EnergyAustralia warns coal supplies for Mount Piper power station at risk

Flooding could curtail coal supplies for Energy Australia’s Mount Piper coal power station, a blow for Australia’s electricity market that is set to struggle with increased demand.

EnergyAustralia has warned coal supplies to its Mount Piper power station could be disrupted until the end of the year after recent flooding, which threatens to increase the vulnerability of Australia’s grid during what is expected to be a hot, dry summer.

The revelation is the latest in a series of woes endured by EnergyAustralia, which recently posted heavy financial losses and was charged by Australia’s competition regulator for misleading customers.

EnergyAustralia’s 1,400MW Mount Piper coal station has suffered a spate of hiccups in recent years, and was hit hard in 2022 during heavy rains that brought widespread disruption to the country’s National Electricity Market.

In a surprise revelation after recent dry weather across much of the country, EnergyAustralia said the power station’s primary supplier – Springvale coal mine – has suffered flooding and the capacity of the generator could be curtailed until the end of the year.

“The multi-mine supply contract executed with the coal supplier this year has diversified supply sources to maintain continuity of supply in the face of this risk. Despite the mitigation, a shortfall in coal deliveries is expected until the end of the year,” EnergyAustralia’s parent company, CLP Holdings said.

CLP said EnergyAustralia expects to be able to manage the coal power station with existing stockpiles and expected demand, but warned such an outlook had downside risk.

The potential lower output of the Mount Piper coal generator comes as Australia’s east coast is expected to see an uptick in electricity demand as an El Nino weather event is likely to bring hot, dry conditions to the country’s east coast.

Hot weather will likely drive up demand for cooling, and authorities fear Australia’s ageing coal power plants will struggle to deal with the increased load.

Coal is Australia’s largest source of electricity, generating about 60 per cent of the country’s power.

The role of coal is rapidly waning, but Australia is likely going to have to rely on the fossil fuel to get through summer.

The potential limit to generation capacity from Mount Piper will also curtail potential earnings for EnergyAustralia. Elevated demand over the rest of the year will underpin wholesale electricity prices, which EnergyAustralia could tap with Mount Piper, a blow to the company’s quest to return to profitability.

EnergyAustralia in August posted a half-year loss of more than $100m as interest payments from a loss of more than $1.5bn one year earlier hampered the country’s third-largest electricity and gas retailer.

Financial losses have raised fears that EnergyAustralia will be unable to match its rivals, Origin Energy and AGL Energy, in spending on new renewable energy generation.

In late August, EnergyAustralia said it will spend $5bn by 2030 to rapidly develop renewable energy generation assets to replace coal power generation. The $5bn spend, which EnergyAustralia said will be spent both individually and with partners.

AGL said last year it would develop a $20bn pipeline of 12GW in renewables and storage, while Brookfield – which is hoping to complete its $18bn deal for Origin – has pledged to spend between $20-$30bn to accelerate the transition away from fossil fuels.

EnergyAustralia is also grappling with charges from the ACCC, which in September said the retailer had misled existing customers and deceived potential new ones, potentially exposing the company to fines worth millions of dollars.

Meanwhile, EnergyAustralia on Monday said it had appointed Chris Opperman as its new chief financial officer.

Mr Opperman joins EnergyAustralia from Incitec Pivot, where he is interim president of its fertilisers division. He was previously the company’s CFO.

Originally published as EnergyAustralia warns coal supplies for Mount Piper power station at risk