By Nick Toscano
Power and gas giant Origin Energy’s boss has warned Australia is under-prepared as it drifts closer toward a decade of extraordinary upheaval for the electricity grid when all remaining coal-fired generators are expected to close.
While coal has been Australia’s main electricity source for decades, its years of powering the grid are numbered, as utilities face spiralling costs to maintain ageing power stations and intense competition from cleaner and cheaper renewables.
Origin CEO Frank Calabria is leading the industry’s push for a comprehensive redesign of Australia’s energy market rules.Credit: Louie Douvis
At least half of eastern Australia’s coal-fired plants are due to shut down within 10 years, while the market operator expects coal to leave the grid entirely by 2040. Efforts to clean up Australia’s polluting electricity sector depend heavily on replacing fossil fuels with more wind, solar and hydropower projects.
But balancing a system increasingly dominated by less-predictable renewables is much more challenging, says Frank Calabria, who is running Australia’s biggest power and gas retailer, adding the need for long-term vision and policy certainty.
Calabria is leading the industry’s push for a comprehensive redesign of Australia’s energy market rules, which he says are no longer fit for purpose and will be unable to drive the multi-decade investment boom needed to transform the grid and minimise the threat of power shortages or price spikes after coal’s exit.
“We’ve got this enormous transformation of the energy sector required, and therefore the amount of investment, new technology and scale needs to be put into that context,” Calabria said.
“We need to do it as smoothly as possible for customers, and we need to make sure the lights are on at all times.”
Much of the federal government’s energy transition focus centres on Australia’s 2030 targets, which include delivering a 43 per cent emissions cut and more than doubling the share of renewables in the grid from 40 per cent to 82 per cent.
The Capacity Investment Scheme, launched by Climate Change and Energy Minister Chris Bowen, aims to turbocharge the financing of new renewable projects and dispatchable assets, such as big batteries (for when it’s not sunny or windy), out to the end of the decade.
Origin is investing heavily in more renewables and batteries to replace retiring coal, and Calabria backs the government’s 2030 targets. But he warned the energy transition “does not end in 2030”, and difficult reform decisions for the 2030s and beyond must not be kept in the “too-hard basket” or left too late.
“One of the features today is decisions get made, but they get made very late, and they tend to get made late against an urgency or real need,” Calabria said.
He pointed to the need for more fast-response gas-fired power stations, known as “peakers”, which the Australian Energy Market Operator (AEMO) warns will play an infrequent but critical role covering supply shortfalls during long periods of low wind and sunlight.
Last winter, gas-powered generators ran much harder than usual as a protracted wind lull collided with a burst of cold weather hiking electricity and gas demand from home heaters. Unlike grid-scale batteries, which exhaust their stored energy in a matter of hours, gas plants can run for as long as they are needed.
However, gas remains shut out from federal funding under the Capacity Investment Scheme. The Victorian government has refused to support taxpayer money going to fossil fuels that contribute to global warming.
“Not everyone has the same support for gas,” Calabria said. “But if you look at what’s required if you are going to close coal ... we do need to have a scalable, long-duration technology that can go for days.”
He also called for market rules to give greater consideration to the promising role of aggregated networks of home solar panels and batteries, known as “virtual power plants”, whereby power providers give customers bill credits in exchange for being able to use their stored energy to address imbalances in the grid and keep the network stable.
Australia is experiencing one of the world’s fastest energy transitions as renewable energy expands its share of the grid every year and now supplies nearly 40 per cent of the average generation mix.
But the installation of new renewable generation and storage projects and thousands of kilometres of new power lines needed to link them to major cities is running behind the rate officials say is necessary to keep power supplies and prices stable once the next wave of coal-fired power stations retire, making grid planners and governments nervous.
The Albanese government is expected to launch a fresh review to examine post-2030 power market reforms which will consider arrangements to pay generators for being on standby to supply the grid when needed, rather than only paying generators for the power they produce.
A previous review completed in 2021, which considered post-2025 reforms, had recommended introducing a similar scheme, known as a “capacity mechanism”. However, the proposal attracted significant opposition from sceptics who believed it would be used to prolong the lives of coal-fired generators, and dubbed the proposal “Coal Keeper”.
At a conference in Sydney earlier this month, Calabria said industry players recognised that the system was not “optimally structured” to manage a future with no coal, significant variability in renewable generation conditions, and changing patterns of energy usage.
He said he hoped the upcoming post-2030 review would not be constrained by “unhelpful rhetoric and a lack of consensus across governments and the sector”.
“It is important that we learn the lessons from previous attempts at reform,” he said.
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