Coal is on the way out. The head of the world's largest coal export port says it needs to prepare for the day it will no longer be viable to send coal from Newcastle to the rest of the world. And there is no doubt coal will disappear from Australia’s energy system, too. The question is just how quickly, and how messy this process will be. It is in the hand of governments to make the transition palatable.
Net zero emissions for any country relies on a near carbon-free electricity system that can also supply clean energy in transport and industry. In Australia, that means replacing coal power with renewables and storage.
In fact, in Australia the shift away from coal does not rely on climate policy. It is happening already driven by the market. Eleven of Australia’s power stations have closed since 2012, some at very short notice. The average age at closure was around 40 years. Half of the remaining 16 power stations are over 35 years old. The writing is on the wall.
The new investment is invariably in wind and solar plants, with a smattering of battery storage and gas turbines. That is because wind farms and solar parks supply energy at far lower cost than a new coal power plant could or any gas plant can, let alone nuclear. That cost advantage is so great that it can easily pay for energy storage when it becomes necessary as much more renewable power is added to the grid. Right now, extra transmission lines are needed. The cost will be borne by electricity users, but even so electricity costs are likely to fall.
The pressure on coal plants is only going to increase. Higher supply of renewables means lower prices in the market, and greater need to ramp coal plants up and down, putting extra stress on the machinery. Plants will exit, quite possibly faster than expected.
Old coal plants are typically run until major repairs are needed and the only economic option is to shut them down. Such closures tend to happen at short notice, as was the case with Hazelwood.
This leaves the local community in the lurch, and gives state governments very little time to plan and implement regional strategies. It also puts the grid under extra pressure until replacement investments are made, and it drives up electricity prices as the tight supply reduces competition.
There is no good reason to let this happen. A range of different mechanisms could make power plant exit predictable. All will mean accepting that governments need to take a role in managing the decline of this industry.
The evidence from international best practice is crystal clear. Proactive, well planned strategies for a just and orderly phase out of coal-fired power will achieve far better economic and employment outcomes than an unplanned, reactive approach. And they allow more rapid emissions reductions too.
Australia’s solar and wind resources can provide affordable, reliable energy for private consumers, and for our businesses and industries. Longer term, they could underpin new export industries in green hydrogen, steel and aluminium.
Even if the overall economic picture looks bright, the transition will need careful planning and will often be difficult. New jobs will often not be in the same locations that coal jobs are lost in, and may not offer wages as high. Any new industry will tend to employ fewer people as a result of automation. It becomes all the more important to fairly distribute the economic benefits derived from Australia’s resources.
A well managed, just transition to a prosperous zero-carbon economy will rest on respectful and inclusive engagement with workers and communities; adequately funded re-employment and retraining programs; and far-sighted public investment in economic diversification strategies, tailored to regional strengths.
Too often, politicians paint a picture of a coal industry that will last for a long time to come, and raise the prospect of subsidies for the incumbent industry. This is not helpful to local communities, unless the rest of the country were to provide massive, long term subsidies.
There is a better way. That is to acknowledge that change is coming and to plan for it. It is to prepare roadmaps for economic resurgence, to make public money available for investment in infrastructure and new businesses, and to support communities in coal regions. Australian governments face a clear and urgent choice. Harness the opportunities of the zero-carbon global economy, or lock into an industry that faces rapid decline.
Written by Professor Frank Jotzo is with the ANU Crawford School of Public Policy & Professor John Wiseman is with the Energy Transition Research Hub, University of Melbourne and ANU.
Originally published in WAtoday