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ABC News
ABC News
Business
energy reporter Daniel Mercer

Australia's great energy transition reaches a 'tipping point' as clock winds forward for coal

In a big week for Australia's energy industry, Bruce Mountain from the Victoria Energy Policy Centre perhaps summed it up the best.

"I think it's a tipping point," Professor Mountain told ABC radio.

He was commenting on the decision by AGL – Australia's most prominent electricity provider – to close its Loy Yang A coal-fired power station by 2035, thereby exiting the fuel altogether.

At a capacity of 2200 megawatts, Loy Yang A is Victoria's biggest single generator and also its newest coal plant, which wasn't technically due to shutter until the mid-2040s.

While Professor Mountain was talking specifically about Loy Yang A, he could have equally been speaking about any number of the seismic shifts that took place in recent days.

Everywhere you looked, it seemed, the super-charged transition from coal-fired power to renewable energy was on display.

Transition 'underway in earnest'

Firstly, the Victorian government of Daniel Andrews unveiled the country's biggest energy storage target to date, vowing to install 6.3 gigawatts within 13 years, or enough, it claimed, to power half of the state's current homes at peak energy use.

A day later, Queensland Premier Annastacia Palaszczuk all but announced the Sunshine State would be out of coal-fired power within an identical time frame – again, much earlier than planned.

The timeline was announced as part of a major shake-up of the state's energy system that would include the construction of giant pumped hydro projects and big licks of renewable energy.

Finally, on Thursday, AGL dropped its own bombshell by revealing it would bring forward by 10 years the closure of Loy Yang A.

To replace that capacity, the company said it would plough a massive $20 billion into technologies such as wind and solar farms as well as storage.

For Professor Mountain, the AGL decision in particular was a "watershed moment".

"It (Loy Yang A) is Victoria's biggest generator by far," Professor Mountain said.

"Essentially, the biggest player has folded.

"It's the start of the transition in earnest we can put down to this day."

By calling this week a tipping point, Professor Mountain and others also brought into sharp focus the urgent nature of the task at hand – to build all of the kit required to keep the lights on before coal is gone for good.

Turning the grid 'on its head'

It's a job that requires not only the new generation to replace coal, but all the poles-and-wires needed to connect those new sources, along with the vast amounts of short-, medium- and long-duration storage to provide back-up.

To that extent, the clock has been officially wound forward.

Tony Wood from the Grattan Institute, a think tank, said there was reason to be hopeful Australia could "get it right" with the transition but he cautioned the path would be littered with pitfalls.

Mr Wood said Australia effectively had to completely rebuild its electricity system within barely a decade – a challenge that would be Herculean at the best of times.

Adding to the complexity, he said the job needed to be done when demand for the materials and workers were already in short supply across the globe.

"We do know that we're way behind already where we need to be," Mr Wood said.

"We've got to fundamentally turn this electricity [system] on its head now … most of it in the next 10 years, if not the next 15 to 20.

"That is very, very hard.

"The amount of stuff that has to be built is enormous and it's going to require very significant people and physical resources and we already know those systems are under stress in every other part of our lives.

"Lining this all up requires incredible coordination and cooperation between industry, government, community and the organisations that actually run the energy system."

According to Mr Wood, failure to manage the rebuild properly could put at risk Australia's goals for the move to renewable energy.

"We need to do better than we are now because otherwise there will be threats," he said.

"Either we will miss the targets on emissions or we'll end up with higher prices or blackouts."

Consumers 'must be central'

As if to underline the point, on Thursday the Australian Energy Regulator noted energy affordability was fast emerging as the biggest challenge to the transition.

In a report, the watchdog said a "perfect storm" of conditions had caused wholesale electricity prices to rise from relatively low levels at the start of 2021 to record highs this year.

AER chair Clare Savage said households were continuing to install rooftop solar in record volumes but many customers were struggling to deal with the hike in power prices.

"Energy prices are pushing up in an environment where consumers already face higher costs of living," Ms Savage said.

"We've seen record wholesale energy prices in July, but network costs are also likely to increase as inflation and rising cost of capital impact the cost of network investments that will be needed to support an orderly decarbonisation of the energy system.

"Consumers need to feel confident that Australia's transitioning energy market is working for them.

"And we are focused on doing everything we can to make that happen."

Professor Mountain said there was little doubting the size and the scope of the revamp required for the power system.

But after a week in which governments and industry seemed to lean into the challenge, he said he was become more optimistic Australia could grasp the nettle.

"I think I'm increasingly confident," he said.

"Certainly in Victoria, I think the fundamental policy platforms have been created in storage, offshore wind, onshore wind and solar and solar on homes and businesses.

"Now I think it's about really building on the foundations so that government can execute quickly."

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