Australia stands at a crossroads when it comes to its energy strategy. On the one hand, the country has moved to embrace clean energy in the past few years, with renewables growing to 29% of total generation in 2021, after stagnating at about 10% through the 1990s and 2000s. Meanwhile, in June, Australia’s newly elected Labor government greatly increased the country’s target for cutting carbon emissions, and projected renewables would rise to 82% of generation. The country also has been a hotbed for innovative clean energy projects, like the Distributed Energy Resources (DER) Marketplace from the Australian Energy Market Operator (AEMO), and projects that pair solar and storage in a way that enables remote areas to wean themselves off fossil fuels.

However, Australia also remains heavily dependent on coal, relying on it for more than half of its energy generation in 2021. Coal continues to be a major contributor to the economy. Australia is one of the world’s biggest exporters of coal, and it’s one of the most fossil fuel–reliant advanced economies. Up until this year’s election, the country’s affinity for coal often acted as a handbrake for its clean energy efforts, and concerns about deindustrialization and job losses limited the public’s appetite for turning away from coal too quickly.

As the election in May shows, the political tides in Australia have shifted to favor the clean energy transition, which will necessitate an acceleration in the decommissioning of coal plants to meet the new government’s aggressive emissions targets. Besides the shifting political winds in Canberra, a winter of electricity woes has also brought attention to the pitfalls of Australia’s reliance on coal, particularly in the eastern states of New South Wales (NSW is home to Sydney and a third of Australians) and Queensland.

Flooding at coal mines in the two states limited production, while technical issues and scheduled maintenance combined to knock out a quarter of Australia’s coal capacity. The issues with coal generation, the spike in energy prices this year, and increased demand as the Australian winter sets in, forced AEMO to temporarily suspend the country’s wholesale electricity market, electing to instead set prices directly to avoid price gouging.

“Though Australia’s coal plants suffered unexpected challenges this year, the impacts highlighted the pitfalls of the journey in transitioning from coal; physical dispatch requirements are changing and there is growing misalignment of market incentives,” said Patrick Lee, president and CEO of PXiSE Energy Solutions, a company that has worked on projects in Australia for years. “Energy storage and grid control software can help the country gradually decommission coal plants in a way that doesn’t shock the grid—something the Australian government and the country’s utilities have recognized, and the embrace of modern grid solutions demonstrates their smart approach to the transition to clean energy resources.”

Origin Energy, a major Australian power company, earlier this year said it would close Australia’s largest coal-fired power plant in 2025, seven years ahead of the scheduled shutdown date. “The reality is the economics of coal-fired power stations are being put under increasing, unsustainable pressure by cleaner and lower-cost generation, including solar, wind, and batteries,” Origin Energy Chief Executive Frank Calabria said in a statement. Origin plans to install a battery energy storage system (BESS), with as much as 700 MW of capacity, at the Eraring power station site, located about 75 miles north of Sydney. Origin said it plans to have the BESS mostly in place prior to decommissioning the 2,880-MW coal-fired facility, integrating the battery storage with renewable energy developments across NSW by 2026. Origin said the site also could be home to other energy projects over time that can utilize the existing power transmission lines.

Calabria said Origin is confident that its plans for new gas-fired power plants, pumped hydro stations, and BESS installations “will be more than enough to compensate for the exit of Eraring.” Origin’s strategy is likely to be followed by other Australian generators.

Canberra’s new aggressive emissions target, and the worsening effects of the climate crisis, are reasons enough for Australia to ramp up the decommissioning of its coal plants. The issues with coal plants in NSW and Queensland further highlight the need for the country to bring replacement energy production resources online quickly. Though unexpected, the various factors leading to coal’s price surge and technical problems related to aging coal plant infrastructure may happen again in years to come, and could again coincide with a surge in demand and scheduled maintenance.

