2018 will likely go down as the year that fossil fuels in Australian electricity generation began an inexorable decline, with renewable energy making significant in-roads. These will continue into 2019 and 2020, and almost certainly beyond that.
Renewable energy broke through the 20 per cent market share threshold for the first time since the 1970’s, achieving a share of 21.3 per cent across the combination of Australia’s main east and west-coast grids. This was significantly up on 2017’s share of 17 per cent.
Much of this growth was concentrated in Australia’s east coast grid, with limited growth in renewable generation in WA or the Northern Territory (confined to rooftop solar), in spite of their rich renewable resources.
Within the east coast National Electricity Market both coal and gas generation fell in absolute terms in 2018 relative to the prior year. Gas suffered a particularly big fall, dropping by 26 per cent on the prior year.
Wind and solar by contrast experienced substantial growth. Wind generation was up in the NEM by 26 per cent, while solar was up by 35 per cent. Hydro generation was also up substantially by 29 per cent, however this represents more of a cyclical, short-term phenomenon.
Extending our gaze back several years helps to illustrate the breakthrough renewable energy achieved in 2018. Figure 2 shows the change in generation in one year relative to its prior year.
For wind there was a remarkable turnaround in 2018 after almost no growth in 2017 (which was a legacy of the Abbott-induced investment drought over 2014 and 2015). Rooftop solar has been steadily growing generation year on year but 2018 saw a big leap up, 86 per cent greater than the average additions of 2015-2017.
Yet it was large scale solar farms that really jumped out of the blocks in 2018 with generation leaping up by almost 300 per cent on the prior year. It passed the 1,000GWh mark over the year although it remains small at present, but with a far bigger impact to be seen this year and next as thousands of megawatts under construction come online.
The chart also shows how hydro tends to see-saw quite dramatically and 2018 happened to be an up year. However, given just how much wind and solar capacity will come online over 2019, hydro could have a down year and overall renewables will still grow its market share.
While 2018 was promising for renewable energy, the overall task of decarbonising the grid remains substantial. Figure 3 shows the cumulative change in generation levels by fuel type relative to 2014.
While wind, solar and bioenergy generation has grown substantially since 2014, coal generation levels still remain above 2014 levels (albeit just slightly now). This is quite remarkable when you consider that Northern, Anglesea and Hazelwood Coal Power Stations closed over this period.
In 2015 coal generators realised a large jump in generation levels driven more by the start up of Gladstone’s LNG plants than the abolition of the carbon price.
These new LNG plants delivered a double windfall to coal of much more expensive gas and extra electricity demand (the LNG industry is a major consumer of electricity).
Renewables growth has only just last year managed to whittle away much of coal’s gains made in 2015. Meanwhile gas and oil, after recovering generation levels somewhat in 2017 thanks to Hazelwood’s closure, were pushed down to their lowest levels since the abolition of the carbon price.
Figure 4 puts this into overall perspective looking at absolute levels of generation rather than levels of change. It shows that while brown coal and gas have declined, black coal has been chalking up significant growth in generation levels since 2014 which only flat-lined in 2018.
Looking forward though, black coal will see some noticeable declines in 2019. While large-scale solar farms were pretty small beer in the NEM in 2018 generating 1,850GWh, next year we expect their generation to lift to around 8,000GWh.
While wind recorded a big lift in generation levels in 2018 relative to prior years, it will add double that amount of generation in 2019. Wind farms already under construction or contracted will add the same amount extra in 2020.
Then we can add onto this a full year’s impact from the 1600MW of small-scale rooftop solar installed over 2018 and plenty more progressively added to the grid over 2019.
This means not just gas and brown coal, but also black coal power plants will see their generation suffer significant falls in 2019, with the only bright side for fossil fuels being less hydro generation from Snowy, whose storages have run low over 2018.
Tristan Edis is Director – Analysis & Advisory with Green Energy Markets. Green Energy Markets assists clients make informed investment, trading and policy decisions in the areas of clean energy and carbon abatement.
