According to the Australian Energy Market Operator (AEMO), coal will likely be out of Victoria’s electricity grid by 2032, with other parts of Australia following suit.

The 2022 integrated system plan was published in the report. It confirmed what many people involved in energy policy knew for years: the end of coal is near, though some industries and governments may be surprised by the speed at which it happens.

The Integrated System Plan is the planning blueprint that the market operator publishes to assist industry and policymakers with assessing how Australia’s electricity system might change. It is an important document that guides where and when investments are needed to unlock renewable resources to meet the demand.

Governments mustn’t ignore the ISP prediction of the imminent closure of coal-fired power plants. It is not in the best interest of coal workers or their communities to continue denial about the imminent end of coal-fired power generation.

What does AEMO predict?

The ISP’s most important feature is that what was once called the “step change” has become the “central scenario”. This central scenario is consistent with Australia’s Paris Agreement commitment to limiting global temperatures to rise below 2.

According to the ISP, huge amounts of coal will be retired over the next ten years, including brown and two-thirds of black coal. Significant investments will also be made in new renewables and “firming technology” (such as pumped hydro, gas, and batteries).

It is believed that 14 gigawatts (GW) of coal will be leaving the National Electricity Market in the next decade. This is more than three times as many coal retirements announced by the industry.

Effectively, AEMO is stating (yet another) that the incumbent sector is likely to be taken by surprise due to the speed of transition.

AEMO doesn’t just predict an increase in renewables investment. To provide backup generation capacity for solar and wind failures, AEMO predicts that there will be approximately 9GW of gas-fired power and an additional 620GW of storage (provided either by batteries or pumped hydro).

The electricity demand is expected to rise to 350 terawatts by 2050. This includes electric vehicle uptake, conversion of natural gas heating and hot to electricity in homes and electrifying many industrial processes, such as low-emissions Steel and Aluminium.

These developments will require major grid overhauls. To unlock the $29 billion investment benefits, an estimated A$12.5 billion must be spent on transmission.

Why is coal being left behind?

Two main factors are driving this substitution of coal with new technologies.

First, the cost of these technologies is continuing to drop rapidly. Customers are voting with their feet. Some of Australia’s most famous and iconic businesses now purchase 100% of their energy from renewable sources, such as Woolworths, BHP, and Coles.

Second, the state governments filled the gap left by a lack of consistent national energy and climate strategy and are now implementing ambitious policies to drive uptake and firming.

The NSW government’s 12GW Energy Roadmap is the most ambitious. It effectively prepares for retiring old coal-fired power plants and facilitates investment in new capacity.

What should governments do?

Governments must be focused on a “just transition” to these new technologies and offer support to communities, workers, and those most affected, such as those living in the Hunter Valleys and Latrobe Valleys.

These policies are crucial to ensure these areas have the best opportunities. They include job placements, relocation assistance and financial support for local economies. Workers can be trained to transition to new and related industries by retraining before closing.

Access to clean energy should be available for everyone who uses energy. The biggest obstacle to taking part in the solar- and battery revolution at the moment is the ownership of your home.

This important policy debate has been largely absent from the government. Future policies that encourage the adoption of solar and battery storage should prioritize Australian households with low income and renting properties.

The government must ensure that the private sector, not consumers, is protected from the risks of poor investments. To protect consumers, governments are taking on increasing risk by underwriting renewable energy projects and ensuring that large multi-national energy companies make investments.

Some economists, including us, have provided alternative models to governments to achieve the same goals but with greater emphasis on reducing consumer risks.

Consumers must be aware of what they’re buying, given the increase in renewable energy purchases by households and businesses. The Clean Energy Regulator has done some interesting work in this area by creating emissions and renewable power transparency register within the national greenhouse-energy reporting framework.

Governments could introduce a carbon price if they want to help. This policy is considered to be political poison. However, a carbon price would make reaching this goal easier and more cost-effective.

The end of the coal era

ISP predicts a cleaner and better future. Australia is well-positioned to move beyond the coal age into an age of efficient renewable energy. We have some of the most valuable renewable resources in the world.

We have much to gain from new industries like green hydrogen and mineral processing, as global leaders increasingly focus on reducing emissions. Both major parties at the national level have targets that aren’t too far from AEMO currently considers the status quo.

The lack of stones didn’t cause the stone age to end. The coal age is ending, despite its abundance – regardless of whether governments believe it.

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