- Shift from coal could trigger tighter energy supplies, impacting Asia
According to Nikkei Asia article published on November 10, 2022, Australia's major power companies are accelerating plans to shut down carbon-spewing power plants that run on coal, due to ramped-up pressure from investors and the government.
Australian power supplier AGL Energy plans to shutter the Loy Yang A Power Station in 2035, a decade earlier than the previous target date of 2045.
"The targeted earlier closure of Loy Yang A Power Station will avoid up to 200 million tonnes of greenhouse gases being emitted," Damien Nicks, AGL's interim CEO, said in a Sept. 29 statement.
Loy Yang A, located in the southeastern state of Victoria, is one of AGL's three coal-fired plants, generating 2.2 gigawatts of power. The plant covers about 30% of the electricity demands of the state, which includes Melbourne, Australia's second-largest city.
AGL had previously announced on Feb. 10 that it would fast-track Loy Yang A's shutdown to 2045 from 2048. The company also said at the time that it will close another coal plant in the state of New South Wales by 2033.
But that was not enough for investors, with Loy Yang A considered the top producer of greenhouse gases among all of Australia's power plants. The idea that the power station would stay in operation for another two decades-plus drew a firestorm of criticism, prompting the earlier closing date.
Leading the charge against Loy Yang A is Mike Cannon-Brookes, the billionaire co-founder of Australian software company Atlassian. About 10 days after AGL's February announcement, Cannon-Brookes joined forces with a Canadian investment firm and extended an offer to buy out AGL -- a move that would ensure a speedier shutdown of the power plant.
AGL rejected the offer, saying the bid undervalued the company. But the buyout amounted to a powerful message urging AGL to swiftly reduce its carbon footprint. As part of the deal, Cannon-Brookes' consortium would have spent an additional 20 billion Australian dollars ($12.9 billion) on AGL renewable energy projects.
AGL is not alone among Australia's big-three power providers in accelerating the closure of coal plants. Rival Origin Energy will shut down Eraring power station, its only coal-fired plant, in 2025 instead of the original target date of 2032.
The last of the big three, EnergyAustralia, will shutter the Yallourn coal plant in Victoria in 2028, four years earlier than originally planned. It will terminate its last coal-fired plant three years ahead of schedule, by 2040.
In October last year, Australia's then-ruling Liberal-National coalition announced a goal to attain net-zero greenhouse gas emissions by 2050. After the Labor Party won the federal election in May, the center-left government unfurled an ambitious plan calling for a 43% reduction of greenhouse gases by 2030, compared to 2005 levels.
The new climate goals placed additional pressure on the power-generation sector, which expels roughly 30% of the country's greenhouse gases.
Environmental policies adopted at the state level are impactful as well. In Victoria, which will hold state parliamentary elections later this month, incumbent Premier Daniel Andrews has pledged to source 95% of the state's electricity from renewables by 2035.
Energy companies are scrambling to adopt alternatives to coal. AGL will invest up to AU$20 billion to develop 12 gigawatts of renewable energy and power storage infrastructure. The company is partnering with Japanese peer Inpex in a feasibility study toward producing and exporting hydrogen, with findings due later this year.
Origin plans to build a 700-megawatt battery storage unit on the grounds of the Eraring plant. As one of Australia's largest battery projects, it received approval from the state of New South Wales in May.
Because Australia does not have any nuclear power plants in commercial operation, cities along the eastern seaboard are highly dependent on coal power, which can be supplied inexpensively. Coal is the source of 67% of the power in Victoria, while New South Wales' share is 75%.
This year, the war in Ukraine triggered higher coal prices and several breakdowns occurred at Australia's aging electrical plants. As a result, the country faced a serious power crisis in June, amid a record early-winter cold snap.
Power bills are expected to continue their upward trend. In Canberra's budget outlook released last month, retail electricity prices are forecast to jump 20% in late 2022, then climb another 30% by June 2024.
The development of renewable energy has not progressed to the point of completely offsetting coal. With coal-fired power being scaled down, energy companies face the challenge of providing stable power supplies in a way that is profitable.
One solution is natural gas, a resource that is abundant in Australia, much like coal.
"It might be that natural gas can be a source of energy to at least help balance that system while we continue to explore other alternatives," said Tony Wood, energy and climate-change program director at the Grattan Institute.
However, the mounting shift to gas could impact countries, especially in Asia, that depend on imports of Australian liquefied natural gas.
In August, the Australian Competition and Consumer Commission recommended that the government curb exports of liquefied natural gas in the interest of energy security, raising a cause of concern for Japan and other LNG importers.
