Molly Ayala
Australia's electricity sector is currently undergoing its greatest transformation since the 1950s, with a shift from traditional fossil fuels to renewable energy sources. In 2023, fossil fuels contributed 65% of Australia's total electricity generation, with coal accounting for 46% and gas contributing 17%. However, renewable energy sources such as solar, wind, and hydro are gaining traction, accounting for 35% of total electricity generation in 2023. This marks a significant increase from previous years, and Australia has set ambitious targets to further expand its renewable energy capacity in the coming decades.
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What You'll Learn
Fossil fuels remain the dominant energy source
However, there is a notable shift towards renewable energy sources. In 2021, renewable sources like wind, solar, and hydro provided about 29% of Australia's electricity generation. This is a significant increase from around 10.5% in 2010. The Australian government has implemented various initiatives, such as the Powering Australia plan, with a goal for renewables to constitute 82% of the national electricity mix by 2030.
While fossil fuels still dominate, their contribution has been gradually declining. Coal-fired generation is on a long-term decline, and in 2014, Australia's four major banks were already unwilling to make loans for coal-fired power stations. This shift away from fossil fuels is driven by economic, engineering, and environmental factors, as well as changing consumer preferences for more control over their energy supply and a growing awareness of global warming and climate change.
The transition towards renewable energy sources is also influenced by the increasing cost-effectiveness of wind and solar photovoltaics (PV), which are now the cheapest forms of new electricity generation. Additionally, the development of battery storage technology for solar power has gained popularity, with over 3.1 million solar power PV systems in Australia as of June 2022.
To summarize, while fossil fuels remain the primary source of electricity generation in Australia, there is a significant push towards renewable energy. The Australian government and consumers are driving this transition through policies, economic incentives, and a growing awareness of environmental sustainability.
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Coal is the main fossil fuel used
Australia was the fourth-highest coal producer in the world in 2009, producing 335 megatonnes of anthracite (black coal) and 64 Mt of lignite (brown coal). The country was the biggest exporter of anthracite, with 31% of global exports. In the states of Victoria, New South Wales, and Queensland, coal provides the main baseload capacity, with Victoria using brown coal and the other two states using high-quality black coal.
The use of coal in Australia is declining, however. Coal-fired generation has been in long-term decline, and jobs associated with coal-fired power stations are forecast to decline as plants age and close.
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Renewable energy sources are growing
In 2023, renewable energy sources, including solar, wind, and hydro, contributed 35% of Australia's total electricity generation, up from 32.5% in 2021 and 10.5% in 2010. Solar power, in particular, has seen significant growth, with over 3.1 million solar power PV systems installed as of June 2022, and most jobs in renewable energy in Western Australia being in solar power. Wind power is also expanding rapidly, with an average annual growth rate in installed capacity of 35% over the five years leading up to 2011. In 2016, wind power accounted for 5.3% of Australia's total electricity demand and 30.8% of total renewable energy supply.
The Australian government is actively supporting the transition to renewable energy sources through initiatives such as the Large-scale Renewable Energy Target (LRET) scheme, the Rewiring the Nation program, and the Powering Australia plan. The Powering Australia plan aims for renewables to constitute 82% of the national electricity mix by 2030, while also targeting a reduction in emissions to 43% of 2005 levels by the same year.
The shift towards renewable energy sources is also influenced by the decreasing feasibility of traditional fossil fuel sources. In 2011, electricity producers in Australia were not building gas-fired power stations, and banks were reluctant to provide loans for coal-fired power stations. Additionally, coal-fired generation is in long-term decline, with a decreasing number of coal-fired power stations and a shift towards aging plants.
The growth in renewable energy sources is also supported by advancements in battery storage technology, with the National Electricity Market (NEM) enhancing its battery storage capacity and aiming for further expansion by 2025. This expansion in battery storage and the increasing share of renewable energy sources in Australia's electricity generation are expected to improve grid reliability and contribute to meeting the country's net-zero emissions targets.
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Wind and solar are the cheapest renewables
Australia has traditionally relied on fossil fuels, with coal being the dominant source of electricity production. However, the country has faced criticism for its high per capita carbon emissions. As a result, Australia is now seeking to reduce its dependence on fossil fuels and transition to renewable energy sources to meet its net-zero emissions target by 2050.
