Coal’s Australian Reprieve Is an Energy Transition Reality Check

Australia’s leaders like to portray the nation as a trailblazer in the energy transition, touting a solar buildout that has installed panels on almost one in three rooftops and rapid growth in battery storage.

The more valuable lesson, though, may be in its struggle with coal.

Eraring, the country’s largest power plant, burns through as much as 6 million tons of the fossil fuel annually and had been due to close as soon as August next year. Last week, those plans were scrapped — instead, it will operate until at least 2027.

The reason is painfully simple. Eraring meets a quarter of power demand in New South Wales, Australia’s most populous state, and local authorities feel that cleaner alternatives are simply not on track.

The problem lies, at least in part, with a sharp slowdown in spending on clean energy projects as developers struggle with rising costs, lengthy approval processes and grid constraints.

New investment in renewable energy in Australia fell by more than a third to $6.9 billion last year, with a particular decline in utility-scale solar projects and onshore wind farms, according to BloombergNEF.

That’s creating concerns around power reliability later this decade, the Australian Energy Market Operator said in an unscheduled update intended to address the changing picture.

Eraring does offer relief — but it doesn’t solve the problem for a country that still relies on coal to generate more than half of its electricity.

For one, there’s a cost attached. Eraring’s owner, Origin Energy Ltd., had decided to close the 40-year-old plant because coal power’s profitability crumbled. Now it will receive as much as A$225 million ($150 million) a year from local authorities to help cover those losses.

Worse, climate campaigners warn, such extensions act as yet another deterrent to investors in renewable energy, who’ll fret more plants could simply be kept alive, too.

The national government says it’s tackling the problem of waning investment with financial and other incentives. Officially, a target for renewables to meet 82% of electricity demand by 2030 remains on track.

It’s an inevitable recalibration, Climate Change and Energy Minister Chris Bowen said last week. India, Indonesia and other middle-income nations struggling to move away from the black stuff will take note.

–David Stringer, Bloomberg News