Australia confronts "tidal wave" of new renewables supply

Up to 70,000GW of renewable energy supply is expected to be added to Australia's National Electricity Market (NEM) by 2025, hastening the unviability of gas and coal power plants.

Between three and five of the remaining 15 coal power stations in the NEM will be under financial stress by 2025.

The warning is sounded in a new report from the Institute for Energy Economics and Financial Analysis (IEEFA) and Green Energy Markets.  

The new wind and solar plants coming on stream equate to New South Wales’ entire electricity consumption. 

"The market is facing a tidal wave of new supply, much greater than anything government authorities or market analysts forecast or even contemplated just two years ago," said Tristan Edis. "The supply added from 2018 to 2025 equates to over a third of the entire demand in the NEM, and more than 8 times the annual generation of the Liddell coal-fired power station in NSW."

Coal plants will be financially unviable and at least one is likely to face closure several years sooner than planned due to their poor flexibility and inability to adapt to a rapid influx of renewable energy.

"Rather than propping up these plants which are getting very old, we need new government policies that supports private-sector investment in dispatchable power plants that will be viable over the long term," writes Edis. "To be viable they need to be highly flexible to work around changes in wind and solar output. And they need to be low emission if we are to deliver on our climate change obligations." 

Co-author Bowyer notes this extra supply will lead to a collapse in output from many of the existing fossil fuel generators.

"They will be displaced because wind and solar have no fuel cost and typically bid into the market with prices close to zero,” says Bowyer. "We predict that gas power station output will fall by 78% and coal output by 28% by 2025 compared to 2018 levels."

The extra competition from wind and solar plants will also have a deflationary impact on wholesale electricity prices, as more expensive gas and coal generators will be needed far less, the report adds. 

While prices will be more volatile, on average they are likely to return back to the kinds of levels that prevailed in 2015. "This is because the extra supply from renewables is several times greater than that lost from the closure of Hazelwood, Northern and Liddell Power Stations."