Leslie Massey
Australia's electricity sector has been undergoing significant changes in recent years, with a shift from traditional fossil fuel-based generation to an increasing focus on renewable energy sources. The country's vast size and dispersed population present unique challenges for its electricity grid, which consists of the National Electricity Market (NEM) in the southeast and east, the South West Interconnected System (SWIS) in Western Australia, and a smaller grid in the Pilbara region. In 2021, Australia's electricity production reached 265 TWh, with coal and natural gas contributing significantly, but renewable sources like solar, wind, hydro, and bioenergy collectively accounted for a growing share of approximately one-third of the total electricity generation mix. The Australian government has set ambitious targets to further increase the proportion of renewable energy, aiming for renewables to constitute 82% of the national electricity mix by 2030.
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What You'll Learn
Coal-fired plants
Australia's electricity production in 2021 was 265 TWh, with coal accounting for 52.9% of the energy mix. Coal-fired power stations burn coal to power steam turbines that generate electricity. However, these coal-fired power stations are aging, with many due for decommissioning and are being replaced by renewable energy sources. In 2017, 75% of coal-fired power stations were operating beyond their original design life.
The Liddell Power Station was the latest major coal-fired power station to be decommissioned, which occurred on 28 April 2023. Other examples include Kwinana A (240 MW), which was shut down in 2010, and Kwinana C (400 MW), which was shut down in 2015. The Australian Capital Territory does not use coal or oil for electricity generation.
Despite the aging infrastructure, commentators and politicians have called for renewed investment in coal-fired power generation, including government intervention to build new power stations. However, this advocacy has been criticised for being misleading and incorrect, with a distinction between coal projects "under construction" and "under active development".
In 2023, coal-fired generation continued its long-term decline, contributing 46% to the energy mix, compared to 52.9% in 2021. This decline can be attributed to the declining cost of renewable energy sources, such as solar and wind power, and the increasing share of renewable energy in total electricity generation.
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Natural gas
The use of natural gas as an electricity source has been trending upwards globally for over three decades. In Australia, natural gas is particularly important as a baseload power source, as it can quickly ramp up and down to match demand changes, making it a good partner for intermittent renewable energy sources such as wind and solar power. This flexibility also allows for more renewables to be integrated into the grid.
There are two main types of power stations used to turn natural gas into electricity: gas turbine power stations and thermal gas power stations. Gas turbine power stations use gas combustion to generate electricity, while thermal gas power stations use gas combustion to power steam turbines that produce electricity. Onshore coal seam gas (CSG) wells have also recently become a significant additional source of gas in Australia, with the recently approved $3.6 billion Narrabri coal seam gas project in northern NSW expected to provide up to half of the state's natural gas needs.
While natural gas is a fossil fuel and contributes to carbon emissions, it is a cleaner energy source than coal and has been playing a role in the transition towards a lower-carbon world. In Australia, the use of natural gas instead of coal for electricity generation can lead to a significant reduction in greenhouse gas emissions.
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Renewable energy sources
Australia has a diverse range of renewable energy sources, including solar, wind, hydro, and bioenergy. In 2021, renewable sources accounted for 26.7% of the country's total electricity generation mix, with solar and wind power being the fastest-growing sources of energy.
Solar energy is predominant in the eastern states of Queensland and New South Wales, which have the highest capacities of solar photovoltaic (PV) installed. Solar PV includes rooftop solar and solar farms. Rooftop solar, along with wind power, has led to a fast-growing share of renewable energy in total electricity generation. Feed-in tariffs have been enacted to encourage investment in renewable energy sources like rooftop photovoltaic panels, with incentives for residential infrastructure.
Wind power is also a significant contributor to renewable energy in Australia, with Victoria and South Australia well-suited to wind power generation. In 2012, wind power accounted for 26% of renewable electrical sources, and it is expected to play a major role in the country's energy transition.
