The Australia Institute’s annual National Energy Emissions Audit Report shows a grid in transition, with coal slowly but surely being pushed aside.

The latest Australia Institute annual National Energy Emissions Audit Report presents a snapshot of the energy market to June 30. As wind and solar slowly replace brown coal, black coal and gas in the generation mix, the annual emissions intensity of the NEM has decreased by more than 25% below the historic maximum set in 2008.

Almost two thirds of the total reduction in emissions intensity is due to the changing mix of generation, says author Hugh Saddler, away from coal and towards wind and solar, with 22% of the total reduction due to the growth of rooftop solar installations and subsequent decreased demand for grid connected generation.

Over the decade the volume of electricity used by final consumers has decreased, whilst the population and GDP have grown, the report says. Just under 8% of the total reduction in emissions intensity is due to the decrease in electricity used by final consumers, driven by increased efficiency, changing energy use behaviour and the cessation of some electricity intensive activities, notably the closure of two aluminium smelters.

In Victoria and South Australia the combined wind and solar share of generation has almost doubled in the past four years, from 15% to 29%. Total renewable share, including hydro, was just under 33% in 2019-20.

The coal share of generation in Victoria and South Australia combined has fallen from 72% to 53% since 2016.

In Queensland and NSW the transition from coal to renewables has progressed only half as far as in Victoria/South Australia. The wind and solar share of generation in 2019-20 was 14.5%, whilst total renewable share including hydro was 16%.

The average coal generation capacity in NSW has fallen below 60%. If the rate of fall continues for the next two years, Saddler writes, it may approach 50% by April 2022, when AGL plans to begin closing Liddell power station. Liddell should be closed by 2023 depending on the outcome of the Liddell Taskforce review.

The average coal capacity factor in Queensland is about 69%. However, it has been falling longer and faster than in NSW. On current trends it may reach the current NSW level of 60% by 2025, putting at least one of the older power stations under strong financial pressure.

Coal plant closures should be timed with investments in new renewable generation capacity, the report says, together with investments in storage, transmission, and other technologies, to avoid the surge in wholesale prices that followed the closure of Hazelwood power station.