Approximately 75% of Australia’s long-dominant fleet of coal power plants are expected to retire by 2035, according to new research by BloombergNEF (BNEF).
Coal-fired power makes up roughly 45% of Australia’s total power generation, but old age, intensifying competition from low-cost renewables, and government decarbonisation targets are driving many coal plants to an early retirement.
However, research suggests this might still not be enough for the country to reach its decarbonisation goals.
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“The exodus of coal needs to happen, and fast, for Australia to achieve its decarbonization ambitions, but fears are growing that not enough replacement capacity will be installed in time,” BNEF Australia senior associate and author of the report Sahaj Sood said.
“The country’s clean power transition is now a delicate balancing act: moving too quickly could compromise energy security, but moving too slowly could mean failing to achieve its newly updated Nationally Determined Contribution (NDC) to reduce emissions between 62% and 70% on 2005 levels by 2035.”
Australia’s stuttering buildout of renewable energy capacity has already resulted in some state governments financially supporting struggling coal plants to ensure grid security.
In August 2023, the Victoria government and AGL Energy entered into an agreement that subsidises the operations of its Loy Yang A power station until its retirement in 2035.
Origin Energy has also agreed to extend the closure of its Eraring Power Station until 2029, marking the coal plant’s second extension since its intended closure was announced. The plant had previously been slated to close in 2025.
In Queensland, the state government has strengthened its support for coal through its recently released energy roadmap, in which it announced its intention to continue operating its state-owned coal plants, which make up 70% of the state’s coal fleet, well into the 2040s.
This policy puts Queensland’s government squarely at odds with the federal government, which must rapidly accelerate Australia’s transition from coal to clean power over the next 10 years to achieve its carbon targets.
“Maintaining Queensland’s coal fleet won’t come cheap, casting doubt over the economic rationale for extending the lives of these plants,” Sood said.
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“The government has allocated a whopping $1.6 billion toward the upkeep of its state-owned generation assets, mainly to financially prop up coal plants facing growing competition from low-cost renewables, especially rooftop solar. These rooftop solar systems, together with utility-scale renewables, are outcompeting coal in the system at midday.
“Further moves by state governments to extend the lives of coal plants will increasingly come at the expense of renewable energy, and the value of solar on households.”
