Coal Power Extension Highlights Energy Transition Challenges
The decision to extend the operational life of one of Australia’s largest coal power stations underscores the volatility of the country’s transition from fossil fuels to renewable energy. Despite ambitious plans to double renewable energy output by the decade’s end, concerns over energy security have necessitated a reassessment of coal’s role in the power grid.
Victoria’s Yallourn power station, originally slated to close by mid-2028, is now expected to operate for an additional four years. This delay, negotiated between the plant’s owners, the state government, and grid operators, reflects fears of electricity shortfalls that could result from an over-reliance on intermittent renewable sources without sufficient backup capacity.
The core issue lies not in coal itself but in the lack of sufficient gas-fired generation to support renewables. Without an adequate supply of gas and gas peaking plants to stabilise the grid, coal stations must continue running to prevent blackouts. Victoria has already committed to subsidising the Loy Yang A power station until 2035 and Yallourn until 2028, and now an additional extension is in the works, though details remain undisclosed.
New South Wales has also extended the life of the Eraring power station until 2027, with a direct $450 million subsidy to ensure continued operation. These decisions highlight the growing contradiction in Australia’s energy policy—failed renewable targets, secret coal subsidies, and increasing dependence on the gas industry while power prices climb and energy security remains uncertain.
Major investors in the renewable sector argue that slowing the transition will drive electricity prices higher by maintaining reliance on aging coal plants and expensive gas generation. Asset management firms and energy companies with significant stakes in wind and solar projects continue to push for an accelerated shift away from fossil fuels. However, their advocacy often aligns with their financial interests in expanding renewable generation.
A parallel issue emerges in the gas sector, where concerns are growing over potential government intervention to redirect domestic gas supplies. Queensland’s LNG producers are bracing for policy changes that may force them to prioritise local markets once existing export contracts expire. Companies such as ConocoPhillips and Shell are already increasing exploration efforts, anticipating stricter government measures to ensure domestic supply security.
As Australia navigates its energy transition, the challenge remains balancing affordability, reliability, and sustainability. While renewables are the long-term goal, ensuring stable baseload power through coal and gas remains an unavoidable necessity in the near term.
One would have thought the powers that be would have kept coal and gas going until the so-called renewables were capable of carrying the full load of output. But no, we trash the coal powered installations, make them unpopular to investors and do all we can to malign coal, a mineral that has pulled millions of people out of poverty. And still does.
If you look at the AEMO app where it shows daily graphs indicating what sources each state and the nation is using to run our electrical system, with the sole exceptions of SA that does well out of wind but often needs a huge gas backup, Tasmania that does well out of hydro, the rest of the states use up to 80% coal to keep them going. It varies, but every day they still need a huge amount of coal-fired power.
Given that we now need at least two systems to power the nation, coal would have served us well into the future and my guess is it will remain as an important source of generation for decades to come.