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Coal closures and renewable energy targets – summary of the biggest week in Australian energy news

This week has been massive for clean energy news in Australia. Queensland and Victoria have both announced big targets, and AGL has brought forward its closure of Loy Yang A (one of the dirtiest power stations in the grid). This article summaries the key facts from these major announcements.

Queensland sets 80% by 2035 renewable energy target

The Queensland Government announced its Energy and Jobs Plan. This represents $62 billion of investment (public + private) in the energy system from now to 2035. The plan includes the following:

– Queensland will significantly increase its renewable energy targets to 70% by 2032 and 80% by 2035. These targets are aligned with AEMO’s Step Change scenario in the 2022 Integrated System Plan. The Step Change scenario already has broad agreement from industry as the most likely path for the future of the grid.

– Development of the 5 GW/24-hour storage “Battery of the North” pumped hydro project. This would be the world’s biggest pumped hydro energy storage system. Stage 1 of the project could be completed by 2032. A smaller 2 GW pumped hydro project is also planned, with a proposed completion date of 2030.

– Development of the “super grid” to export North Queensland’s sunshine and wind energy to the rest of the state. The super grid is planned to deliver 1,500 km of 500 kV transmission lines from Brisbane up to North Queensland and out west to Hughenden.

– Queensland plans to end its reliance on coal by 2035. Existing coal-fired power stations will progressively become “clean energy hubs” from 2027. Infrastructure at these hubs will include grid-scale batteries and gas (and later hydrogen) power stations. The large spinning turbines at coal-fired power stations will continue to be used to provide system strength to the grid.

Victoria sets 6.3 GW by 2035 storage target

The Victorian Government has announced the biggest energy storage targets in Australia. Victoria has set a target of 2.6 GW of energy storage capacity by 2030 and 6.3 GW of storage by 2035. The targets are expected to bring in $1.7 billion in investments from 2023 to 2035. The targets are inclusive of both short and long duration storage.

To support these targets, the Victorian Government is investing $119 million from the Renewable Energy Zone Fund in a 125 MW battery and grid forming inverter in the Murray Renewable Energy Zone, between Bendigo and Red Cliffs.

The Victorian Government has also announced that the latest round of the Energy Innovation Fund will include $7 million for a 100 MW battery and inverter in Terang.

AGL to exit coal by 2035

AGL has been dragged kicking and screaming, but it has finally committed to closing its fleet of coal-fired power stations by 2035.

It has taken a failed demerger plan, billionaire intervention, shareholder activism, exodus of board members, its single biggest customer (Tomago Aluminium) pledging to go renewable, rejection of a proposed chair, and more to get to this point. 

AGL owns three coal-fired power stations in the NEM: Liddell, Bayswater, and Loy Yang A. One unit at Liddell has already closed this year. The remaining three units are scheduled to close in 2023. In February 2022, AGL brought forward the closure date of Bayswater from 2035 to 2030-33 and Loy Yang A from 2048 to 2040-2045. AGL’s latest announcement has brought forward the closure date of Loy Yang A to 2035.

We have written extensively about the declining business case for coal-fired power stations and why companies like AGL need to transition quickly to survive. You can read the article here.

AGL has set an internal goal of 12 GW of new firming and renewable assets by 2036 to replace the retiring capacity.

Author: Marija Petkovic, Founder & Managing Director of Energy Synapse
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Clean energy potential in Toowoomba and the Surat Basin

The Toowoomba and Surat Basin region in southern Queensland is an energy powerhouse home to a diverse mix of resources including coal, gas, and renewables. As the uptake of renewable energy grows, this region has huge potential to be one of Australia’s clean energy capitals.

Fast facts about the Toowoomba and Surat Basin (TSB) region:

– TSB is home to half of the existing clean energy capacity in Queensland, including the biggest wind farm, solar farm, and battery in the state.

– Projects under development amount to five times the existing clean energy capacity in the region.

– TSB is close to major load centres. This contributes to high marginal loss factors (MLFs) for local generators.

– Sunny Queensland in general is a great area for solar. But what many might not be aware of is that the wind profile is very interesting as well.

The future is renewable

We are on the cusp of the biggest clean energy investment opportunity in a lifetime. The Toowoomba and Surat Basin region is extremely well placed to take advantage of this boom.

Data below from the Energy Synapse Platform shows power projects under development across the National Electricity Market (NEM) as well as specifically in the TSB region as at July 2022. As can be seen from the chart, fossil fuel projects represent a very small portion of all projects under development. When it comes to power generation, the future is very much renewable.

Why wind in the Surat Basin?

We probably don’t need to explain why companies would be interested in building solar farms in Queensland. However, some might be surprised to learn that this is a very interesting region for wind as well. For example, Coopers Gap Wind Farm in the Surat Basin was one of the best performing wind farms in the NEM in 2021.

At a high level, the wholesale value of a power generation asset is a result of two variables:

1. The amount of electricity the asset can produce; and

2. The value of that electricity in the energy market.

Coopers Gap Wind Farm did not produce an extraordinary amount of electricity. In fact, this wind farm had quite an average capacity factor throughout 2021. The reason it did better than most wind farms is almost entirely due to the pricing side of the equation.

Firstly, as can be seen from the chart below, Queensland has had the highest wholesale electricity prices out of any NEM region over the past year. This gives a significant advantage to any power stations that are located in Queensland. Furthermore, we anticipate that Queensland will experience above average volatility (compared to other states) over the next decade (particularly if AEMO’s Step Change scenario eventuates).

However, it is not just the average price that matters. Wholesale electricity prices change every five minutes in the NEM. Prices tend to be lowest in the middle of the day when solar PV (both utility-scale and rooftop) is generating large amounts of electricity. In contrast, electricity prices tend to be higher in the morning and evening when more gas and hydro is needed.

The chart below from the Energy Synapse Platform shows the average intraday capacity factor during 2021 for two wind farms: Coopers Gap and Yendon in Victoria. Yendon has quite a flat generation profile, which is typical for many wind farms in Victoria. In contrast, the wind resource at Coopers Gap dips in the middle of the day. This makes Coopers Gap very complementary to solar and well placed to take advantage of higher prices that tends to occur on the solar shoulder periods. This type of generation profile tends to be much more valuable in the wholesale market than a profile that it is relatively flat throughout the day.

Opportunities for battery storage

As the transition to clean energy continues, battery storage will become increasingly valuable in the market. This is because batteries are dispatchable and fast responding. A large portfolio of batteries will needed across the NEM, including the TSB region. Furthermore, there will be opportunities to repurpose existing grid infrastructure and install utility-scale batteries at many of the fossil fuel generators within the Surat Basin when they retire.

The energy mix is undoubtedly changing. This is creating a massive opportunity for the Toowoomba and Surat Basin region to secure its next stage of economic growth.

Author: Marija Petkovic, Founder & Managing Director of Energy Synapse
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