Australia’s reliance on coal to generate electricity will diminish as conventional power plants reach their use-by date, the country’s chief scientist says.
But the existing market is not equipped to deal with the transition and, if not addressed soon, could impact reliability and security.
Alan Finkel, in a major report into the system published on Friday, said Australia’s coal fleet is old and coming towards the end of its design life.
He predicts generation will decline over the next 30 years.
More than three-quarters (76 per cent) of electricity produced in 2015/2016 came from coal-fired generators.
But by 2035, about 68 per cent of existing coal generating plants will have reached 50 years of age, and investors have signalled they’re unlikely to invest in new coal-fired generation.
“The existing conventional coal-fired generators are unlikely to be replaced with like-for-like generation assets,” he wrote.
Large generators are likely to be replaced by a number of smaller plants, as the cost of wind, large-scale solar, and new gas-fired generators rapidly declines.
However, the existing framework “is not well suited to co-ordinating the transition ahead”.
Generators are being retired with much shorter notice to the market than the time it takes for new capacity to be planned, financed and built.
“This will be problematic in the future where the retirement of large coal-fired generators could have implications for system security and reliability,” Dr Finkel said.
“The security and reliability services that these generators provide can and will be met by other means, but the transition will need to be more closely monitored and managed.”
Key to that will be obliging large generators to provide both the market operator and wider community with more notice of their intention to close.
The report recommends a three-year notification period.
“This will provide time for replacement capacity to be built and for affected communities to plan for change.”