The transition to renewables is unstoppable

This isn’t just our opinion. We worked with independent experts, CSIRO, ClimateWorks Australia and The Brattle Group, to develop and model six future energy scenarios out to 2050. The scenarios range from a future based on current trends, to a backwards-looking slump in Australia’s economic growth, to more optimistic scenarios where Australia hits the Paris Agreement’s aspirational 1.5⁰C decarbonisation target and becomes a global, clean energy superpower.

Here’s the thing. In all the scenarios we examined, by 2050, renewable energy will supply the majority of the NEM’s electricity needs. In five out of the six scenarios, renewable energy supplies more than 70% of the NEM’s annual energy needs by 2035 and more than 90% by 2050.

What is driving this?

In 2009, the International Energy Agency predicted that 96GW of solar PV would be installed globally by 2020. In reality, 718GW was installed. This highlights the radical disruption that has occurred across the energy supply chain.

Globally, the cost of solar PV has fallen 87% and wind 63% since 2009, and battery storage has fallen 80% since 2013, as calculated by BloombergNEF.

And the disruption has only just begun – coal generators are aging, the cost of renewables will continue to fall and the world is strengthening its action against climate change.

The cost of solar PV in Australia is projected to fall a further 70% by 2050, 50% for wind and 60% for grid batteries (BloombergNEF).

Coal generators retire earlier than expected

The influx of renewables means coal is likely to disappear more rapidly than imagined even a few years ago. Our analysis indicates that, by 2030, with decarbonisation objectives aligned to a 1.5⁰C temperature trajectory, as much as 18GW of coal capacity could be withdrawn from the NEM – 13GW more than currently anticipated[1]. In the ‘Deep carbonisation’ future we modelled, coal production ceases in in the NEM in 2032 – just 11 years from now.

The Institute for Energy Economics and Financial Analysis and Green Energy Markets recently concluded that, by 2025, coal plants in the NEM are likely to see a 44-67% reduction in revenues. At this point, the financial viability of several generators will be severely compromised and at least one generator may close.

This mimics a seismic shift occurring globally. Our top three thermal coal export markets, Japan, China and South Korea, have all announced their intention to achieve net zero emissions by the middle of the century (2060 for China). China recently committed to stop funding overseas coal projects, and this is significant because the Bank of China is currently the largest single financier of coal projects. NSW Treasury projects that, under a low global coal demand scenario, NSW will cease producing coal by 2041.

What will speed up the onset of renewables?

Multiple factors could further accelerate the NEM’s current transition from coal to a renewable-based power system, including:

• Further cost reductions and deployments of renewables and storage driving down the price of electricity, making it more difficult for coal generators to remain profitable
• More ambitious climate change policies
• The technical failure of coal units, driven by age and increased ramping in response to variable renewable energy
• A growing consumer preference for low emissions electricity

As more of these factors come into play, pressure on coal generation will only increase.

What does this mean for jobs?

Thermal coal mining employs almost 25,000 Australians and supports many more indirect jobs. As the tide of renewables rises higher and higher, Australia must start planning how we will ensure a just transition for all the workers and communities whose jobs and economies rely on fossil fuel mining and electricity generation.

Importantly, our modelling suggests new opportunities to create jobs in low emissions industries – in the very areas where fossil-fuel related jobs will be lost. For example, Australia can leverage its abundant renewable energy resources and mineral ores to become a global, clean energy superpower, exporting green hydrogen and metals to the world.

This will create a significant quantity of new jobs in renewable energy, storage, transmission and downstream hydrogen and steel production.

A ‘Deep decarbonisation’ of the Australian economy supports 41,000 electricity sector jobs across the NEM this decade, 45% more than in our business as usual ‘Current trends’ future. In our ‘Clean energy superpower’ scenario, these new industries would support 57,000 Australian electricity sector jobs over the next 30 years, more than today’s levels (34,000 jobs) and twice the level of jobs projected in the ‘Current trends’ scenario.

In fact, actual job creation would be far greater than these figures because the analysis does not consider additional jobs created in downstream sectors that use electricity, such as hydrogen, green steel and aluminium industries.

Our modelling suggests a significant proportion of new renewable energy and downstream hydrogen and green steel production jobs will be created in regional areas, many in similar locations to where existing coal industries are located, such as the Hunter Valley in NSW.

These regions can be at the forefront of Australia’s clean energy future – if we start acting now.

We need to ensure an orderly transition of the power system. One where no community is left behind – and people are provided every opportunity to harness the full potential of new export industries.

This will take proper planning and investment in reskilling and upskilling. But it will be worth it. Our analysis indicates that the transition towards a clean energy future can create immense opportunity for Australia if we set ourselves on the optimal course – a course that will support not just decarbonisation, but job creation and economic growth.

[1] Based on announced retirement dates for coal generators, or at the end of their technical life, as recorded by AEMO.

For more information, visit Energy Vision.