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Australia’s fleet of coal-fired power plants is set to come under competitive pressure as the share of renewable energy increases. New wind and solar power plants already provide energy more cheaply than any new coal-fired power plant would, even when factoring in the cost of storage to balance out intermittent supply. The running cost of existing coal power plants is lower, but the gap is narrowing.
We provide scenarios for the economic viability of existing coal-fired stations under increasing competition from renewable energy sources under assumptions about a range of factors that affect future running costs and revenues. The expectation that plants will operate until their scheduled end of life may turn out a fallacy or may imply uneconomic operation of the electricity supply system. We conclude that policy mechanisms are needed to improve the predictability of future coal plant exit, possibly by way of a time-bound exit trajectory incentivized by a market mechanism.