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EnergyAustralia, Origin back 'pivotal role' for coal

EnergyAustralia, Origin back 'pivotal role' for coal

EnergyAustralia has backed the market operator's plan to keep coal in the system for as long as possible, saying the influx of wind and solar was still a major challenge for the stability of the grid.

As federal Energy Minister Josh Frydenberg spruiked the plan as an endorsement of the Turnbull government's National Energy Guarantee, which he wants to land next month, advocates for renewables said the report was a confirmation of the death of coal over the next two decades and the ascendancy of wind and solar.

EnergyAustralia executive of energy Mark Collette said the market operator's report highlighted the challenges from a large penetration of renewables and the important role that synchronous energy, including coal, plays.

"The plan shows how coal has a pivotal role providing high levels of generation when the wind is low and the sun isn't shining, while reducing output during peak times for renewables. This flexibility will be essential for reliability and will be required from all generators," Mr Collette said.

"Increasing renewable penetration is an emerging challenge. The [integrated system plan] shows that wind and solar will be constrained because there is simply not enough demand when it's windy and sunny. Storage helps, but the cost of storage can mean it's not always an economic option."

The market operator found about 30 per cent of the grid's existing coal resources, which produce 70,000 gigawatts of energy each year, would be approaching the end of their technical life over the next 20 years, which could have a major disruptive effect.

It said existing coal-fired power stations will need to be used for as long as possible before they can be replaced with wind, solar and battery storage.

EnergyAustralia, owned by Hong Kong-based CLP Group, owns two big coal-fired power stations, Yallourn in Victoria's Latrobe Valley, which has coal until 2032, and the Mt Piper in NSW, which has an operational life until 2042.

A spokesman for EnergyAustralia said the company had no plans to close those plants earlier than forecast.

Filling the gap

Origin Energy said its existing coal assets were helping to fill the gap from the quick exit of the Hazelwood power station in Victoria and the Northern power station in South Australia.

"The energy market is currently undergoing a transition and we're playing our part to help to manage it at the lowest cost to customers. This will require getting the most out of existing assets in the market, while Australia continues to progressively increase the share of low cost renewables with required firming from gas peakers, pumped hydro or batteries to maintain reliability," a spokesman said.

"The NSW black-coal-fired generators like our Eraring power station have helped fill the supply gap left by the closure of Hazelwood and Northern and put downwards pressure on wholesale prices. This highlights the important role generators like Eraring will play up until its slated closure at the end of its operational life."

AGL Energy, which has been in a public spat with the Turnbull government over its planned closure of the Liddell power plant in NSW in 2022, would not comment on Tuesday.

AGL chief executive Andy Vesey has resisted overtures from senior ministers to keep the plant open past 2022 or sell it to a competitor. AGL estimated it would cost almost $1 billion to keep Liddell open for another five years. It wants to replace Liddell with a combination of new gas plants, renewables and storage.

Mr Frydenberg said the report confirmed the need to retain existing coal-fired generation as the cheapest current form of generation, saying the NEG would provide the policy and investment certainty the energy sector was craving.

Australian Energy Council chief executive Sarah McNamara said the Council of Australian Government's agreement on the NEG would be critical in determining Australia's future energy mix, saying new interconnectors and transmission lines would also be crucial to link renewable energy zones.

"The existing dispatchable generation fleet continues to be important. Its economic life will be determined by the age of individual plant and national energy policy," Ms McNamara said.

But federal Greens MP Adam Bandt said pro-coal advocates were getting the wrong end of the stick on the AEMO report, saying it confirmed the demise of coal that would account for only 6 per cent of the country's installed generation capacity by 2040 in the "fast-change scenario".

"The government wants to spin this coal's way, but once again AEMO has shown that the future is cheap, clean renewable energy," Mr Bandt said.

Financial Review

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