Rock-bottom wholesale power prices – which regulators say is good news for consumers because they may eventually translate to lower bills – have been piling enormous pressure on the operators of coal-fired power stations.
Large coal-fired generators, which are unable to compete with cheaper-to-run renewables during the day but cannot quickly ramp up and down output to respond to price signals, have been forced to regularly operate at a loss over the past 12 months.
EnergyAustralia last year announced it would shut Victoria’s Yallourn coal-fired power plant in 2028, four years earlier than planned. AGL, the nation’s biggest power supplier, declared the “winds of change” were sweeping the sector much faster than anticipated, prompting the company to embark on a historic demerger of its coal and gas generators from its wider retailing business after sinking to a $2.06 billion full-year loss in the 12 months to June 30.
Because electricity production is a dominant source of Australia’s emissions, reducing output from coal plants would help sharply reduce the national carbon footprint.
However, concerns have been building across the industry that unexpectedly early shutdowns of coal-fired generators could threaten the reliability of the nation’s power market and cause price volatility in the future.
Tony Wood, energy program director with the Grattan Institute think tank, said there were positive takeaways from AEMO’s December quarterly figures, including falling power prices, high levels of reliability and reduced greenhouse gas emissions in the sector. However, he said the increasing risk of extreme volatility was a cause of concern.
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“It’s good news [that] we are seeing lower prices flowing through to consumers, but you can’t have an industry where suppliers aren’t profitable,” Mr Wood said. “Where this all goes next is the challenge … we are continuing to see lower prices, but how do we deal with the financial pressure this is going to put on early coal closures. What are we going to do about that? And how are we going to integrate more renewables into the grid?”
AEMO was aware of the challenges, Mr Wood added, but the pathway through was “not as clear as it needs to be”.
The Morrison government argues gas is vital to ensuring affordable and reliable power as the energy transition accelerates, and is pushing ahead with a controversial plan to build a Commonwealth-owned gas-fired generator at Kurri Kurri in NSW. It is also driving the development of a so-called “capacity mechanism” aimed at spurring private investment in assets including gas, pumped hydro and batteries that are capable of supplying on-demand power when the wind isn’t blowing and the sun isn’t shining.
Federal Energy and Emissions Reduction Minister Angus Taylor said the AEMO report showed average mainland power prices fell 14 per cent to $57 a megawatt hour in the December quarter.
Mr Taylor said having sufficient on-demand energy alongside renewables was necessary to keeping prices low. “Where there is an imbalance or interruption in reliable supply, that can create challenges,” he said. “The Morrison government is focused on maintaining balance in our system by safeguarding the delivering of sufficient reliable generation alongside record-breaking levels of renewables.”
Coal, gas power shrinking in Australia as renewable energy shines
Source: Philippines Alive
