Concerns that rushing the exit of coal could threaten Victoria’s ability to keep the lights on

Energy experts are warning that rushing the exit of coal from the state’s energy mix could have dire consequences.

Rushing the exit of coal from Victoria’s energy mix could cause cost blowouts and delays that would threaten the state’s ability to keep the lights on, energy experts warn.

Alinta Energy has also acknowledged the planned closure of Loy Yang B in 2047 would not be a “unilateral decision” on its part, as the energy market operator forecasts all of Victoria’s coal-fired power stations will close in a decade.

Under a new plan for the energy grid, released by the market operator on Thursday, major poles and wires projects need to be fast-tracked as more renewable energy comes online.

Loy Yang power station is due to close in 2047. Picture: AAP

But experts are warning one of the biggest challenges facing transmission projects required to shore up the grid will be securing a social licence.

St Vincent De Paul policy director Gavin Dufty said strong engagement was needed with communities who had never had transmission lines.

“Communities get upset, then we don’t build the transmission lines, then we build things that are more expensive,” he said.

“If they get it wrong we are all going to have to pay for it.”

Grattan Institute energy program director Tony Wood said there would be problems with reliability if transmission networks were not upgraded.

“Wanting to do everything faster, it essentially ends up being slower and more expensive,” he said, pointing to major infrastructure projects as examples.

Alinta Energy executive director Daniel McClelland said: “We don’t want to see dislocated coal exits send bills higher for customers, compromise our energy security, or negatively impact our employees or the communities in which we operate”.

But Mr McClelland added: “The closure date for Loy Yang B won’t be a unilateral decision on our part”.

He said adopting the Energy Security Board’s planned capacity mechanism to support on-demand generation was “essential and urgent” to deliver on the market operator’s plan.

Alinta has advocated for the mechanism to include coal and gas until 2029, with a review of its inclusion from that point forward.

“If we want energy security through this transition, we have to legislate for it, and incentivise the market to provide it,” he said.

But Victoria does not want fossil fuels to be eligible for payments to ensure reliability in the grid, under the proposed mechanism.

Daniel Andrews acknowledged coal-fired power was “not going to be here in another 15, 20 years”.

“The Australian Energy Market Operator is convinced that our coal-fired power stations are probably a thing of the past in the early part of the next decade,” the Premier said.

“Coal is really running for the exits in some ways.”

AGL, which owns the Loy Yang A station due to close between 2040 and 2045, said it was strongly committed to decarbonisation and would consider the new plan its strategic direction review.

Australian Petroleum Production and Exploration Association spokesman Damian Dwyer said the roadmap was “another wake-up call” for the state government and its plans to phase out gas.

Mr Dwyer said: “Given we have the national energy market regulator outlining in a 30-year roadmap the ‘crucial’ role gas will play for decades partnering with and stabilising renewables to keep the lights on, it’s time the Victorian government shelved its substitution roadmap once and for all”.

Warning as coal power to end sooner than expected

Victoria’s coal-fired power stations are expected to shut down in a decade — 15 years earlier than expected — in the energy market operator’s sweeping plan to transform the electricity grid.

Renewable energy will provide 83 per cent of our power by 2030, with 60 per cent of the nation’s coal generators to be mothballed by then, and the nation will be powered entirely renewables at certain times within just three years.

In its finalised plan for the grid, to be released on Thursday, the market operator warns power bills will rise and the reliability of our electricity will be put at risk if the death of coal is not properly handled in a “once-in-a-century transformation”.

It is now pushing to fast-track major poles and wires projects — including two for Victoria worth almost $7bn — to bring online more solar and wind and provide “valuable insurance” against the demise of coal.

Victoria's Yallourn coal-fired power station will shut down in 2028. Picture: Jason Edwards

Loy Yang B, which provides about 20 per cent of the state’s power, is currently slated to remain open until 2047.

Earlier this year, AGL brought forward the closure date for Loy Yang A from 2048 to 2040-2045.

But the market operator’s plan assumes Victoria’s coal-fired stations will be gone in a decade.

It recommends spending $12.7bn on 10,000km of new transmission lines that will deliver net market benefits totalling $28bn.

This will help activate a nine-fold increase in solar and wind generators, along with a trebling of the on-demand capacity provided by gas, hydro and batteries to fill the coal void by 2050.

By then, the grid will require double the power it currently produces to cover the electrification of transport, industry and our homes.

While Australia is currently installing solar and wind at the fastest rate ever, this speed will have to be maintained every year for a decade, then doubled to 2040 and again to 2050.

About a third of homes now have rooftop solar, a rate expected to rise to more than half in 10 years, with many to be complemented by batteries so households are self-sufficient.

The market operator’s plan does not factor in the Victorian government’s offshore wind plan. It said while offshore wind had “great potential”, it was currently more expensive than onshore wind generation, but it could feature more prominently as costs were reduced.