Eraring deal signals death of baseload power in Australia, and Dutton’s nuclear fantasy

Australia’s biggest coal generator will operate with the same capacity factor as the average solar farm as a result of the deal to delay the Eraring closure. It confirms baseload power has no future in Australia, so what does Peter Dutton think he is going to do with a big nuclear plant?

The one thing that you can say about the federal Coalition energy policy over the last two decades is that it has been consistent, at least in so far as the technology that they don’t want to support: Let’s call it “Anything but renewables.”

Two decades ago John Howard scrapped the then mandatory renewable energy target after being convinced by the fossil fuel lobby of the potential horrors of doubling wind and solar output from just one per cent to two per cent.

Nearly a decade later Tony Abbott scrapped the carbon price, and then tried to do the same with the current renewable energy target, and the institutions that supported it. He was thwarted by an unlikely combination of Al Gore and Clive Palmer, but succeeded all the same in creating a two year investment drought.

Now the Peter Dutton led Coalition is having another crack, albeit from Opposition, demanding that the rollout of large scale renewables – wind, solar and storage – be brought to a crashing halt, and promising to rip up contracts with the commonwealth if they are returned to power.

So absolute is their hatred and fear of renewables that it is just a little surprising that they haven’t yet figured out the alternative for the country’s ageing fleet of increasingly unreliable and highly polluting coal fired power stations.

The Coalition started with a fixation on new coal fired power stations – remember HELE – laughingly called high efficiency, low emissions, but in reality exactly the opposite?

That didn’t last long because they realised that no one would actually want to build one, although if you search into the bowels of X, you might just find a cosplay former Coalition minister still singing the fossil fuel’s tunes.

Then it was the turn of nuclear small modular reactors (SMRs), before it dawned on them that the sort of machines the travelling salespeople had been talking to them about with such enthusiasm don’t actually exist – and probably won’t for a while and will likely be terribly costly when they do.

So now it’s back – for a second attempt – at large scale nuclear, cheered on by a group of energy and climate Flat Earthers, who refuse to acknowledge the weight of evidence from energy experts that – in Australia at least – the technology is too slow, too costly, and frankly too stupid to consider.

Clean Energy Council boss Kane Thornton on Tuesday described the push for nuclear – six times more costly than renewables and storage and two decades until it could possibly be produced for the first time in Australia – as a “mad-hatters’ tea party”. That is the almost unanimous view in the energy industry, but the FUD – fear uncertainty and doubt being spread by the Coalition and right wing media creates a different picture in the public arena.

The nuclear boosters thought they had a victory last month when they assumed the delay in closing the country’s biggest coal generator Eraring was vindication of their insistence that wind and solar won’t work, and that the only way to replace centralised fossil fuel generation is with another centralised baseload fuel source.

But the extraordinary – and many say unnecessary – deal struck by the NSW government and the Eraring owner is anything but.

Yes, the 2.88 GW official closure is pushed back by two years – not because wind, solar and storage can’t do the job, but because it hasn’t been built quickly enough, and that’s the fault of both Eraring owner Origin and the state government.

The delay is not due to reliability concerns because there is no obligation on Eraring to be producing power at the time that the market operator says it will need it most – the “tail risk” events that might occur in the middle of summer, for instance, when an intense heatwave creates a surge of demand and renders other generation useless.

The extension is really just about the risk and fear of high prices – exacerbated by the delays in new projects – and the fact that these might occur in the lead up to the next election in early 2027.

One thing that the government can observe is that the energy industry exercises no self control about bidding practices, which is why an automatic price cap had to be imposed last month when a bunch of coal generators were out of action. There is no doubt that, given the same opportunity, they will repeat the dose.

But here’s what the Eraring deal really tells us, and it’s a big problem for Opposition leader Peter Dutton’s nuclear fantasies: It’s a signal – indeed confirmation – that the concept of “baseload” power – interpreted by most as “always on” generation and the fundamental back drop to energy markets for half a century – is now dead in the water.

The deal with the government only requires Origin to operate Eraring at just one quarter of its rated capacity, about the same capacity factor as your average solar farm, and less than most wind farms.

The deal requires it to provide little more than one third of its recent average annual output – just 6 terawatt hours. Last year it produced 16 TWh. That’s partly because the plants are getting old – but it’s also because there is simply no room in the grid for an ‘always on’ big baseload generator any more.

This has been admitted by the owners of Eraring, Origin Energy, for some time. It was clear more than a decade ago that this was going to happen, and Origin admitted as much in 2018. “The idea of base-load power stations is well and truly gone,” said Greg Jarvis, the head of markets said then.

It is expected that Origin will cycle two or three of its Eraring units over summer, and perhaps just one over winter. One thing that is for sure, it won’t be running at baseload, and so won’t likely be in the market for so-called “baseload” swaps. Which means, according to some analysts, it might just pick the moments when prices are higher.

Running a big baseload plant at low capacity factors, is clearly not economic, at least at face value. So if Origin can’t pick high priced moments for Eraring, it has at least the security of having the NSW taxpayer on the hook to underwrite its looses – up to a hefty $225 million a year – and pay for any major equipment upgrades.

The other private operators of coal generators in Australia agree that baseload is dead as a concept. AGL says there is simply not the demand to operate coal fired power stations as “baseload,” and EnergyAustralia is pushing for contracts that will allow its last remaining coal generator, Mt Piper, to switch off completely in certain seasons.

There is speculation that its Yallourn generator in Victoria will end up doing the same thing, notwithstanding the current but hidden contract to keep it open until 2028.

The CSIRO, of course, took this into account when estimating its generously low costs for large-scale nuclear in the recently released final version of the GenCost report.

The Coalition and its supporters howled their disapproval. Energy spokesman Ted O’Brien wants the CSIRO to calculate capacity factors of 92 per cent, without ever explaining how this can possibly fit into a grid where rooftop solar in many states already accounts for all, or nearly all, daytime demand.

It’s not the only problem with large scale, of course. There are questions about the need for more standby capacity for such large machines (1.4 GW) and there is the question about critical system services which in many other countries nuclear is given a grid pass on because it requires them to produce less power, which they don’t like doing.

The nuclear lobby has also been absolutely insistent that the CSIRO include integration and transmission costs for wind and solar, which the CSIRO has done. Curiously, they haven’t said a peep about the considerable integration, storage and transmission costs for nuclear, which are not included in the CSIRO report.

There was a big range of reactions to the Eraring decision – from frustration and anger from those who think it is not needed and not justified, to quiet resignation and a roll of the eyes from many in the energy market, and as some sort of validation for the renewable naysers and nuclear junketeers.

One of the most inventive responses came from the Centre for Independent Studies, which decided that fossil fuel subsidies, like the $450 million offered to Eraring to keep less than half its output going for another two years, are really subsidies to the renewable energy industry, because – they argue – it is in response to its failures.

Full marks for creativity, but none for reality. The nuclear boosters have decided, like Donald Trump, that the best way to disguise a dud deal is to make ever more outrageous claims.

It underpins the carefully choreographed claims that nuclear is cheap (it’s not), that everyone is doing it (they are not), that nuclear can be built in Australia faster than anywhere else in the world (it can’t), and that is the only technology that can keep the lights on (clearly not true)..

Denial has morphed from climate change to technology. But it doesn’t stack up. If the lowest cost “baseload” can’t find room in the market, then there’s not much hope for the most expensive “baseload.” And climate science tells us there is no time to wait.