This shift towards renewable energy is not just an environmentally conscious decision but also an economically strategic one. Wind and solar power have consistently been proven to be the cheapest sources of new electricity generation in Australia. The GenCost report, an annual analysis conducted by the CSIRO and the Australian Energy Market Operator (AEMO), evaluates the costs of large-scale electricity generation in the country. The report consistently ranks solar photovoltaic (PV) and wind energy as the most cost-effective technologies, even when integration costs such as energy storage and transmission infrastructure are considered.
The variable nature of wind and solar power, which cannot produce electricity around the clock, initially posed challenges in terms of energy storage and grid infrastructure. However, Australia has been actively addressing these issues. Since 2017, the country has been building grid-scale batteries, mainly lithium-ion, to enhance energy storage. By 2025, the National Electricity Market (NEM) is expected to have an additional 1,700 MW of battery capacity, significantly improving grid reliability.
The affordability of wind and solar power is expected to attract further investment in renewable energy projects. This will not only drive down electricity prices for consumers but also help Australia meet its international climate commitments. As of 2023, renewables contributed 35% of total electricity generation in Australia, with solar and wind accounting for 16% and 12%, respectively. The Australian government aims for renewables to constitute 82% of the national electricity mix by 2030.
In addition to the economic and environmental benefits, the transition to wind and solar power also has positive implications for employment. The development and maintenance of renewable energy facilities require a skilled workforce across various occupations, including electricians, electrical engineers, and construction workers. This shift towards renewables is expected to substantially increase the number of jobs in the renewable energy industry by 2030.
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Nuclear power is a possibility
Australia has the third-largest uranium deposits in the world, accounting for around 33% of the world's total. Nuclear power has been a topic of debate in Australia since the mid-20th century, with the country never having had a nuclear power plant. The country's extensive low-cost coal and natural gas reserves have been strong arguments against nuclear power. However, with the decline of coal and a shift towards renewable energy, nuclear power is once again being considered as a possibility.
In the mid-2000s, former Prime Minister John Howard made statements in favour of nuclear power on environmental grounds, and the government commissioned the Switkowski report to investigate the merits of nuclear power. The report concluded that nuclear energy could be competitive with coal-fired power if carbon credits were imposed. The industry claimed it could deliver baseload power to Australia by supplying a third of its power needs. However, anti-nuclear campaigns and scientists argued that nuclear power could not significantly substitute other power sources and that uranium mining could become a source of greenhouse gas emissions.
In 2015, the Minister for Resources, Energy and Northern Australia, Josh Frydenberg, announced a potential site for a nuclear power plant, but it was ruled out in 2019. The Coalition, a political party, has expressed interest in nuclear energy and proposed plans for nuclear power sites. They have also stated their intention to store spent reactor fuel temporarily at operational nuclear power plant sites. However, the Coalition lost the 2025 federal election, casting doubt on the future of nuclear energy in their platform.
Supporters of nuclear power argue that it is the only alternative to coal for base load grid power and that small modular reactors could be integrated into the existing electricity grid system. However, opponents argue that nuclear power is too expensive, slow to build, and risky for energy reliability. Additionally, the water usage of nuclear power is a concern in Australia, the driest inhabited continent. Federal Climate Change and Energy Minister Chris Bowen has dismissed nuclear power as not "stacking up" for Australia, citing concerns about the proposed sites and state bans on nuclear power.
While nuclear power has been considered as an option, renewable energy sources like solar and wind power are currently favoured in Australia. In 2022, renewable energy accounted for 35-39.4% of Australia's electricity generation, and the government aims for renewables to constitute 82% by 2030. The shift towards renewables is driven by the need to reduce emissions and combat climate change.
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Frequently asked questions
Fossil fuels are the main source of electricity in Australia, with coal and gas accounting for around 70% of electricity generation in 2021. Coal alone accounted for 52.9% of electricity production in 2021.
Coal and natural gas are the most common fossil fuels used to generate electricity in Australia. In 2023, coal accounted for 46% of electricity generation, gas accounted for 17%, and oil accounted for 2%.
Yes, renewable sources such as solar, wind, and hydro are also used to generate electricity in Australia. In 2023, renewables contributed 35% of total electricity generation, with solar accounting for 16%, wind 12%, and hydro 6%.
The National Electricity Market (NEM) interconnects the five eastern and southern states and the ACT, delivering around 80% of Australia's electricity. Western Australia and the Northern Territory have their own electricity systems and are not connected to the NEM.
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