Australia facing decade of summer blackouts, higher energy prices without ‘urgent’ action

Australia faces a decade of energy instability unless “urgent” action is taken, with two states warned to brace for blackouts and higher prices this summer.

Australia faces a decade of energy instability unless “urgent” action is taken to invest in new power sources as the nation transitions away from fossil fuels, the regulator has warned.

Victoria and South Australia in particular are at risk of blackouts this summer as forecast demand is expected to exceed supply, according to the Australian Energy Market Operator (AEMO).

AEMO on Thursday released its annual Electricity Statement of Opportunities (ESOO) report, which serves as a blueprint for governments, energy generators and investors to plan for the decade ahead.

The damning 2023 report has ratcheted up AEMO’s prior warnings about the need to build new renewable energy generation and storage capacity to plug the gaps left by the closure of coal-fired power stations.

AEMO chief Daniel Westerman described the situation as “more and more urgent”.

“Quite simply, Australia’s energy transition is happening at pace,” he told The Australian.

“Our coal-fired power stations are closing down at the same time as demand for electricity is increasing and without urgent and ongoing investment in new sources of electricity, and the transmission that we need to connect it to consumers — there are significant risks to reliability.”

NSW’s Liddell Power Station closed in April this year. Picture: Saeed Khan/AFP

AEMO says it now predicts “larger reliability gaps” than in February’s update to the 2022 ESOO assessment, with “generator unplanned outage rates … forecast higher than previously”.

Over the next 10 years, AEMO says around 20 per cent of the country’s coal, gas and diesel generation fleet, representing 6730 megawatts (MW) of capacity, is set to close.

That includes NSW’s Eraring Power Station in August 2025, South Australia’s Torrens Island B Power Station and Osborne Power Station in 2026 and Hallett Gas Turbine in 2032, Victoria’s Yallourn Power Station in 2028 and Queensland’s Callide B Power Station in 2028.

“With up to 62 per cent of its coal fleet now expected to close before 2031, Australia’s [national energy market] is perched on the edge of one of the largest transformations since the market was formed over 20 years ago,” the report says.

“The scale of opportunity to meet an imminent and growing need for firm capacity, new forms of energy production, and significant consumer energy investments is unparalleled in Australia’s energy history. This ESOO shows that imminent and urgent investment is needed to meet this opportunity, or the reliability of the NEM will be at risk.”

Wind turbines in Waubra, Victoria. Picture: Carla Gottgens/Bloomberg via Getty Images

The report singles out Victoria as facing the greatest risk of blackouts — or unserved energy [USE] — this summer.

“Factors that influence when and how USE occurs include occurrences of generator outages and high demand at the same time as low wind and solar generation conditions,” the report says.

“For the coming summer, the Bureau of Meteorology is currently advising that hot dry conditions, with elevated bushfire risks, and El Niño weather patterns are likely.”

NSW is expected to experience similar shortfalls from 2025 when Origin’s Eraring Power Station closes, while Queensland faces reliability issues from around 2030.

AEMO says the “majority” of the predicted risks can be addressed if the current pipeline of renewable energy generation, storage and transmission projects is delivered.

More than 248 gigawatts (GW) of generation has been announced, but only 9.9GW has been committed to as of July 2023.

“Federal and state government initiatives, including transmission projects identified in the Integrated System Plan, and mechanisms delivering firming capacity, such as the Commonwealth’s Capacity Investment Scheme, can address many of the identified risks over most of the 10-year horizon, if delivered to schedule,” Mr Westerman said.

The Albanese government says the report proves that its plan to “turbocharge renewables is more critical than ever following a decade of Coalition energy inaction and neglect”.

Energy Minister Chris Bowen. Picture: Twitter

Energy Minister Chris Bowen said the former government had left Australia’s energy system vulnerable.

“After a decade of energy policy chaos, the Albanese Government is implementing overdue policy reform to deliver a cheaper, cleaner, more reliable energy system,” he said.

“The latest ESOO confirms our federal government programs, including Rewiring the Nation and the Capacity Investment Scheme, will improve the strength of the grid and reduce reliability risks. While the former government put its head in the sand and ignored repeated calls to bring on new supply and transmission, we are acting to ensure Australia’s energy grid is fit-for-purpose in the 21st century.”

Climate Councillor and energy expert Andrew Stock said the report “shows that accelerating the rollout of renewable energy, storage, and transmission projects is key to fortifying Australia’s energy supply”.

“Critical to this transition are not only sources like wind and solar but also supporting technologies like advanced batteries and efficient transmission lines that can bring this generated energy to where it’s most needed,” he said.

Stephanie Bashir, founder of renewable energy consultancy Nexa Advisory, said it was “not news” that coal and gas power had been identified “as being more unreliable than ever”.

“What has changed is that six months ago it was assessed by AEMO that all the reliability risks would be addressed by projects in the pipeline if we delivered them on time,” she said. “They won’t be, unless we pull our fingers out.”

Ms Bashir said, for example, the ESOO identified a gap of only 191MW of missing capacity to meet the reliability standard once Eraring closes. “The NSW government could easily address this gap by just slightly increasing the firming tenders underway,” she said.

Victoria faces blackouts this summer. Picture: Jason Edwards

“With a wealth of clean energy projects ready for implementation, Australia has no excuse for inaction. The consequences of maintaining our dependence on unreliable fossil fuels is a future fraught with climate and energy instability and risk. By industry, governments and communities working together to accelerate renewables, storage and transmission, Australia will ensure its energy future is both clean and reliable.”

But Shadow Energy Minister Ted O’Brien said the report showed Australia “is in imminent danger of the lights going out”.

“Australians are now paying some of the highest prices for electricity in the world, but they have no guarantee that when they flick the switch at home the lights will even come on,” he told reporters in Brisbane on Thursday.

“This is the risk we are now in. And this is a direct consequence of the policy suite of the Labor government. This is a radical experiment with Australia’s energy system under the Labor government and it is turning bad.”

Mr O’Brien said the situation was a “direct consequence” of Labor’s policies.

“Number one, Labor is forcing a premature closure of baseload power stations,” he said.

“Number two, Labor is restricting the supply of gas. Number three, Labor is stalling investment in renewable energy generation. Australia cannot continue down this pathway. It will leave Australians poorer and weaker and set future generations up for an even greater fall. Today’s report should be a stark warning to the government. Stop gambling with Australia’s future. The stakes are too high.”

Saxon Davidson, research fellow at the Institute of Public Affairs think tank, said the anticipated summer blackouts “are a direct consequence of net zero emissions policies that are forcing affordable and reliable baseload power generation off the electricity grid”.

“The current situation Australia finds itself in with record and rising energy bills, blackouts, and an increasingly unreliable energy grid are core features of Australia net zero future,” he said.

“Both sides of politics have failed us on energy policy by signing up to net zero without understanding baseload power is critical to everything we do. It is high time our leaders were honest and got serious about our nation’s energy challenges. It is astonishing that in the year 2023 how any political leader believes it is acceptable to risk Australians’ energy security in the name of net zero.”

Originally published as Australia facing decade of summer blackouts, higher energy prices without ‘urgent’ action