Australia Needs to Close 90 Percent of Coal-Fired Fleets in 10 Years to Meet Emission Targets: AEMO

The Australian Energy Market Operator (AEMO) has said the country needs to replace 90 percent of coal-fired power plants in the next 10 years to meet its carbon emission targets.

This comes amid concerns about AEMO's role in the renewable transition and its inability to forecast electricity prices.

At a recent inquiry hearing, AEMO CEO Daniel Westerman revealed the current state of the national electricity market and the country's coal-fired fleets.

"Over the last 12 months, [coal] has provided around 55 percent of energy needs in the national electricity market, about 5 percent from gas, and about 40 percent from renewable energy," he told a parliamentary committee.

"We've seen 12 coal-fired power stations retire over the last decade, and that is obviously forecast to continue."

The CEO noted that the shutdown trend was due to the asset owners' decisions and was not influenced by AEMO.

Power station owners are required to give AEMO a three-and-a-half-year notice before the closure, he added.

There were also different projections about the closure of fossil fuel power stations in the coming period.

"To meet Australia's emissions targets on the way to net zero, 90 percent of all coal-fired power stations are expected to close in the next decade," Westerman said.

However, the CEO explained that the above projection was not a conclusion, but a scenario that was most likely to happen if the government wanted to achieve its emission targets.

Due to the introduction of renewable energy, Westerman said there had been significant changes in the way coal-fired power stations worked.

"Those power plants that used to run 100 percent of the time are finding that in the middle of the day, what they need to do is to ramp down to their absolute minimum generation," he said.

"I suppose what Australians want to know ... is will they see a reduction from current levels?" he asked.

"Will we go back to the power prices we paid in living memory, only 10-15 years or so ago?"

In response, Westerman said AEMO does not model future power prices.

He said that according to AEMO's analysis, the lowest cost pathway to net zero and meeting government targets was through investment in renewable energy, supported by batteries and pumped hydro, and backed up by flexible gas, while ensuring robust transmission and distribution systems.

Canavan questioned why AEMO is unable to forecast electricity prices despite conducting 20-year planning for the future electricity system.

Westerman said AEMO was required to consider the lowest cost pathway to meet energy reliability and security targets via the government emission targets to net zero.

"What we don't consider ... for example, is investment that's required in distribution networks, local transmission augmentations, distributed energy resources, [and] the investments that consumers make in rooftop solar, in batteries, in electric vehicles, energy efficiency," he said.

"This is a complex [issue]."

"I suppose the thing that perplexes me more than anything else is that we have probably, per capita, the greatest blessing of energy resources in the world–amazing resources of coal, of gas, world's largest uranium reserves," he said.

"Yet we now have left ourselves with a situation where the United States has power prices a third of ours."

Canavan then questioned how such a situation happened when Australia had very similar energy resources to the United States, which had a much bigger and very dispersed population.

"How have we allowed that to happen? Has anyone got an answer for that?" he asked.

Westerman replied that he was unable to provide an answer at this time.