Finance Finance News Coal power stations struggling to meet Australia’s energy needs

Coal power stations struggling to meet Australia’s energy needs

Australia's ageing energy infrastructure isn't up for the task of keeping our homes cool. Photo: Getty
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Australia’s ageing power plants are becoming less and less reliable, and growing demand for air-conditioning in peak summer heat is only adding to the problem.

In the two years to December 2019, a gas or coal-fired power plant was breaking down once every 3.2 days, IBISWorld research shows.

In coming years those breakdowns will become more frequent, IBISWorld senior industry analyst James Caldwell told The New Daily.

And one of the major risks facing fossil-fuel fired power plants is increasingly hot weather forcing more Australians to turn on their air-conditioners.

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“These coal-fired power stations are only getting older, so they’re going to be less reliable and some of them will be taken offline in the future,” Mr Caldwell said.

“So as long as Australia relies on coal, our electricity transmission will be quite unreliable.”

Further investment in coal would also drive up energy costs, Mr Caldwell said, because the “massive investment” required to build new plants would end up stinging consumers.

It would be billions of dollars, which the consumer would end up paying,” he said.

“We’re not going to see the end of coal electricity generation any time soon, but I think it’s on its way out.”

Export market remains, but becoming risky

Coal’s future as a power source may be limited in Australia, but demand remains strong elsewhere and Mr Caldwell said exports will continue.

“Australia exports most of its coal – I don’t see how that is going to change,” he said.

“That’s what the government is very keen on, because it’s good for the economy.”

Data from the Department of Industry, Innovation and Science showed coal exports brought $54 billion into the economy in the 2016-17 financial year.

But Australia’s large involvement in the global supply of coal could also leave us exposed to the next global financial crisis, according to the Bank for international Settlements (BIS).

During the 2008 GFC, the US central bank – the Federal Reserve – was forced to bail out retail banks that had given bad loans to optimistic home buyers.

A similar scenario could play out with coal and fossil fuel mining, the BIS cautioned, as a sudden shift away from these commodities could leave resource companies unable to pay their loans.

And if the world is to meet the Paris Agreement target of limiting global warming to 1.5 to 2 degrees, then 80 per cent of current coal reserves (and 50 per cent of natural gas) would need to be left in the ground – making them ‘stranded assets’.

University of Canberra assistant professor Dr John Hawkins told The New Daily this places Australia in a difficult position.

Though governments around the world have been relatively slow to respond to climate change, Dr Hawkins said those attitudes can change rapidly and without warning.

Massive climate-related catastrophes – including the bushfires currently tearing across Australia’s east coast – could even trigger a rapid change in policy.

“If governments start coming down heavily on greenhouse gases, that could be a real shock on the economy. The better thing to do would have been to start on this 20 years ago,” Dr Hawkins said.

“As a country, our banking sector does have a significant exposure to coal, and so if there is a sudden drop in value of coal deposits and an increase in stranded assets then that is a serious concern.”

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