Australia’s energy transition accelerates

The closure of Australia's largest black-coal fired power station, the 2,880MW Eraring, seven years earlier than previous planned in August 2025 follows increased competition from renewables, accelerating the country's energy transition that will affect demand for gas power peaking plants and hydrogen projects.

The plant will be partly replaced by a planned 700MW battery that Australian utility Origin Energy intends to install at the Eraring site in the coal-producing Hunter valley region of New South Wales (NSW). The deployment of further renewable power capacity from wind and solar, gas peaking plants, as well as additional transmission power infrastructure will all help replace the power generated from Eraring, Origin's chief executive Frank Calabria said.

Coal in terminal decline

The planned closure of Eraring will come a little more than two years after the 1,680MW Liddell black-coal fired plant that is to fully close by April 2023. This will mean that almost 46pc of NSW's black coal-fired power capacity will close within 3½ years, to be replaced by renewables, batteries, gas peaking plants and imported electricity from South Australia (SA) with the 800MW EnergyConnect transmission link due to open by 2024 after starting construction this week.

The expected electricity transmitted to NSW via the EnergyConnect link will be generated by wind and solar as SA has some of the cheapest renewable resources in the country.

The closure of Liddell and Eraring will be followed by the shutting of the 2,640MW Bayswater coal-fired power plant by as early as 2030. Its closure was brought forward last week by Australian utility AGL Energy, which had previously earmarked the plant to close in 2036. Bayswater, Eraring and Liddell are all located in the Hunter valley, the largest thermal coal exporting region in Australia and were built there there because of the proximity to coal reserves.

The 1,320MW Vales Point is scheduled to close in 2029, meaning that there may be only one coal-fired power plant in NSW by the end of the decade with the 1,400MW Mount Piper earmarked to close in 2040.

Coal generated 68pc of NSW's electricity in the past 12 months, according to data from the OpenNEM website. Mount Piper represents about 14pc of NSW's existing coal-fired power plant nameplate capacity. The shutting of four coal-fired power plants will affect domestic NSW coal consumption, which totalled 25.8mn t in the 2019-20 fiscal year to 30 June or more than a quarter of domestic national use over the same period.

Most of the mines supplying NSW coal plants are dedicated to these power stations. They are not connected to the rail network supplying coal to NSW's Newcastle port that is the country's largest thermal coal export port.

Power shock or change

The Australian federal government has warned of higher power prices and possible outages with the coal-fired power plant closures. This has been a consistent message from Canberra since Australian energy minister Angus Taylor took up his role in August 2018.

Shortly after he became minister Taylor unveiled plans for the federal government to underwrite new generation to provide firming capacity to the network to back up renewables, which at the time accounted for 20pc of power generation in the National Electricity Market (NEM) that covers east Australia.

Officials from the Department of Industry, Science, Energy and Resources on 14 February at a hearing in the upper house of parliament the Senate said the federal government had not yet provided any underwriting to the 12 projects on a short list to provide the renewables back-up. These include five gas peaking plants, the upgrade of Vales Point and six pumped hydropower projects.

Origin cited the rise in renewables, which have lower operating costs than coal-fired power plants, as the main factor behind the accelerated closure of Eraring. This was already highlighted in the latest quarterly energy dynamics report from the Australian Energy Market Operator (Aemo) of the displacing of the equivalent of around 850MW of thermal power generation capacity in the October-December 2021 quarter compared with the same period a year earlier.

Renewables accounted for about a third of power generation in the NEM in the past 12 months, with it expected to extend the trend of increasing market share. The NSW state government this week said it had received more than A$100bn ($72bn) worth of proposed renewable energy projects with a total nameplate capacity of 40,000MW for the Hunter valley and central coast region, which is one of five renewable energy zones (REZ) the state government plans. This is in addition to 95,000MW of renewable energy project proposals covering its other REZs.

Transitioning to hydrogen

This volume of proposed projects also underline the expected increase in electricity demand, as more electric vehicles are deployed in Australia and the expected development of hydrogen projects using renewable energy instead of fossil fuels. This is part of efforts to lower greenhouse gas (GHG) emissions and help Australia meet its emissions reduction targets of between 26-28pc by 2030.

The NSW government plans to be a significant producer of hydrogen for domestic use and export, through a A$3bn state-funded investment plan for the expansion of renewable energy to produce hydrogen rather than for alternative methods of producing hydrogen from coal or gas. It has targeted a hydrogen price made from renewable energy, otherwise known as green hydrogen, at A$2.80/kg by 2030 from around A$8.60/kg currently. A move to more renewable energy is part of the plan to lower hydrogen production prices.

Cutting emissions

Australia's electricity generation accounts for about a third of national GHG emissions and was estimated to be around 179mn t of carbon dioxide equivalent (CO2e) in 2019, the last year that Australia's GHG accounts were audited.

NSW electricity accounts for 52mn t of CO2e. Origin estimated that Eraring's emissions were more than 12mn t of CO2e last year. AGL has said the closure of Liddell will reduce GHG emissions by 8mn t/yr of CO2e. The closure of their two coal-fired power plants will cut emissions by a total of around 20mn t of CO2e by the end of 2025, or 38pc of NSW's emissions from electricity and 11pc of emissions from the NEM.

These GHG reductions are all within Australia's emissions projections, which forecasts that renewables will account for 61pc of Australia's electricity by the end of the decade and 11,000MW of coal-fired capacity would close by 2030. The accelerated closures of Eraring and Bayswater now means that the government's forecasts of coal closures by 2030 is now more or less met (see table).

The pace of change in Australia's power generation may see further announcements of earlier closures of coal-fired power plants with Aemo modelling 14,000MW of such closures by the end of 2030.

By Kevin Morrison