Origin Energy has announced that Eraring, Australia’s largest coal-fired power plant, will close seven years earlier than expected in 2025. This is a significant step forward for Australia’s clean energy transition.
Learning is a 35-year-old operation on the central coast of New South Wales. Based on calculations using electricity market data and emissions records, Eraring alone accounted for approximately 2% of Australia’s greenhouse gas emissions last Year.
It was forced to close its coal plants early because of the devastating impact renewable energy has upon its profitability. Origin announced that it would build a 700-megawatt battery at its site to store renewable energy.
This announcement comes after the acceleration of major coal plant closing
- Liddell’s power station will close in 2023.
- Yallourns’ closure was moved forward to 2028.
- AGL Energy pushed forward the scheduled closing of two additional coal plants.
Origin’s transition planning is welcome. However, this highlights the danger of Australia’s clean-energy transition moving too fast without a national plan to exit coal.
This is why?
Because of their connections to transmission lines and large electricity capacities, old power stations make excellent locations for batteries. This was also announced for the closed Hazelwood and Wallerawang coal power plants.
The market share for renewable energy has increased to more than 30% in the last 12 months. Particularly, daytime wholesale electricity prices have plummeted due to the rapid growth in rooftop solar and solar farms in the middle of the day.
Coal plants use a variety of strategies to stay open. They use a variety of strategies to keep their coal plants open. This includes reducing their output on sunny days and increasing it for higher prices when the sunsets. This stresses older plants and breaks downs are becoming more frequent.
Something must give. Electricity market analysis last Year showed Eraring as the coal plant most vulnerable to the growth and use of renewable energy. Learning is likely to lose substantial money by 2025.
Origin announced the closure citing its commitment to net zero emissions by 2050 and the International Energy Agency’s recommendation that advanced economies shut down coal plants by 2030.
What happens to the labor market and workers?
The coal power plant was shut down in 2017. It had been closed with only a few months’ notice. Power prices soared for many years, and many workers couldn’t find other work.
Origin has, however, given three years’ notice to comply with electricity market rules after the shockwaves caused by closing. It also announced that it would create a transition plan for employees. This will include redeployment, training and prioritization of employees at the site for long-term operational positions.
Origin provided figures that showed the energy and capacity gap would be filled by a combination of new storage, Snowy 2.0 and a new transmission line between South Australia, NSW and NSW. Also, a new infrastructure for renewable energy is planned for NSW.
Therefore, prices will likely be affected less than by the closure.
Eraring’s closing may give other coal plants breathing room. In essence, coal plant owners are playing a game with their plants by holding on to the hope that another plant will shut down and tighten the supply.
Origin’s figures show that there are many more renewable energy projects. These figures did not include rooftop solar’s phenomenal growth last Year.
This is not likely to be the end of coal plant closings shortly. According to the Australian Energy Market Operator, the draft 2022 integrated system plan, which is a roadmap for the electricity grid, shows that as much as 60% could be lost by 2030.
There is no exit strategy for coal
Despite coal plants closing down faster than ever, Australia doesn’t have an exit strategy for coal. This is unlikely to change as neither major party wants to “own” closures in an election year.
This pattern is likely to continue. Renewable energy will continue its growth as the most affordable form of electricity generation. Governments will set up policies to speed its growth, and the market and asset owners will decide on closing it. This is very risky.
Origin gave three years’ notice and committed to a transition plan. It also invested in battery storage.
However, energy market players do not consider penalties for failing to comply with notice requirements an effective deterrent. They see the financial incentive to hold on to their plant and hope for a price increase when it closes.
We are left to rely on the owner’s goodwill and enlightened self-interest and fear of reputational harm to be responsible.
Perhaps Australia will manage to get by just fine. Without a plan, however, we are at risk of seeing a rush to closures in the future, with devastating impacts on electricity prices, regional economies, and livelihoods in the coal communities.
We need to make policy commitments
A range of models has been proposed for an orderly exit from coal. National agreements have been negotiated to eliminate coal from other countries, Germany and Spain.
The Australian Energy Market Operator acknowledged technical issues in the transition to clean energy but believes they can be overcome. Alternative generation and storage options exist to replace the lost energy from coal plants.
This week, the NSW government received expressions from interested parties in renewable energy and storage projects valued at more than A$100 billion. This was equal to the electricity output from ten coal-fired power plants in the Hunter Valley Renewable Energy Zone.
Hopefully, the other side will have a political and policy commitment to an orderly withdrawal from coal. This plan can reduce the impact on our electricity system and support workers at coal power stations through the inevitable transition.