Hydroelectricity is another important renewable energy source in Australia. The main power storage in the country is the 600 MW Tumut 3 pumped-storage hydroelectricity system. Additionally, the Snowy Hydro scheme in New South Wales is expanding through the Snowy 2.0 project, aiming for a total capacity of 6 GW by 2026.
Other renewable energy sources in Australia include bioenergy, geothermal, wave, and solar thermal energy. Clean hydrogen, also known as green hydrogen, has been identified as a valuable fuel for decarbonizing parts of Australia's economy. The country has also implemented initiatives like the Large-scale Renewable Energy Target and the Small-scale Renewable Energy Scheme to encourage investment in renewable power stations and incentivize individuals and small businesses to adopt small-scale renewable energy systems.
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Privatisation of electricity
The privatisation of electricity in Australia began in the 1990s, with South Australia leading the way in 1999, followed by Victoria in the same decade, and New South Wales in the 2010s. The process involves transitioning public services or goods to the private sector. In the case of electricity, this means selling state-owned utilities to private companies, often foreign power companies.
The privatisation of electricity in Victoria, for example, brought in $22.5 billion, with the majority of the funding coming from borrowing from domestic banks, and the rest from equity provided by the purchasers. The state governments justify this move by promising cheaper prices and the need to use the revenue generated for infrastructure projects.
However, since the privatisation of electricity in Australia, prices have risen by 183%. Economists have warned about the risk of creating a monopoly, which has been the case with Telstra, limiting market competition and efficiency. There are also concerns about rising electricity prices and the loss of jobs in the electricity sector. Despite the initial bipartisan support for privatisation, it has become an unpopular move with the Australian electorate, with the Labor Party ruling out any further privatisations of state-owned assets.
In 2023, fossil fuel sources contributed 65% of Australia's total electricity generation, with coal being the largest contributor at 46%. However, coal-fired generation is on a long-term decline, and renewable energy sources are on the rise, with solar and wind power being the fastest-growing sources of energy in the country. In 2021, renewable energy accounted for 32.5% of electricity production, almost double the proportion from five years prior.
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Rooftop solar
In 2024, rooftop solar installations are expected to surpass a combined total of 25 GW of installed capacity, with New South Wales leading the way with the highest level of total installed capacity of rooftop PV at 6.6 GW. The average installation size has also increased over the years, rising from about 2 kilowatts in 2011 to 8 kilowatts in 2023, and 9.7 kW in the first half of 2024.
The rapid increase in rooftop solar capacity is expected to play a crucial role in the Australian government's efforts to decarbonize the economy and meet its climate goals. By 2050, rooftop solar capacity is predicted to more than triple, potentially providing more energy than the country's entire electricity demand.
However, there are challenges to be addressed. While the uptake of rooftop solar has been impressive, the adoption of home battery systems lags behind. The integration of household batteries is essential to maximize solar savings during periods of low sunlight and to stabilize the electricity supply. Additionally, with home ownership becoming increasingly unaffordable, Australia needs to explore ways to extend the benefits of rooftop solar to renters and individuals in social housing.
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Frequently asked questions
The main sources of electricity in Australia are coal, natural gas, and oil. In 2023, fossil fuels contributed 65% of Australia's electricity, with coal at 46%, gas at 17%, and oil at 2%.
The main renewable sources of electricity in Australia are solar, wind, and hydro power. In 2023, renewables contributed 35% of Australia's electricity, with solar at 16%, wind at 12%, and hydro at 6%.
In 2022-23, Australia's total electricity generation was around 274 terawatt-hours (988 petajoules).
The National Electricity Market (NEM) is a wholesale market that coordinates the dispatch of electricity across interconnected grids in the southeast and east of Australia. It is managed by the Australian Energy Market Operator (AEMO) and includes both state and privately owned assets.
One challenge for Australia is building more dispatchable generating capacity. There is also a broader strategy to lower emissions by 43% from 2005 levels by 2030 and achieve net-zero emissions by 2050. The government aims for renewables to constitute 82% of the national electricity mix by 2030.
