Nobody said it was easy, but it’s time for us to part: VIC’s climate targets & coal

In 2017, the Victorian Government legislated a state target of net-zero greenhouse gas emissions by 2050. Since then, short-term targets have been set in five-year increments, with the 2030 target being to cut emissions by 45-50% below 2005 levels. The Government is currently consulting on the 2035 target, which must be set by March 2023. It will likely put forward an updated climate change strategy, along with whatever target it chooses for 2035.

While reaching net-zero emissions is about the whole state economy, including transport, heat, industry, and non-energy emissions, the reality is that decarbonising the electricity supply lies at the heart of most credible climate strategies. For example, a key enabler of achieving the 2030 target is the closure of the Yallourn brown coal power station in 2028 and its assumed replacement with lower emissions alternatives.

In this Chart of the week, we look at the half-hourly emissions intensity of Victorian electricity supply over the last few years to evaluate progress so far. First, the headline numbers – annual emissions intensity has fallen from 0.97 tCO2e/MWh in 2018 to 0.83 tCO2e/MWh in 2021 and 0.81 tCO2e/MWh in 2022 year-to-date, representing a 16% reduction in the emissions intensity of electricity supply. The Chart below shows that the bulk of this improvement has come during daytime hours, primarily due to the uptake of rooftop solar PV by homes and businesses, and partly due to utility scale solar. Emissions intensity in the evening and overnight has improved too thanks to an influx of wind capacity, but not as markedly as the middle of the day. Seasonal effects are somewhat noticeable too, with emissions intensity in spring and summer being lower than in winter (although a comparison between months within any one year is affected by new supply coming online throughout the year).

Going forward, it appears that the largest emissions benefit would come from targeting periods outside daytime hours, where intensities are highest. Of course, rooftop PV should and will continue to play a role in decreasing emissions, but the Chart shows that the marginal emissions benefit of each panel added in 2022 is considerably lower than in 2018. Furthermore, Victoria’s brown coal power stations are often regularly running close to their minimum stable level, indicating that only so much rooftop PV can be added before either the stations are retired, or rooftop PV starts being consistently curtailed.

Yallourn’s closure is already slated for 2028, creating “room” in daytime hours for more solar and rooftop PV and helping to meet the 2030 emissions target. But what about meeting the upcoming 2035 target? We don’t know the target yet, but if we take a roughly linear trajectory towards net-zero by 2050, we can estimate the target will be an emissions cut of 60-65% relative to 2005 levels. The electricity supply will need to do much of the heavy lifting again. Much of the low hanging fruit (rooftop PV) will be exhausted by that time. The Victorian Government’s recently announced offshore wind targets will help decrease emissions in the evenings and overnight, but it looks increasingly likely that another brown coal power station also needs to go.

Cornwall Insight Australia’s in-house Benchmark power curve price forecast subscription services shed light on how prices are likely to evolve, considering the impacts of new regulations. For more information, please contact us at enquiries@cornwall-insight.com.au.

To keep reading, please log in to your account or sign up for free

Alternatively, please sign up to receive free market insight online and direct to your inbox

Related thinking

Commercial and market outlook

EV uptake set to transform the grid in the Australia – but how much?

Electric vehicles (EVs) are slowly becoming more popular in Australia, with new car sales increased during the last two years. Although Australia is behind in EV deployment compared to other countries, Federal and state governments have taken serious steps to accelerate EV uptake. Therefore, EVs could play a significant role...

Energy storage and flexibility

Unlocking REMA: emerging market views

Recent market events have continued to highlight the challenges of the energy trilemma, specifically the need to decarbonise the energy system while ensuring energy security and affordability. The government announced in April 2022 it would be undertaking a Review of Electricity Market Arrangements (REMA) to address these issues, and in...

Power and gas networks

CMP395 BSUoS cap

On 21 September, the Final Modification Report for CMP395 was published by National Grid ESO (NG ESO). CMP395 seeks to cap the half-hourly Balancing Services Use of System charge (BSUoS) at £15/MWh over the winter period (1 October 2022 – 31 March 2023), with the deferred costs recouped in the...

Commercial and market outlook

Moving with the times: How trading strategies in the NEM changed in a year

Inherent in an electricity market like the NEM is its ever-changing landscape. Contributors to these changes may be government-driven policies, evolving market dynamics caused by external factors like a global pandemic, a worldwide rise in fuel prices, and even changes in the market structure itself. As cliché as it may...

Energy storage and flexibility

It’s a fix! BEIS floors competitive energy market

Last week saw the government announce the Energy Price Guarantee (EPG) which will see the typical dual fuel household’s unit rates capped at 34p/kWh for electricity and 10.3p/kWh for gas. Customers on fixed tariffs will get support to bring their tariffs down to the same level, up to 17p/kWh of...

Energy storage and flexibility

Now we’re peaking with gas: how much evening NEM demand could be replaced with batteries?

The events leading up to the recent market suspension in June have highlighted the role that peaking gas-fired generation plays in satisfying demand and setting prices across the NEM in the morning and evening peak periods. The team recently explored some of the drivers and effects of these events in...

Commercial and market outlook

Off the charts: ESOO flags earlier reliability shortfalls but no need to panic yet

In the space of a year, the prospect of reliability shortfalls in the NEM has increased significantly. This is the stark finding of AEMO’s latest Electricity Statement of Opportunities (ESOO) report. In our Chart of the week, we illustrate how reliability forecasts have deteriorated in just a year, and we...

E-mobility and low carbon

Winds of change: World EV Day

The energy crisis is hitting vehicle running costs for both electric vehicles (EVs) and internal combustion engine (ICE) cars. In this week's 'Chart of the Week', we focus on World EV Day by taking a look at one of the areas we have been tracking – public charging – and...