February 10, 2022
Australia is often considered an outlier among rich countries for its dependence on coal, both as a domestic power source and as a key export commodity, as the world’s second largest exporter. The country is still reliant on coal for two thirds of its domestic consumption, amid a symbiotic relationship between the government and big coal, and a media landscape dominated by outlets promoting fossil fuels and spreading climate change scepticism, many of them controlled by Australian-born magnate Rupert Murdoch. However, the constant improvements in renewable energy and battery storage technology are making as much of an impact on the energy market in Australia as anywhere else, as the country’s competitive and wide open market provides favourable conditions for new energy players seeking to take advantage of Australia’s obvious natural potential for wind and solar power generation.
Renewable energy generation hit record levels in every Australian state in 2021, supplying five times more power to the National Energy Market (NEM) than gas power, which dropped to its lowest level in over 15 years. Renewables rose 20% in the NEM mix, including a 26% rise in Western Australia and 30% in Victoria. Clean energy pioneer Tasmania again achieved 99.9% of renewable energy, with just minimal amounts of gas power required to stabilise the grid. In the last week of 2021, South Australia set what could be a world record for comparable grids by producing over 100% of its energy requirements from clean sources for a whole week, 64% of that from wind power.
For Q4 2021, renewables reached a record NEM share of 35%, with a single-day peak of 62% on November 15th. Operational demand for other types of energy fell commensurately, reaching its lowest Q4 average level since 2005. The trend has continued into the new year, with three of Australia’s states setting new records for wind and solar power production in January. Many Australian wind farms are now recording over 50% capacity, competitive with the country’s coal plants.
Part of the improvements are a result of investments in upgrading the country’s transmission and distribution networks to adapt to more renewables in the mix. However, also driving the change are the ever-increasing number of green entrants to the market, investing heavily in renewable energy which is supplied for ever cheaper prices, facilitated by advances in large-scale battery storage infrastructure. Citizens are thus empowered to make green consumer choices, aided by a highly competitive market with as many as 50 energy retailers to choose between. When green energy firm Powershop was acquired by Shell in 2021, around 6,000 of its customers switched to alternative providers in response.
Private citizens are also highly active in the expansion of residential solar power production, incentivised by the option to sell unused power to the NEM for generous tariffs. The cost of installing rooftop solar panels in Australia is far below that in Europe and the United States, more akin to prices in South East Asia. Over 3,000MW of solar power was installed on home rooftops in 2021, and around a third of Australian homes now host solar panels, the highest rate in the world. The more supply is expanded, the further renewable energy costs are driven down, creating a virtuous cycle for consumers. Australian consumers now have among the cheapest electricity in the world, at an average $17.6/kWh, down $3 in the last six years, and less than half the $40/kWh paid by German consumers.
Coal power is now feeling the pressure, dropping by 4.4% of the mix year-on-year, and 15% in the last five years. Total emissions from electricity generation fell to a record low of 28 million tns of carbon dioxide for Q4 2021, 8% less than the previous low one year earlier. Nonetheless, Australia’s grid is still among the most polluting in the world, and the country has higher emissions per person than the EU, China, or the United States. The biggest suppliers are dragging their feet in the phase-out of coal-fired power stations, and the Liberal-National federal government, considered to be close to the big coal energy firms, is still approving new coal extraction projects. The government’s net-zero plan, issued late and reluctantly on the eve of November’s COP26, set a target date of 2050, well behind the date climate scientists say is required of rich countries, and retains a significant role for coal and gas power.
Even in the absence of government support or coordination, however, the green transition has its own momentum. Given the prevailing trends, there is wide and growing support in Australian business and industry for decarbonisation, as renewable energy is rapidly becoming an obvious economic imperative, and attracting major investment. Australian mining giant Fortescue has just announced plans for the Uaroo Renewable Energy Hub, a 5.4GW renewable energy and large-scale battery storage project in a remote part of Western Australia, to power its mining operations in the area. The plans would repurpose land used for cattle grazing with 340 wind turbines, a solar farm, and a 9,100MWh battery storage facility, which would be the largest battery in the world, over four times the size of the current largest in California. Alongside comparable wealthy countries, Australia is indeed still coal-powered, politically, economically, and for its energy. But all indicators suggest that the writing is on the wall for coal, and the only question that remains is how long it will take for the political class to get with the program.
