An analysis of the Australian energy market has found that some of the country’s coal-fired power plants may be financially unsustainable by 2025, and at least one may be forced to shut down prematurely.
The Institute for Energy Economics and Financial Analysis joint report claims to thank and advise the company Green Energy Markets attempts to quantify the increasing pressure on coal-fired power plants, as a flood of cheaper and more flexible renewable energy arrives on the network.
The most vulnerable power plants were in New South Wales, with fears that sudden shutdowns could lead to a shortage of available electricity, unless the transition is better managed.
“The market is facing a tidal wave of new supplies, far greater than anything government authorities or market analysts predicted or even envisioned just two years ago,” said the chief market officer. of green energy, Tristan Edis.
“The added supply from 2018 to 2025 is equivalent to more than a third of the total demand in the national electricity market and more than eight times the annual output of the Liddell coal plant in New South Wales .
“Something must give.”
Between 2018 and 2025, new wind and solar power plants will add 70,000 gigawatt hours of additional supply, which is more than NSW’s total annual power consumption, according to the report.
Prices close to zero
IEEFA co-author Johanna Bowyer said the extra energy would lead to a production collapse of many existing fossil fuel generators.
“They will be moved because wind and solar have no fuel costs and usually bid on the market with prices close to zero,” she said.
“We forecast that gas-fired power plants will decline by 78% and coal by 28% by 2025 from 2018 levels.”
The report states that the additional supply of renewable energy could make electricity prices more volatile but also cheaper on average, which would have an additional impact on the profitability of coal-fired power plants.
The Liddel Power Plant in NSW Hunter is already set to close in 2023, but the report says at least one more shutdown in the state is likely before 2025.
He ranked Eraring, Vales Point and Mount Piper in New South Wales and Yallourn in Victoria as the most vulnerable.
“What we really need to do is plan to replace these coal-fired power plants with something that can help balance wind and solar and that’s really flexible, because that’s the problem with coal,” Mr. . Edis.
He said gas could play a role in the short term, while pumped hydropower and large-scale battery storage are likely to be more competitive and green solutions in the long term.
“One thing is clear, it is probably impractical to support coal, and it is certainly a very stupid idea to build new coal-fired power plants,” he said.
Early closures planned
The report echoes recent comments by the independent Chairman of the Energy Security Council, Dr Kerry Schott, who is working on major reforms to the national electricity market to help it cope with the energy transformation.
Last week, she said renewables were making coal increasingly less profitable and warned that coal-fired power plants could shut down four to five years earlier than expected.
In this scenario, the four coal-fired power plants in the NSW Hunter area would be phased out by 2030.
“What Kerry Schott is doing, I think, is saying we have to get this situation under control and deal with it,” said Tony Wood, energy director of the Grattan Institute.
Mr Wood said the IEEFA / Green Energy Markets report’s analysis focused on the “aggressive end”, but “not at all implausible”.
He said uncertainty in the energy sector was a significant problem, in part caused by conflicting government policies to support both renewables and traditional generators.
“The sooner we get much more credibility and predictability in our energy and climate policy, the sooner we will see a reduction in what could be a potential for nasty problems,” he said.
Last week, Origin Energy CEO Frank Calabria revealed that the country’s largest coal-fired power plant in Eraring, NSW was already suffering from low wholesale prices and reported the plants shutting down prematurely.
“I would go so far as to say that wholesale prices are not sustainable, there will be a supply response – it’s just whether it’s planned or not. And that’s really where the market is today, ”he said, while providing Origin’s mid-year results.
“I think it’s actually going to be a pretty complicated time, and I think you’ll see us leading our generation less in Eraring less. This is what you see now.
Origin, AGL, Neoen and CEP Energy are all planning massive battery projects in an effort to prepare for the future.
The Australian Energy Council, which represents producers of coal, gas, hydropower and renewable energy, said the wholesale energy market was undergoing “major changes” as more renewable energies were entering the system.
“This puts additional pressure on coal-fired generators in particular,” said AEC CEO Sarah McNamara.
“The main issues will be to ensure an orderly exit from the old thermal power plant, as well as investments in distributable generation and to encourage the right overall mix of system resources and services to maintain system safety and reliability. “
She said these challenges had been pointed out by the Energy Security Council, which will be essential to coordinate the network and support timely and effective investments.
“Their job is made more difficult when governments impose policies outside of national market agreements, and which can exacerbate the problems identified in this report,” she said.