Australia 2050: a net zero-emission economy

Australian Energy Market Operator calls for investment in hydro storage to help with energy transition

It was called an end of an era. A year ago this month, Liddell, the oldest coal-fired power station in Australia, finally shut down the last of its four units. It became the latest station of its kind to turn off its boilers and go into retirement, part of the country’s plan to shift from the dirty fossil fuel to wind, solar and other renewable sources for its energy needs.

Located in Hunter Valley north of Sydney in the state of New South Wales, Liddell had been in service for more than half a century. At its peak, it supplied nearly 10 percent of the state’s energy needs, but at the cost of emitting tonnes of CO2 into the air.

Australia’s energy transition plan: next steps

When it finally shut down, there was barely a flicker of a light bulb because its contribution to the power grid had been already replaced by solar panels, wind turbines and other renewable sources being installed to meet Australia’s ambitious goal of reaching a net-zero economy by 2050.

As for the remaining coal-fired plants, however, their retirement might not occur as smoothly, according to the Australian Energy Market Operator (AEMO), which manages electricity and gas systems and markets across the country. In New South Wales, for example, there is Eraring with a production capacity of 2,800-megawatt (MW) that uses coal and diesel; and Bayswater, a coal-fired thermal plant with a capacity of 2,640 MW.

The last of these plants is forecast to shut down before 2040 – a little more than 10 years away. Hence the urgency to complete the energy transition, which involves massive investments not only in the generation of electricity by renewable resources, but also in its firming, storage and transmission.

Price and Blackout Risks

In its latest two-year plan – the Draft 2024 Integrated System Plan, which sets out the best way for Australia to complete this transition – the AEMO identifies the untimely withdrawal of coal-fired plants from the system as one of the challenges to achieving the 2050 goal. If the system is not ready to pick up the slack when the plants shut down, there could be sharp price increases if not blackouts.

“Risks to the reliability of the system are already becoming visible, and the NEM (National Electricity Market) must be resilient to shocks such as unanticipated coal closures or outages, intense weather events or, conceivably, cyber attacks,” it says in the plan, for which the AEMO has sought public consultation.

“The NEM must almost triple its capacity to supply energy by 2050 to replace retiring coal capacity and to meet increased electricity consumption,” it adds. The NEM is used by producers and consumers to trade electricity.

The damage that can be caused to the NEM by a storm became evident in February when strong winds knocked down transmission lines and towers in the state of Victoria, cutting off major power producers from the NEM and causing widespread blackouts.

Storage for Stability

Australia has nevertheless made great strides in reducing its dependency on coal. Renewable sources accounted for almost 40 percent of the total energy delivered through the NEM in the first half of 2023, according to AEMO. The state of South Australia is actually at the vanguard of this transition, having transformed its energy system from 1% to more than 70% renewable energy in just over 20 years. By 2026 at the latest, the AEMO forecasts this could rise to approximately 85%.

But more needs to be done – and quickly. One of the areas of investment is storage, which includes hydro power. It is just as important as solar panels, wind turbines and transmission lines because it helps smooth out any variations in the demand and supply of electricity that might occur at a given moment, especially when the wind is not blowing or the sun is not shining. “Storage …(firms) up the renewables to help maintain grid stability and inertia, smooth out volatile frequencies, and balance out fast changes in supply and demand,” reads AEMO’s plan.

Snowy 2.0

One of the projects that will provide this kind of storage is Snowy 2.0 in the Snowy Mountains. Under development by Italy’s Webuild and its Australian subsidiary Clough in the Future Generation Joint Venture for utility Snowy Hydro Limited, it is a pumped-storage scheme, able to provide electricity on demand whenever there is a drop in supply in either New South Wales or Victoria.

The largest project of its kind under construction in the country, it will connect two existing reservoirs – the Tantangara and Talbingo – through a network of nearly 30 kilometres of tunnels. At the heart of this underground complex will be a power plant that will provide up to 2,200 MW to the power grid, ensuring stability by making available at a moment’s notice its stored hydropower when other renewable energy sources like solar or wind are not available.

This complex engineering project is actually an expansion of the Snowy Scheme, increasing its total production capacity from 4.1 to 6.3 MW. Water from Tantangara at 1,230 metres above sea level will be drawn down a tunnel to turn the turbines of the underground power plant before emptying into the Talbingo basin at 540 metres above sea level. When electricity prices are cheap, the water is pumped back up to the Tantangara, ready to be used again when needed.