Is coal’s recent revival in Australia’s energy mix just a blip or something more?

Australia’s electricity sector was fast to cut carbon pollution due to renewables as alternatives to coal and gas – until lately

Australia’s electricity sector was fast to cut carbon pollution due to renewables as alternatives to coal and gas – until lately

Australia’s electricity sector has long been the largest contributor of greenhouse gas emissions in the economy, accounting for more than a third of the national total.

The industry was one of the fastest to cut carbon pollution because of the availability of wind, solar and hydro power as alternatives to burning coal and gas – until lately.

Recently there has been an uptick in the use of coal, in particular, in the national electricity market that serves about 80% of Australia’s population.

Let’s look at the reasons for that.

Is coal making a comeback?

If you compare the June quarter from a year ago, black coal-fired power generation was up about 7.25% and the brown coal-sourced variety was up 4.4%, according to Dylan McConnell, an energy expert at the University of New South Wales.

That was quite a jump. The nearest comparable increase was the June quarter of 2015, when coal-fired production rose by 2,682 gigawatt-hours, or 7.7% from a year earlier. The prompt back then was the end of the carbon price, McConnell said.

Brown coal alone rose more than 10% and black coal 6.5% in that rebound.

Coal has actually been perking up for a while, with a small increase of coal-fired power in the first quarter of 2024, according to the Australian Energy Market Operator.

Is coal’s revival a blip or something more?

Key to the recent rise in coal and gas power was the unexpected drop of almost 20% in wind energy output even as more turbines got added to the grid.

Weatherzone estimated the wind lull at the start of autumn was so extreme as to be a one-in-4000 year event. Southern Australia has seen other calmer-than-usual periods.

McConnell says the average capacity factor for windfarms – a measure of how much farms operate – was down about a third versus the June quarter of last year.

Taking a longer perspective, though, coal’s recovery looks less impressive.

For the full year to June, black coal plants in NSW and Queensland reported a modest 0.4% drop while output from Victoria’s brown coal power stations rose 2.2%.

That combination was well shy of the double-digit advances of solar energy from households and solar farms, McConnell’s data shows. Hydro’s drop of more than 10% came as Tasmanian operators sought to conserve water amid much drier than usual weather.

Shouldn’t coal be on the decline as plants close?

The closure of AGL’s Liddell coal-fired power station in NSW in April 2023 took out more than 1,000 megawatts of capacity. Remaining plants, though, ramped up production.

In June alone, NSW’s four remaining coal plants operated at 77% of capacity, a 13-year high, David Dixon, a Rystad energy analyst, said in a social media post.

Emissions, though, have generally been on the decline. Pollution from the electricity sector was down 28.9% between June 2009 and last December – but still accounted for just under 34.8% of total emissions, the federal government says.

McConnell said the recent pause in the emissions slide was partly because “we haven’t been building renewable energy fast enough”. He notes Aemo’s modelling in its blueprint report estimates coal output should be falling about 10 terawatt-hours a year between now and 2030.

A flat outcome for emissions over the past year is “so far away” from Ameo’s projections but also the federal energy department’s targets as of last December.

Apart from pumping out more carbon emissions (and pollute nearby sites with mercury, arsenic, coal ash, etc), burning more coal typically nudges wholesale power prices higher.

The so-called merit order in the electricity market means the last bidder that matches supply with demand sets the price for all bidders. If renewables meet all demand, then prices are close to zero, or sometimes negative.

Coal has been setting that price more of late, particularly in NSW. In the first quarter, black coal set prices in 34% of the intervals across the national market, up 3 percentage points from a year earlier, Aemo says.

When expensive gas sets the price, the effect is even worse. Wholesale power prices in Victoria were up 44.5% to $138.70 a megawatt-hour in the June quarter, while those in NSW were up almost 28% to $189.10/MWh.

McConnell estimates as much as $60 of NSW’s quarterly hike was due to an extended price ceiling imposed by Aemo when power supplies ran short.

Wholesale prices make up about a third of the retail bill so the recent spikes won’t help bring down power bills even if default prices began this financial year with small falls.

Relying on ageing coal plants to provide power indefinitely – including extending the life of the biggest one by two years – is also not without its risks. Callide C in Queenland, for instance, was offline for more than 500 days after a cooling tower collapse.

Only renewables can be added at scale and in (relatively) short time. We need more of them and soon.