Power prices under pressure as Callide station delays mount

One of Queensland’s largest coal power generators damaged by fire will now be offline until mid-2024, with the delay likely to mean higher wholesale electricity prices.

Workers from the Callide Power Station outside the site after a fire. Picture: William Debois

One of Queensland’s largest coal power generators will remain offline until 2024 as repairs to the Callide C power station are now expected to take an additional three months, delays that will hinder efforts to put downward pressure on wholesale electricity prices.

The Callide C power station has been offline since May 2021 when a fire ripped through Queensland’s fifth largest coal power station, an outage that has contributed to recent increases in wholesale electricity prices.

State-owned CS Energy - which owns 50 per cent of the Callide C power station - said in March it expected a staggered return of generation from late September before full capacity was reached in late January 2024.

But CS Energy said repairs are now expected to take longer than it previously thought, and the coal power station will not begin producing electricity until early January 2024. The full capacity of the power plant will not be restored until July, 2024, CS Energy said.

“CS Energy is acutely aware of the importance of reliable generation from coal-fired generators such as the Callide C Power Station, particularly at a time of high gas and coal prices and with reducing coal generation across the energy sector,” Mr Varvari said.

CS Energy’s acting chief executive officer Andrew Varvari said the repairs are highly complex and the task was complicated when Genuity - which owns the remaining 50 per cent of Callide C - was placed into administration.

“(We) are doing everything we can to have the units safely back up and running as soon as possible,” said Mr Varvari.

“The demolition and rebuild of the C3 and C4 cooling towers, and the subsequent recommissioning of the units is a highly complex project, further complicated by our JV partner being in an Administration process.

Mr Varvari said work began in May to demolish the cooling tower of one of the Callide C power station units. He said nine cells have been demolished to date, and this will be followed by the demolition of a second cooling tower.

The cause of the fire is still unknown, with an independent report still yet to be published, but the delays in returning Queensland’s fourth largest coal generator is a blow to efforts to depress electricity prices.

Wholesale prices - the cost retailers pay to procure electricity to meet their customers needs - have been steadily rising in recent months amid a global energy crunch and renewable energy developments struggle to keep pace with the retirement of coal power stations.

The increase in wholesale prices in 2022 was a key driver in the decision of the Australian Energy Regulator to approve power bill increases of up 25 per cent from July 1 for much of the country.

Authorities had hoped the return of Callide C would lower wholesale electricity prices, which in turn would limit any increases to household bills in 2024.

Cost of living is at the forefront of minds of many Australians struggling under soaring interest inflation and rapidly rising interest rates. The federal government in its May budget said it would deliver energy bill relief to some 5 million households, while it imposed a $12 per gigajoule gas price cap imposed in December.

Wholesale electricity prices have in recent weeks begun to trend upwards as traders digest the recent closure of AGL Energy’s Liddell coal power station and worry about the impact of the scheduled closure of Origin Energy’s Eraring coal power plant in 2025.

Originally published as Power prices under pressure as Callide station delays mount