, effectively eating coal’s lunch.
Wholesale electricity prices drop on sunny days because of the abundant wind and sun. they become negativeFinancially penalizing generators who generate power during those times.
What’s more, coal-fired power stations are less flexible than batteries, hydroelectric dams, and responsive gas-fired generators. This makes it difficult for coal plants to increase their output when electricity prices rise, or decrease when they are low or negative.
The economics of coal-fired generators simply aren’t well-suited for a system with lots solar and wind-powered power.
Coal stations closing earlier than expected
Poor economics combined with higher maintenance cost and increased risk of technical disaster make it difficult to justify the closure of coal plants.
A faster closure means less coal generation capacity for future years. For example, Eraring and Yallourn will be closed earlier than expected to reduce coal generation capacity by 1.5 gigawatts in 2030.
Nevertheless, the current closure schedule would still allow at least six coal-fired power plants to continue operating in Australia after 2040.
As noted by the CSIRO in July, this is incompatible with Australia pursuing the Paris Agreement goal to limit global warming to 1.5℃ this century.
What are the states doing about it?
Victoria’s Loy Yang A and B power stations use brown coal, making them some of the cheapest but most polluting plants to operate. Victoria also has legislated its commitmentVictoria plans to have net-zero carbon emissions by 2050, and to use half of the renewable energy by 2030.
Increasing the availability of renewable energy in the state will increase the likelihood of the remaining coal-fired power station being shut down. In fact, each Loy Yang plant’s owners have indicated that they are open to the possibility. their closure dates will come forward.
Queensland is more complicated, as it has Australia’s youngest fleetof coal-fired electricity stations. Five of them will close after 2040.
However, four of the five properties are either partially or fully owned and managed by Queensland. This means that the timing of their closures is both a political and an economic issue.
Queensland also has some the best renewable resources in Queensland, including vast tracts suitable for renewable energy projects. These resources are combined with the Queensland’s renowned renewable resources. 50% renewable energy target by 2030The state government has the power to pull the coal-fired generation system out of the system by 2040.
We need a strong, national strategy
Grattan Institute analysis finds that a mostly renewable system with no coal – and only a limited role for gas – can maintain a reliable electricity supply while slashing emissions cheaply.
This is because solar and wind have fallen in cost, and energy storage like batteries can help to smoothen out fluctuations in supply and demand. Gas is the most cost-effective backstop solution until hydrogen becomes more affordable.
This will require significant, timely efforts to achieve this result by 2040 or earlier. investment in the transmission networkIt allows states to share supplies within and between states. This reduces costs for consumers and allows them to be more efficient. Keeping a lid on the costs of transmission projects is also crucial – the risk of cost overruns is higherThe more complicated the project,
It will be difficult to ensure a smooth coal exit. For example, unexpected closures or breakdowns of coal plants can lead to shortages in electricity supply because investors in the electricity market don’t have enough time to build new capacity.
A national policy to coordinate the coal exit would reduce uncertainty in the electricity system.
Grattan previously recommended that coal plant operators set a time frame within which their plant will close. This was in addition to a recommendation by Grattan. payment of at least $100 million into an escrow fund. The operators’ money would be released only if the plant closes within its nominated window – if it exits unexpectedly, the money would be kept by the market operator to deal with any reliability problems.
If they want to eliminate coal-based NEMs by 2040 then the government could require that nominated closing windows occur before that date. Alternatively – and more efficiently – they could establish an emissions standard for the NEM with tradeable certificates, allowing market participants to meet the emissions standard in the lowest cost way.
Economists back carbon price, say benefits of net-zero outweigh costs
Despite overwhelming support for carbon pricing, the current political reality is that neither side wants to be seen as supporting any policy that could be compared to a carbon tax. Australian economists and the business community.
It is likely that the states will set the NEM’s renewable energy targets, which will determine how quickly it becomes coal-free. But if governments can muster the courage, our work shows that it’s possible to achieve a vastly lower-emissions electricity system in less than two decades.