Coal-fired electricity is not flexible enough for negative prices

He is sure to stick to his forecasts because they reflect what the owners of coal-fired power plants have told him. No owner of a coal-fired power plant has contested the draft 2022 plan.

The plan increased the amount of coal-fired electricity that will be phased out by 2030 to a level three times higher than expected in its “step-change” scenario.

He said that “current announcements from thermal power plant owners suggest that about 5 gigawatts (GW) of the current 23 GW of coal capacity will be phased out by 2030,” the FAI said.

However, modeling suggests that 14 GW could do just that. Over the past decade, coal producers have pulled out of the market ahead of announced dates, and competitive and operational pressures will intensify with the ever-increasing penetration of coal. inexpensive renewable energy production.

“All lignite production and more than two-thirds of black coal production could be phased out by 2032.”

Many coal-fired power plants struggle to make money when the wholesale price of electricity drops below $ 50 per megawatt hour (Mwh). The economics are marginal for a number of reasons, including the cost of coal and capital outlays.

But the main reason why coal energy is less and less profitable is the rise of renewable energies varying between 10 a.m. and 3:30 p.m. every day.

Wholesale prices are heading towards zero

Australia’s national electricity grid is heading for a similar situation to that which occurred in South Australia during the December quarter.

AEMO data shows wholesale electricity prices in South Australia were zero or negative between 10:30 a.m. and 3:30 p.m. every day for the three months leading up to December 31.

In the middle of the day, when variable renewable energy provides electricity, coal-fired power plants often earn only $ 5 per Mwh. In other words, they pay to bring electricity to the grid.

Coal-fired power plants try to implement what is called “two shift operations” where they try to slow down in the middle of the day and ramp up in the evening. But the technology is not suited to this.

The two major problems with the national grid and coal-fired power plants are that they cannot increase power quickly enough when variable renewable energy is not available and the level of renewable energy is increasing faster than infrastructure. can’t cope with it.

The difficulty with the AER is that it is responsible for managing the bureaucratic and slow process of approving investments in additional transport capacity.

But it is advancing at a slower pace than the rate of installation of variable renewables approved and deployed by state governments.

The regulator is left behind

Both NSW and Victoria are developing renewable energy zones that are not regulated by the AER, which approves transmission capacity for the system to function properly.

The AEMO “step change” scenario assumes the installation of 45 GW / 620 GWh (gigawatt hours) of storage, in all its forms, by 2050, 7 GW of existing hydroelectricity and 9 GW of gas production.

The assumptions underlying the distributable power forecast deserve more attention, but this would re-emphasize the role of the AER in ensuring that the transmission grid infrastructure is fit for purpose.

If the AER fails to fulfill its end of the energy transition market by not approving on time the infrastructure needed to fill the void left by coal-fired plant closures, the federal government could end up with the box.

Given the recent history of federal intervention in the national energy market, there is a clear incentive for owners of coal-fired power plants to seek government subsidies to continue producing unprofitable electricity.

This would pose interesting commercial and strategic choices for the federal government, which must receive at least three years’ notice before a plant closes.