Solar power gets its moment in the sun, eclipsing coal
Coal-fired power is under mounting pressure from renewables with the amount of solar energy briefly eclipsing coal for the first time at lunchtime on Sunday.
Coal-fired power is under mounting pressure from renewables, with the amount of solar energy briefly eclipsing coal at lunchtime on Sunday, the first time that feat has been achieved since the National Electricity Market was created more than two decades ago.
Coal plummeted to a new record low of 9315 megawatts shortly after noon on Sunday, according to the University of Melbourne’s Dylan McConnell, while overall renewable energy including rooftop solar and wholesale solar represented 57 per cent of national electricity generation. The collapse in demand saw spot power prices fall deep into negative territory in the middle of the day across the east coast.
The move came as a powerful investor group backed by Andrew Forrest and Macquarie Group warned that coal plants could be closed a decade early under its blueprint for the power grid, while a $70bn renewable energy pipeline to replace it is in danger of being lost unless major reforms are introduced.
The Clean Energy Investor Group – whose members include Dr Forrest’s Squadron Energy, Macquarie, Blackrock and Snowy Hydro – said a string of changes were needed to cut the cost of capital and lure big name investors to Australia’s electricity market this decade.
The CEIG has called for the market to commit to a “step change” scenario, a move that would focus on hitting Paris climate agreement goals and result in a renewables-dominated grid, triggering early coal plant retirements.
One coal plant or unit would be cut every year from 2023 and major stations including AGL Energy and Alinta Energy’s Loy Yang power stations closed at least a decade earlier than planned should its system reboot proceed.
Nearly half of the current capacity of the power grid, some 22GW of coal generation, would close by 2040, requiring 51GW of solar and wind and 15GW of storage to be added in its place.
Investors have so far only committed to build 3GW of the 51GW renewable total, sparking concern by green generators.
“This is because clean energy bears excessive risk and revenue uncertainty,” the CEIG said in a report to be released on Monday. “That has caused an investment deficit which is predicted to be 20GW over the next 10 years and 48GW by 2042.”
Members of the CEIG are prepared to commit 27GW of wind, valued at $41bn, and 24GW of solar at $29bn if the right market conditions are in place.
A $7bn saving could be made if reforms were introduced that would cut the cost of capital by 100-250 basis points, according to estimates from the group, which represents 18 domestic and global investors.
It has called for Australia’s energy ministers to put the country on track with international markets by committing to net zero targets and creating a new electricity transition and security board to ensure ambitious state-based renewable targets are in sync with the national market.
It also wants the removal of hurdles that cloud revenue certainty for green investors and the chance for developers to interrogate decisions by market bodies.
“Adopting the Clean Energy Investor Principles would address the key risks faced by investors and align Australia’s energy investment landscape with international market expectations, unlocking the low-cost capital required,” CEIG chief executive Simon Corbell said.
“Focusing on reforms which address the need for timely and secure access to the grid, greater revenue certainty, contestability in transmission development and fit-for-purpose NEM governance will deliver the investment confidence needed – and at a cheaper cost.”
The intervention by the CEIG follows a furious debate within the industry over major reforms planned for the electricity market after 2025 as the sector and policymakers grapple with the best way of working through an accelerating transition to renewables.
Major investors sent a letter to energy ministers on Thursday urging them to oppose a mechanism that would pay coal generators to guarantee sufficient back-up capacity.
Clean energy companies say the move will blunt investment in new supplies and increase costs for consumers by subsidising old coal plants but power giant Origin Energy denied that a capacity mechanism was designed to extend the lifespan of plants using the fossil fuel.
Australia’s energy ministers late on Friday gave initial backing to a controversial new payment incentive to keep sources of power generation including coal in Australia’s electricity system, swatting away renewable investors who demanded they reject the plan.
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