1. AGL Energy earlier this year announced it will close the Liddell coal-fired power plant in April 2023, and already has begun shutting down the station’s four 500-MW units. The company said it wants to add a 500-MW battery energy storage system, along with renewable energy resources, a gas-fired peaker plant, pumped-hydro storage, and a synchronous condenser at the site. Courtesy: AGL Energy 

AGL Energy, another Australian power group, earlier this year estimated it will cost more than $970 million to replace its Liddell coal-fired plant in the Hunter Valley mining region of NSW. AGL plans to close the Liddell plant (Figure 1) next year, and already has begun a phased shutdown of the station’s four 500-MW units. The company said it wants to add a 500-MW BESS, along with renewable energy resources, a gas-fired peaker plant, pumped-hydro storage, and a synchronous condenser at the site. Hunter Valley also will be home to the Hunter Energy Hub, a planned development featuring a grid-scale battery, solar thermal storage, wind power, hydrogen production, and pumped-hydro storage.

Renewable resources are well-positioned to fill in the demand gap caused by the decline in coal generation. Solar is the best option for Australia; the sunny country with a sparsely populated desert interior has the highest solar radiation per square meter of any continent. The country’s utilities and regulators have realized this, with solar power having a big increase in recent years.

However, Australia is still a far way off from being able to fully rely on renewables, as the electricity troubles of the past few months demonstrated. While this year’s energy crisis is accelerating the adoption of renewables, it will still be many years before enough solar and other renewable projects are brought into the wholesale energy market to match coal generation.

2. This energy storage project in Onslow, Western Australia, is providing electricity to a remote community. It’s among several such projects that are deployed or being developed across Australia as the continent closes coal-fired power plants and replaces that generation with renewable resources and energy storage. Courtesy: Horizon Power 

On the upside, the clean energy transition is highlighting technologies that can help Australia as the country decommissions its coal plants. Energy storage (Figure 2) will be increasingly important so that intermittent renewables can be an effective replacement for dispatchable fossil fuel energy. But energy storage also is key for the gradual decommissioning of coal plants. Operators can add storage to existing coal plants so that they can operate at financially reasonable levels of generation while grid operators prepare to offset the loss in coal generation. These plants will still be decommissioned, but in a manner that doesn’t cause a shock to the grid, a pressing concern as closures come years earlier than planned due to market conditions. Australia can still meet its clean energy goals with more gradual shutdowns of coal plants, but without also destabilizing the grid.

Decommissioned coal plants are also a prime site for energy storage because they already possess the infrastructure needed to connect batteries to the grid. Power producers and regulators are recognizing former coal plants for their energy storage potential. These efforts are likely to be ramped up, and more decommissioned coal sites are expected to be used for energy storage for Australia to fully meet demand with renewables.

In concert with energy storage, smart software solutions can assist Australia’s energy transition as coal plants retire. Grid control software like distributed energy management systems (DERMs) and microgrid controllers give utilities and operators the tools they need to maximize their renewable assets and energy storage. Such autonomous solutions use artificial intelligence to analyze historical demand and usage patterns, develop optimized asset usage plans, and then match them in real time to current grid conditions, updated weather forecasts, and predicted demand.

These software-based solutions can help Australia aggregate the thousands of incremental local contributions of DERs into meaningful impacts on the grid that reduce reliance on centralized generation sources. Plus, built-in optimization functions automatically shape, shift, and redistribute power, virtually eliminating power waste, and thereby requiring less generation and capacity to serve the same network needs.

Australia has already realized the benefits of assets like distributed energy, battery storage, and grid control software. For instance, rural communities in Western Australia, far from main grid connections, are hosting novel projects that pair storage and solar to take the place of fossil fuels. One of these has demonstrated that it’s possible for a microgrid to remain fully operational solely using renewables, without spinning generation.

In more densely populated areas, the country is embracing DER marketplaces to create local and wholesale markets for renewable energy, and operators have already realized the benefit of using old coal sites for energy storage. Australia has demonstrated the need to accelerate coal plant decommissioning, and also is demonstrating how it can repurpose those sites as it transitions to renewable energy.

Jose Carranza is head of Products & Solutions at PXiSE Energy Solutions. POWER staff contributed to this report.