Prolong The Life Of Coal-Fired Power Stations In The National Electricity Market, Says Australian Energy Market Operator

AFR - Mark Ludlow

Coal-fired power stations should be kept in the NEM for longer, said the Australian Energy Market Operator. Glenn Hunt

Existing coal-fired power stations will need to be used for as long as possible before they can be replaced with renewable energy sources, the national market operator has proposed, saying this was the cheapest option in the long term.
In a move which will embolden Coalition backbenchers about the future of coal in the National Electricity Market, the Australian Energy Market Operator's plan to be released on Tuesday warns against the early retirement of coal-fired power plants, saying they provide essential low-cost energy as well as stability in the power system.
"Maintaining existing coal-fired generation up to the end of its technical life is a key element of a low-cost approach," the report said.
AEMO's  plan, a key recommendation of last year's Finkel Review, also found the total investment required to replace the retiring generation capacity and meet on-going demand would be between $8 billion and $27 billion.

AEMO chief executive Audrey Zibelman said the proposed Integrated System Plan showed the energy sector was in the midst of transformative and unprecedented rate of change. Alex Ellinghausen

It also found spending more money on extra transmission assets – to move electricity between the big states – at a cost of between $450 million and $650 million, would help deliver some cost savings on the final bill.
The AEMO report comes as Energy Minster Josh Frydenberg attempts to land the Turnbull government's National Energy Guarantee at a meeting of the Council of Australian Governments energy council meeting next month. It also follows last week's report by the Australian Competition and Consumer Commission, which recommended the Commonwealth under-writing new generation which could include coal.
AEMO found about 30 per cent of the NEM's existing coal resources, which produce 70,000 gigawatts of energy each year, would be approaching the end of their technical life over the next 20 years which could have a major disruptive effect on the energy system, which is already dealing with the large influx of renewable energy sources.
While the coal-fired power plants will be replaced with renewable energy such as wind, solar and battery storage, it was important to keep the coal assets running for as long as possible.
"To support an orderly transition, ISP analysis demonstrates that, based on projected cost, the least-cost transition plan is to retain existing resources for as long as they can be economically relied on," the report said.
"When these resources retire, the modelling shows that retiring coal plants can be most economically replaced with a portfolio of utility-scale renewable generation, storage, DER [distributed energy resources], flexible thermal capacity and transmission."

Energy reliability will require that the life of coal-fired power stations be extended, according to the report. Photo: Michele Mossop

The report will be seized upon by critics of AGL Energy, which has ignored requests by the Turnbull government to keep the Liddell power station in NSW open longer than its planned close date in 2023. AGL says it would be too expensive to keep Liddell open – saying it needed close to $1 billion for another five years – and it wants to replace it with new gas plants, renewables and storage.
While the AEMO report warned about the early closure of coal-fired power stations, it was in no doubt about what should be its replacement – clean energy. It said a portfolio of resources including solar (28 gigawatts), wind (10.5 gigawatts) and storage (17 gigwatts) – complemented by 500 megawatts of flexible gas and transmission investment – would help fill the gap left by exiting coal assets.
This would become even more certain as the price of renewables continued to fall.
"This portfolio in total can produce 90 terawatts of energy per annum, more than offsetting the energy lost from retiring coal-fired generation," the report said.
AEMO chief executive Audrey Zibelman said the proposed Integrated System Plan showed the energy sector was in the midst of transformative and unprecedented rate of change.
"We are witnessing disruption across almost every element of the value change. Due to the vital importance of affordable, reliable and secure power as the engine of a strong economy, care must be taken now more than ever to manage this transformation in order to minimise costs and risks and maximise value to consumers," she said.
In the short term, transmission capacity between NSW, Queensland and Victoria needed to be increased by between 170 megawatts to 460 megawatts, according to the AEMO plan.
In the medium term, even more transfer capacity would be needed as well as the development of "renewable energy zones" and the integration of big projects such as Snowy 2.0 into the grid.
Longer term, the "sweating" of coal assets to make them last longer would be need as well as extra intra-regional network development to connect new renewable projects to the NEM.


Prime Minister Malcolm Turnbull restated his government's commitment to the National Energy Guarantee in spite of rumblings in his own party and his coalition partners, The Nationals.

Links

• AEMO 2018 Integrated System Plan
• Energy plan keeps the coal fires burning as long as possible
• King coal to rule for 20 more years, says independent energy market operator
• AEMO study a "game plan" for transition of the energy sector