“It’s important to say Liddell has given the nation good service.”
As the 52-year-old Liddell Power Station in the Upper Hunter of New South Wales went offline at the end of April, Federal Climate Change and Energy Minister Chris Bowen acknowledged its valuable contribution to Australia’s energy generation mix, but also that its time was now in the past.
On the same day that Liddell shut down (Friday, April 28th) one of the largest wind energy projects in NSW came online, the 224 MW Bango wind farm in the state’s Southern Tablelands.
This is a perfect example of what’s happening to the generation mix that powers Australia. The good news is that more sustainable energy is replacing traditional coal. But it also highlights the fact that stable dispatchable energy is being replaced by intermittent energy. While in the past, humans decided when generation would occur, now it’s left to mother nature.
Wholesale power prices are no longer being set by coal. Instead, energy prices are more volatile and controlled by supply and demand. This is particularly true for solar. When the sun shines power prices are lower, but outside the solar hours, with less dispatchable energy in the mix, power prices are trading higher.
Also on April 28th, the Australian Energy Market Operator (AEMO) released its Quarterly Energy Dynamics report for the first quarter of 2023. Having three major energy-related events on the same day seems like a perfect prompt to take stock of where things stand right now, in terms of Australia’s energy generation, supply, and demand.
The loss of dispatchable power
It’s important to appreciate that we’ve come a very long way in the five decades since Liddell started operating in the early 1970s – and that the pace of change has accelerated markedly over the past decade.
In the eight years since AGL announced it would be closing Liddell, around 4 gigawatts of dispatchable power has been removed from the grid, while only 1 GW has been added. You don’t need a degree in maths to realise that a 3 GW deficit, as the population continues to grow, might not be where we want to be.
Now consider that another four coal-fired power stations will be switched off across the country before 2030 – including Australia’s largest, Eraring, in just two years’ time (seven years earlier than previously planned) – and you start to appreciate the urgency to replace that amount of generation.
Eraring is one of four coal-fired power stations still operating in NSW, while there are only three left in service in Victoria, with Yallourn scheduled to be decommissioned in 2028.
Renewables are stepping up
As we’ve been noting for some time (through numerous previous blog posts), the world-leading penetration of rooftop solar in Australia has significantly reduced the demand on the grid during the daytime, and the value of solar energy is falling.
On 11 February 2023, rooftop solar PV output reached a record high of 11,504 MW, 818 MW higher than the mark set late last year.
According to AEMO’s Q1 Quarterly Energy Dynamics report, we saw a record average output of rooftop solar PV (2,962 megawatts) for the March quarter, up a whopping 23% from Q1 2022.
That means that just as electricity generation from coal and gas is declining – gas-fired generation reached its lowest Q1 level since 2005 – the contribution of rooftop solar resulted in the lowest Q1 operational demand (14,375 MW) in the National Electricity Market (NEM) since 2005, with new Q1 records being set in Victoria, New South Wales, and South Australia.
The report also shows new and recently commissioned grid-scale solar and wind units increased generation by an average of 330 MW and 134 MW, respectively, yielding a record quarterly average of 4,654 MW, which was 11% higher than Q1 2022.
Those figures are easy to gloss over, and if we can keep adding anything like 11% more solar-and-wind-generated power to the mix, year-on-year, that would be an incredible result for the environment, but it could also have a dramatic impact on the value of energy at different times.
Cheaper electricity and reduced emissions
The impact of the closure of coal-fired power stations on carbon emissions is clear. Liddell’s owner, AGL, is Australia’s largest carbon polluter, and the closure of Liddell will reduce the company’s emissions by 17%.
That’s a significant reduction for them and for Australia, as we continue to work toward reducing overall emissions (not only from energy generation). Mind you, it’s less significant on a global scale while China still has over 1,100 coal-fired power plants in service (some with a capacity of more than 6 gigawatts), India around 285, the United States 225, and Japan 92.
The AEMO report outlines that NEM total emissions declined to the lowest Q1 levels on record at 28.83 million tonnes of carbon dioxide equivalent, a decline of 5.1% from Q1 2022.
Growing renewable output across the NEM meant that 12% of the time wholesale prices were negative or zero and between 9.00 am and 5.00 pm wholesale electricity prices were negative in South Australia and Victoria 60% and 55% of the time, respectively.
The impact on prices of increased generation from renewable sources is clear.
Still some way to go
Encouraging as it is to see things moving in the direction we want, everyone in government and the energy industry remains aware of the challenges ahead.
Despite the uptick in large-scale solar and wind generation, the legacy sources – coal, gas, and hydro – still account for an overwhelming majority of the energy we use.
For example, when electricity consumption in NSW is at its highest, about 14,000 MW of power is required. Even post-Liddell, about 13,500 MW of coal, gas, and hydro generation is available.
Until we get more dispatchable energy from renewable sources, most likely in large-scale battery storage, blackouts could become more common, particularly during extended periods of extremely hot or extremely cold weather, even though the market is still able to meet the grid reliability standard.
Under the reliability standard, expected unserved energy needs (leading to blackouts) should be no more than 0.002% of the total energy used in a region. The standard has been set under the assumption that, while the occasional blackout is inconvenient, eliminating them completely is unfeasible (and overly expensive).
The infrastructure challenges remain
With more coal-fired power station closures scheduled, there’s little time to waste in making sure that new renewable energy and firming capacity is put in place before those closures remove large volumes of energy from the mix.
The other big challenge is to rework the infrastructure – what we refer to collectively as ‘the grid’ – so that it becomes fit-for-purpose, rather than trying to force the new generation sources into the infrastructure that was designed and developed for a previous time.
While many new transmission lines need to be built to carry electricity from renewable generators to the grid, that will only address part of the distribution equation.
The preferred model is the development of renewable energy zones (REZs), where clusters of large-scale renewable energy projects can share infrastructure, a concept that will not only help new projects come online more quickly but also simplify planning and approval.
The Victorian Government has flagged funding for six REZs, while the NSW Government has confirmed that it will develop four, and Queensland is looking at three potential REZ ‘corridors’. And perhaps that’s a good topic for a future blog post …