Fossil fuels fall to record low in power grid as renewables hit new high

Fossil fuels sank to their lowest-ever levels across Australia’s east-coast electricity mix in the final three months of 2022 as green power supplies overtook black coal’s output for the first time in the history of the grid.

The Australian Energy Market Operator (AEMO), in new a report on Wednesday, revealed renewable energy generation hit a record high, supplying on average 40 per cent of the grid’s power during the December quarter, beating the previous record of 35 per cent set in the same period of the prior year.

Coal, the dominant fuel in the east-coast electricity grid, has fallen to its lowest average output on record.Credit:Eamon Gallagher

Until now, black coal – the fuel burned at the biggest power stations in NSW and Queensland – had been the single largest source of electricity across the nation’s main power grid.

When black coal is counted with brown coal, which is used in Victoria’s power plants, the fuel still delivers the dominant share of the east-coast electricity mix. However, large wind and solar farms coupled with Australians’ booming uptake of rooftop solar panels, have been radically reshaping the market and squeezing out fossil fuels.

The AEMO figures show that both black and brown coal fell to their lowest average shares since the east-coast electricity market was created in 1998. Gas-fired power generation, meanwhile, declined to its lowest average quarterly output since 2004 amid low demand and historically high domestic gas prices.

Violette Mouchaileh, AEMO’s head of reform delivery, said output from large-scale wind and solar farms across the grid grew strongly during the quarter, producing 20 per cent of total generation as more renewable energy projects were commissioned and connected.

“This growth, along with the lowest output from coal-fired generation … saw National Electricity Market emissions drop to the lowest quarter on record at 26.4 million tonnes [of] carbon dioxide equivalent,” she said.

While peak renewable contribution records were broken and fossil fuels continued to fall, AEMO stressed that coal and gas “both remained essential” to the supply of reliable electricity to homes and businesses.

Coal and gas still need to fill gaps in the market when the wind isn’t blowing and the sun isn’t shining, meaning they continued to set prices for supplies across the grid. Despite increases in renewables’ output, wholesale electricity prices continued to soar in October amid coal-fired power station outages and elevated coal and gas prices, which have been pushed higher as the war in Ukraine deepens a global energy crunch.

In December, however, the Albanese government passed emergency laws designed to shield consumers from the worst impacts of ongoing price rises, by introducing temporary caps on local sales of coal and gas to drive down the cost of running large power stations.

Mouchaileh said the future electricity prices for the remainder of this year had fallen sharply across all mainland states since the price caps were introduced on December 9.

Energy Minister Chris Bowen said the report showed that the government’s climate change policy and price caps were starting to work. “The reduced prices were influenced by wind and grid-scale solar, further proof renewables are the cheapest form of energy,” he said.

Grattan Institute climate change and energy deputy director Alison Reeve said market movements suggested electricity bills will fall following the federal government’s price caps on the cost of gas and coal, but customers may have to wait months to see the benefit.

“The impact could start to be felt from July if you are on a default market offer and it may take longer for people on individual deals with their electricity provider,” Reeve said.

Under the federal government’s commitment to cut emissions by 43 per cent by 2030, it has set a target for the grid to source 82 per cent of its power from renewable energy, backed by a $20 billion “Rewiring the Nation” fund.

Linking the necessary increase in wind and solar farms will require a rollout of an extra 10,000 kilometres of new transmission lines, which Reeve said would add to the cost of renewable energy generation over time.

“That extra network cost may offset the lower generation cost of renewables,” she said.

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