Australia can get rid of coal without prices skyrocketing

A research paper by the Grattan Institute challenges the pro-coal politicians highlighting the ‘myth’ around the importance of coal in keeping prices low.

The paper argues that Australia’s National Electricity Market (NEM) should shut down two-thirds of coal power plants, replacing them with 70 per cent renewable energy as it is unlikely to materially increase costs for Australian households.

The economic modelling suggests that moving to a system with 90 per cent renewable energy without coal could still remain reliable, although it would see the cost of keeping the lights on increase due to the need for generation, transmission and storage for days “when the sun isn’t shining or the wind isn’t blowing”.

“Nonetheless, this would be a low-cost way to nearly eliminate emissions in the NEM, and offsetting any remaining emissions each year could well be the cheapest way to reach net zero,” lead author Tony Wood said.

Australia can get rid of coal without prices skyrocketing

The report pushes for most of Australia’s coal-fired power stations, which are due to be retired in 2040, not to be renewed or upgraded.

“Australia can achieve the trifecta of reliable, affordable, low-emissions electricity, and we can do it without coal,” Mr Wood noted.

However, Grattan’s findings warn against rushing completely to renewable energy, saying it would see prices “skyrocket for consumers” without major technological advances to back up renewable supply.

Instead, they argue Australia should commit only to “net” zero emissions in the NEM by the 2040s, not “absolute” zero emissions or 100 per cent renewable energy.

With the absence of technologies today to go completely renewable, Grattan has noted the importance of gas as a transition electricity source.

They said gas generation with negative-emissions offsets will be the lowest-cost ‘bridging’ technology until a zero-emissions alternative, such as hydrogen-fired generation, pumped hydro storage or carbon capture and storage, becomes an economically competitive backstop.

“Gas is likely to play the critical backup role, though not an expanded role. Australia will make a gas-supported transition to a net-zero emissions electricity system – but not a ‘gas-led recovery’ from the COVID recession,” Mr Wood concluded.

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About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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