The Turnbull government's plan to keep the worn-out Liddell power station running for another five years would cost about $1.4 billion more than replacing it with clean energy, and spew millions of tonnes of damaging carbon pollution, a new analysis shows.
The findings cast further doubt on the wisdom of keeping Australia's oldest operating coal plant open beyond its slated closure in 2022, and have implications for the expected retirement of most existing coal-fired power stations within 15 years.
Prime Minister Malcolm Turnbull and Energy Minister Josh Frydenberg in September ordered energy giant AGL to keep open the coal-fired plant for five extra years or sell it to a party that will.
The demand followed a report by the Australian Energy Market Operator that warned the closure of Liddell, in NSW's Hunter region, would leave a 1000-megawatt shortfall of "flexible, dispatchable" capacity, which is energy that can be created on demand.
AGL says the plant's operating life ends in 2022, and has resisted calls to sell or refurbish it. It is due to report to the government in December on the action it will take to avoid a power shortfall once Liddell closes.
The University of Technology Sydney's Institute for Sustainable Futures compared the financial cost and pollution of three possible scenarios for Liddell: extending its life by five years, pursuing AGL's plans for a combination of renewable and fossil fuel solutions to replace the lost capacity, and a package of clean energy measures.
The research was commissioned by the Australian Conservation Foundation.
It found keeping Liddell open until 2027 would cost $3.6 billion in capital and operating expenses, and that 40 million tonnes of carbon dioxide would be generated over this time.
By comparison, a clean energy package would cost $2.2 billion and create no emissions. This would involve energy efficiency, new wind energy, managing the power demands of consumers and flexible pricing, which means electricity is charged at different rates depending on the time of day or year.
AGL's plans to mitigate Liddell's closure mostly comprise a new gas plant, batteries and demand management, as well as upgrading the adjoining Bayswater coal-fired station.
The analysis showed this would cost $3.3 billion and create 2.5 million tonnes of carbon dioxide over five years.
The figures are drawn from a case that replaces not just Liddell's 1000mw dispatchable capacity but also its 8000 gigawatt annual output - which would address issues surrounding reliability, prices, long-term transition to a decentralised, low-carbon electricity system and climate change.
ACF chief executive Kelly O'Shanassy said Australia desperately needs a comprehensive climate change policy to allow a rapid transition to clean energy.
Any such policy "must be designed to encourage as much clean energy and smart technology as possible, and not prop up polluting coal plants that are damaging our planet", she said.
ISF research director Chris Dunstan said replacing Liddell's lost capacity with renewables could set a powerful precedent as the majority of Australia's coal-fired power stations approach retirement age.
Mr Frydenberg said the government was focused on avoiding a power shortfall when Liddell closes.
"AGL has committed to ensure that there are no consequences for the affordability and reliability of the electricity system from the scheduled closure of Liddell in 2022. We intend to hold them to that," he said.
An AGL spokesman noted the report's findings and said it would deliver its post-Liddell plan within the 90-day timeframe.
