Build replacements first before letting coal retire: EnergyAustralia

Australia must build replacement sources of power generation before allowing coal to exit the grid, the head of the country’s third largest energy retailer has urged.

Australia must build new sources of electricity before allowing coal to exit, the head of the country’s third largest energy retailer has urged, after a stoush broke out over a proposed system allowing state governments to seek temporary extensions for power station closures.

The federal government and states are mulling new powers to allow temporary extensions for power station closures, which potentially would extend the lifespan of coal power plants.

Critics vehemently oppose prolonging coal, but EnergyAustralia chief executive Mark Collette said Australia will risk energy grid instability if new renewable energy sources did not match with the retirement of fossil fuel generations.

“Our approach to the energy transition is pretty simple, build the new system before the old one retires,” Mr Collette told The Australian.

He said EnergyAustralia has not yet determined its final position on the so-called Orderly Exit Management Framework, but initial conclusions indicate the policy will provide certainty without discouraging new renewables.

Mr Collette’s comments came as EnergyAustralia opened NSW’s first gas power station in more than a decade, the $300m Tallawarra B gas power station, which will also be able to run on green hydrogen should the fuel source become commercially available.

The establishment of a so-called gas peaker is a boost to NSW’s grid, as energy transition sees wild swings in power generation.

The Australian Energy Council, which represents electricity and gas companies, on Monday urged a rethink of the OEM scheme as it would threaten the investment signals for renewable energy investment.

Australia can ill-afford to disincentivise new renewable energy projects coming to fruition as it struggles to meet its ambitious transition target. The federal Labor government has set the target of having zero emission generators provide more than 80 per cent of the country’s power by the end of the decade. But Australia is well behind the pace needed to make the target.

In a move widely seen as an indication of Labor’s concern, Energy Minister Chris Bowen last year announced a massive underwriting scheme to get renewable energy developers to commit to new projects.

The Capacity Investment Scheme guarantees developers a minimum return on new solar and wind projects.

Under the scheme, should the wholesale electricity price fall below an agreed threshold, taxpayers will compensate the renewable energy project.

Mr Collette said EnergyAustralia will participate in the new scheme through two new batteries, but said the effectiveness of the plan to ensure grid stability is dented by its failure to include gas.

“When you specify that you want firming capacity, the best way to do that is a capacity investment scheme that ensures that the people who invest are rewarded for that. Australia is going down a different path where you reward some technologies but not others,” Mr Collette said.

“But gas will have a big role to play until there is a zero emission firming technology.”

The proliferation of renewable energy has pushed wholesale electricity prices in negative territory at near record levels, but when the sun sets and demand increases then prices soar.

An increase in gas generation — which is used as a so-called peaker — would help meet demand and cushion the impact on prices.

The onus on bolstering Australia’s firming capacity was also encapsulated by widespread blackouts in Victoria when wild weather caused damage to transmission lines and cut off major generators, most notably AGL Energy’s Loy Yang A coal power station. Australia’s energy market operator used emergency powers to require generators such as gas peakers to dispatch — stabilising the state’s energy grid.

Mr Collette said the new plan will supplement its existing Tallawarra A gas power generator, which would typically run for longer periods of time but has a slower ramp-up speed. EnergyAustralia said it will invest $90m to make Tallawarra A more efficient and also capable of running on green hydrogen once the fuel is available.

Originally published as Build replacements first before letting coal retire: EnergyAustralia