Record clean energy surge set to break Australia’s coal reliance
By Nick Toscano
The threat of blackouts hitting Australian homes and businesses once the next wave of coal-fired power stations retire has been downgraded significantly as official forecasts now expect enough new renewables, batteries and transmission lines will be available to help keep the lights on.
Over the past 12 months, more wind, solar and storage capacity was added to the eastern seaboard’s electricity grid than in any year before, the Australian Energy Market Operator says in an update to be released on Thursday.
EnergyAustralia is due to close its Yallourn coal-fired power station in the Latrobe Valley in 2028.Credit: Rebecca Hallas
It also forecasts that the year’s record investment in 4.4 gigawatts of generation and storage will be surpassed by even bigger increases in the years ahead. AEMO anticipates between 5.2 gigawatts and 10 gigawatts to come online annually from now to the end of the decade, aided by government schemes underwriting the financing of billions of dollars of new projects.
“The 10-year investment pipeline to manage energy reliability is healthy,” AEMO chief Daniel Westerman said.
Australia is experiencing one of the world’s fastest energy transitions as polluting coal-fired generators, which still supply most of the grid’s electricity, reach the end of their lives, while wind and solar farms and household rooftop solar panels are expanding their role in the grid every year.
But officials, including AEMO, have long been worried that the build-out of large-scale renewables and storage, and the thousands of kilometres of new power lines to link them to major cities, was still lacking the speed necessary to compensate for further coal closures without heightening the risk of power shortages or price spikes.
Critical projects have been running into problems including permitting delays, soaring construction costs, equipment shortages and significant pushback from rural and regional communities worried about impacts on farming practices, property values and the environment.
Nervous about the lagging pace of the rollout, the NSW government last year cut a deal with Origin Energy to keep the giant Eraring coal-fired power plant operating until 2027, a timeline some in the industry think may need to be pushed out further still. The Victorian government, meanwhile, has agreements to ensure two of its biggest coal generators – EnergyAustralia’s Yallourn and AGL’s Loy Yang A – do not shut prematurely.
But this week’s update on the investment outlook reflected “positive momentum”, AEMO said, as long as all expected projects were delivered “on time and in full”.
If the rollout proceeds at this pace, it will provide a critical boost to Australia’s ability to replace retiring coal plants while catering for greater electricity demand in the future, such as from power-hungry data centres, electric cars and households switching from gas to electric appliances, AEMO said.
The risk of “reliability gaps” emerging in NSW in 2027-28 following the planned closure of Eraring coal-fired power plant were “no longer forecast”, the report said.
Similar gaps in Victoria in 2028-29, when the Yallourn generator is due to close, had also been removed.
However, AEMO notes that the removal of the two baseload coal-fired generators may make it more challenging to maintain the security and stability of the grid.
The market operator is also forecasting a small reliability risk in Queensland this summer due to project delays, the reduced availability of power generation units and expected periods of elevated demand.
In South Australia, AEMO warns of another reliability gap in 2026-27 due to delays in building the 900-kilometre transmission link known as Project EnergyConnect linking NSW to South Australia, and the scheduled closure of AGL’s Torrens Island B gas-fired power station.
However, AEMO noted it had not factored in AGL’s recent in-principle agreement with the state government to extend the life of the gas plant another two years.
“Should such an extension become formalised, no reliability gap would be forecast in these years,” AEMO said.
In its climate plan released last week, AGL said the talks were ongoing ahead of a September 30 deadline to strike a binding deal. “While the discussions have not yet resulted in a legally binding agreement, AGL has agreed in principle to the request and continues to engage constructively with the South Australian government,” the company said.
Federal Climate and Energy Minister Chris Bowen said the market operator’s latest assessment reminded Australians that ageing, unreliable coal plants posed a risk to the energy system, and the government’s plan to spur greater investment in renewables was working.
“We are making the system cleaner, fairer and more reliable while ensuring we replace retiring coal with the firmed renewables of the future,” Bowen said.
“The Coalition should heed this warning – ripping up targets and derailing the transition will cost Australian bill-payers and hurt reliability.”
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.