In 2009, Western Australia's coal tycoon Ric Stowe was seemingly on to another winner.
After making his fortune mining the black fuel in Collie, 180km south of Perth, Mr Stowe was going downstream.
He was building his very own power station – a 440MW plant that would take coal from the mine he controlled before burning it to produce electricity.
Peter Kerr, a former finance journalist and energy industry executive, said it must have seemed like a recipe to print money.
"It was actually a good time – a buoyant time, if you like – for coal," Mr Kerr said.
"The future looked bright. There was lots of money for new developments and not much competition at the time from renewable energy.
"And Ric Stowe was throwing everything he could at getting this plant online.
"He was paying big bonuses to get the staff to work longer hours, he flew in Jimmy Barnes to have a big thank you concert.
"On the surface, everything looked amazing."
Troubles beneath the surface
Less than a year after the Bluewaters power station came online, powerful investors pulled the plug on Mr Stowe's business empire.
The downfall of Mr Stowe in some ways has served as a troubling metaphor for Bluewaters itself.
Mr Kerr, who now runs energy advisory ATA Consulting, said circumstances conspired to bring Bluewaters low, culminating in the decision by its Japanese owners – Sumitomo and Kansai Electric – to write off their investment in 2020.
"They would have invested, by some estimates, half a billion dollars of their own money … into a $1.2 billion transaction to buy that plant – the rest was funded by debt," he said of the 2011 deal by the Japanese to buy the power station.
"They basically came the realisation in 2020 that they weren't going to make anything back on that $500 million.
"And so, as you do in accounting terms, you write the investment off… and you accept the loss, you take a big hit.
"It's a bitter pill to swallow, but it's the reality."
The extraordinary events at Bluewaters have been reverberating through the Australian energy landscape as everyone from governments and regulators to industry tries to keep up with the breathtaking pace of change.
That rapid upheaval has been on full display so far in 2022, a year in which many pundits have felt Australia has reached a tipping point in its transition away from fossil fuels and towards renewable energy.
Incompatible, inefficient fuel source
One bombshell announcement has followed another since Origin Energy in February said it would bring forward the closure of Eraring, Australia's biggest generator at 2880MW of coal-fired capacity, to 2025.
In June, the WA government said it was closing its remaining coal plants by 2029, while both the Queensland government and energy giant AGL last month revealed they were getting out of coal by 2035 – a decade earlier than scheduled.
Victoria Energy Policy Centre head Bruce Mountain said there was little doubting Australia's energy system was entering a period of unprecedented transformation.
Dr Mountain argued the reasons for this were inescapable and boiled down to the fact that coal-fired power was simply incompatible with renewable energy, which was winning the economic fight.
He noted the record price of coal, although a boon for exporters in New South Wales and Queensland, was hastening the demise of the fuel as a source of power generation.
"Coal generators are enormous installations that have scale economy – they're cheaper per unit the bigger they are," Professor Mountain said.
"But they're very, very capital intensive and they're quite complex.
"And as a consequence, once they're built you need to operate them day-in, day-out in order to compensate for their capital outlays.
"Coal is now finding itself getting pushed off the system because it's a more expensive fuel source and its technology and cost-structure can't compensate for that.
"They're not built to the flexible.
"They're like driving a B-double through a city centre – it's inefficient, they can't do the stop-start."
Coal replacements needed fast
Dr Mountain said Australia was facing a unique challenge in the switch to green energy because of its historic fuel mix.
Unlike many other countries bringing on large volumes of renewable energy, he said Australia's east coast used very little gas and had been almost totally dependent on coal.
As a result, he said Australia was trying to deal with the influx of renewable energy without the flexibility that gas-fired power offered.
He said there was little prospect of gas playing a role as a bridging fuel because of its high cost, which had been propelled to record levels this year, made it too expensive.
"The solution is to bring on storage very quickly," Dr Mountain said.
"And governments are now realising that, and policy is following.
"It needs to go further and faster."
The Australian Energy Market Operator, which runs the electricity market and is responsible for keeping the lights on, echoed the calls for swift action.
In its blueprint for the national electricity market, released in June, AEMO said the mass retirement of coal plants made the need for replacement capacity urgent.
The agency said there would need to be nine times more large-scale wind and solar capacity, five times more rooftop solar and a tripling of so-called firming capacity to provide back-up.
"So things like pumped hydro, batteries, and gas-fired power generation that smooth out the peaks in that variable renewable energy and fill in the troughs," AEMO boss Daniel Westerman said.
'The lights will stay on': AEMO
On top of the new generating and back-up capacity, Mr Westerman said there was also a pressing need for 10,000km of new high-voltage transmission lines to connect new wind and solar projects.
He said a massive 14GW – or 60 per cent – of the coal-fired capacity in the national electricity market (NEM) was set to exit by 2030 and the remainder would retire no later than 2043, meaning there was no time to waste.
Despite the challenges, he was confident the security of the grid would not be compromised.
"Am I confident the lights will go on," he said.
"That's our job. Absolutely.
"The reliability of supply is first and foremost in all of our minds every single day."
Mr Kerr said building a sufficient amount of short-, medium- and long-duration storage would be the key to managing the intermittency of renewable energy output.
He also suggested gas-fired power could provide a vital fallback for the grid until cleaner forms of back-up could be brought online.
However, Mr Kerr agreed the price of gas in the eastern states was a major problem that could make navigating the transition even more difficult.
"The ideal solution to less coal would be more storage to balance the variable renewables but if you didn't have a lot of storage — or enough storage – you'd use some gas," Mr Kerr said.
"But there's a shortage of gas on the east coast and prices are through the roof, partly because of the Ukraine war but also because a lot of Australia's gas is exported overseas.
"So, yes, there are challenging moments and years ahead."
Town lifeblood 'running dry'
In the WA coal mining hub of Collie, locals have reconciled themselves to inevitable eclipse of coal-fired generation by renewable energy.
Nevertheless, former coal miner Jay Scoffern said there was apprehension about how quickly the demise of the industry was taking place.
Mr Scoffern, who until 2019 worked at the Griffin Coal mine that supplies Bluewaters, said Collie's economy had largely run on coal for the past half a century and finding other industries to support employment was not easy.
"Coal has certainly been a lifeblood to Collie," Mr Scoffern said.
"But remember we didn't start with coal – we started with timber. We morphed into coal.
"And whatever happens next, we've got the ability to transition into the next phase, whatever that is and perhaps for a greener future."
Mr Kerr said the plummeting fortunes at Bluewaters should serve as a warning for how quickly the electricity system was being overturned, and how little time there was to act.
"The stakes are enormous," Mr Kerr said.
"I mean, they're as high as they can get.
"We're playing to keep the lights on here and in political terms, the stakes don't get much higher."
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