EnergyAustralia calls for orderly exit of coal-fired power plants
EnergyAustralia, owner of two big coal-fired power plants, wants a plan in place for the orderly exit of the fossil fuel.
Power giant EnergyAustralia will call on governments for a new policy to plan the orderly exit of coal-fired plants from the electricity system amid a growing energy crisis.
The grid operator has also flagged concern over the lack of back-up generation being built.
EnergyAustralia, which owns the big Yallourn and Mt Piper coal-fired power stations in Victoria and NSW respectively, is under short-term pressure to keep the fossil fuel in the energy mix after a string of big units suffering breakdowns amid a broader crunch in the national electricity market.
But it also wants a long-term plan to co-ordinate the orderly shutdown of the nation’s coal fleet, which still supplies up to 60 per cent of demand, as fears grow that the premature exit of the fuel could spark higher prices and a less stable grid.
EnergyAustralia managing director Mark Collette said a mooted payment mechanism, which would put incentives in place to stop the early closure of power plants and create long-term signals for investment in dispatchable generation, might not be enough.
“An orderly ramp-down and check-out of coal and check-in of new capacity needs the policy work of the Energy Security Board completed, particularly on a capacity mechanism. This may not be enough, though. Australia may need a policy approach to plan coal check-out dates. A steady and boring transition should be our goal, not a roller coaster ride,” Mr Collette will tell the Australian Energy Week conference on Tuesday.
The warning presents a fresh challenge for the Albanese government as it battles an unruly market since taking office, including soaring wholesale electricity prices, a squeeze on gas and calls for immediate policy action to ease a hit to big manufacturers and household bills.
The Australian Energy Market Operator, which runs the power grid, will also outline concern over the lack of back-up power such as batteries, gas peakers and hydro, given its long-term plan for 60 gigawatts of firming capacity by 2050, triple current levels.
AEMO chief executive Daniel Westerman will tell the energy conference that while back-up power is absolutely critical for the system, he is worried that investment in firming capacity is not taking place at sufficient scale currently.
EnergyAustralia’s Yallourn station in Victoria – which started operating in 1974 – supplies 22 per cent of Victoria’s electricity and 8 per cent of the national electricity market, but has been under pressure for several years as Australia’s national power grid accelerates a transition to renewable energy.
It will close in mid-2028, more than four years earlier than its planned retirement date of 2032, after striking a confidential deal with the Victorian government. Meanwhile, the final NSW coal power plant will be shut by 2040 at the latest after EnergyAustralia’s decision to bring forward the closure date of its Mt Piper facility by at least two years in a bid to hit new green climate targets.
Citing Origin Energy’s decision to consider closing Australia’s largest coal plant, Eraring, by mid-2025 – some seven years earlier than planned – EnergyAustralia will say the move to renewables may not be smooth.
“In phase one, we saw three major coal check-outs over about 10 years: Wallerawang, Hazelwood and Northern. We now face over 15 check-outs in less than 20 years, many possibly a lot sooner. This is massive, a very large change, and we should not assume it will be naturally orderly,” Mr Collette will tell the conference.
“There are too many uncertainties to assume the existing markets and structures will be fit for purpose for phase two. I’d like to see the new flexible capacity check in before coal checks out. In the scale of the next stage of the energy transition – three and a half times more solar and wind than we have today by 2030 – a bit of insurance along the way for our customers is prudent.”