LAUNCESTON, Australia (Reuters) - Australia, which vies with Indonesia for the title of the world’s largest coal exporter, is planning for an electricity future where use of the polluting fuel dwindles and is rapidly replaced by renewable energy sources.
The Australian Energy Market Operator (AEMO), which controls the country’s largest electricity and natural gas markets, released a report on Thursday outlining the future development of the country’s electricity market. As Christmas approaches, it made for miserly tidings for the coal miners and politicians supporting the industry.
The report said that 63% of Australia’s current coal-fired generation is likely to close by 2040. It will be replaced by a possible tripling of rooftop solar power, as well as pumped hydropower, utility-scale batteries and distributed batteries, which would include households and businesses.
Australia’s current coal-fired fleet supplies about two-thirds of the country’s electricity generation, with hydro and natural gas having about 10% each, and solar about 2.6%.
What the AEMO paper does is predict that this will be turned around in 20 years by adding about 30 gigawatts (GW) of large-scale renewable energy and about 21 GW of what it terms “dispatchable” resources, which include pumped hydro storage and batteries.
The report suggests that Australia will draw on a “technologically diverse mix” to meet its required electricity generation. But it also stated that there is no room at the inn for coal.
“This diverse portfolio will cost less than replacing the existing generators with new thermal generation to deliver the energy and peak capacity needed, and simultaneously reduce emissions significantly,” the report said.
In other words, the electricity market operator is planning for a future Australian power grid largely without coal, but with enough sophistication to deal with the intermittency of renewables.
The key takeaways from the report are that building an electricity system based on renewables, pumped hydro and storage will turn out to be cheaper than replacing ageing coal-fired plants with new coal units. What’s more, with the correct investment, it will be possible to have a reliable system based on renewables.
This challenges the prevailing views of the mining industry’s coal lobby and the ruling conservative Liberal-National coalition, which regularly says new coal-fired power is needed. That’s a view shared by Prime Minister Scott Morrison, who before he became the country’s leader once brandished a lump coal in parliament to demonstrate his support for the industry.
The opposition Labor Party also generally comes out in favour of coal mines and coal power generation. But it also appears split between its trade union-allied arm, which wants coal mines and their associated high-paying jobs, and the progressive, inner-city members, who are more aligned to an environmental agenda of combating climate change.
COAL SUPPORT UNDERMINED
The key argument advanced by the coal-mining lobby and their political backers is that coal-fired power is reliable and cheap.
The AEMO report does much to undermine those two arguments. It points out that with planning and investment a renewables-heavy grid can be built, and at a cheaper cost than building new coal-fired generators.
Australia’s private utilities are also coming largely to the same conclusion, with those that operate coal-fired stations having no plans to build new ones, and some are planning on closing existing plants ahead of their expected decommissioning.
It appears that the economic realities of new coal-fired power have yet to become apparent to Australia’s politicians.
The argument in favour of coal becomes even harder to sustain if a price on carbon is assumed.
Australia currently doesn’t impose a carbon tax or have a carbon trading system, but introduction of such measures may be possible should the Labor opposition win a federal election in the coming years.
It appears that the only way any new coal-fired power plants will be built in Australia is with taxpayer support, something that even a conservative government may battle to achieve, given rising public concern over climate change.
Still, there’s a not inconsiderable silver lining for the coal industry’s Christmases future.
While coal consumption may be in a something of a death spiral inside Australia, it’s likely that the country’s exports of the fuel will continue at robust levels for many years to come.
This is because the main export markets in Asia are still heavy coal users - something that may not change that rapidly, given the dependence of both China and India, the world’s two biggest coal importers, on the fuel.