Victorian grid under pressure as coal and gas outages hit supply

Victoria’s two largest power stations are running at reduced capacity, increasing the state’s reliance on gas. But supplies are under pressure after a fault at major east coast plant.

The Loy Yang Power Station on the outskirts of the city of Traralgon in southeastern Victoria. Picture: Ian Currie

Victoria’s energy system is under renewed strain after outages at major coal and gas plants forced increased gas-powered electricity generation, sending wholesale prices soaring on Thursday and exposing vulnerabilities in the state’s transition to renewables.

The outages illustrate the precarious stability of Australia’s energy grid as coal is retired and the country struggles to build sufficient replacements in time.

And they are compounded as Victorian temperatures drop and output from wind and solar farms is subdued. The disruption was further exacerbated by reduced gas supply from ExxonMobil’s Longford plant, the dominant supplier to eastern Australia.

While the Australian Energy Market Operator (AEMO) has not issued blackout warnings, the grid’s tightness is translating to wholesale price spikes and placing added pressure on the east coast’s already stretched energy infrastructure.

On Thursday, Yallourn — Victoria’s second-largest power station — was operating at only half its normal output. EnergyAustralia confirmed that one of its four generating units suffered a fault over the weekend.

A second unit, which had returned to service earlier in the week, was also taken offline again, according to operational data.

The Longford gas plant in Gippsland. Picture: Stuart McEvoy

Meanwhile, a unit at AGL’s Loy Yang A power station, the largest coal generator in the state, also registered as being out of service, further reducing available baseload power.

Although most residential and small business customers are shielded from spot market volatility through fixed-price retail contracts, persistent high prices typically flow through to bills when annual tariffs are reset.

Gas-fired generation served as a critical backstop, but the system’s resilience was tested further when ExxonMobil confirmed a reduction in gas processing capacity at Longford due to a technical fault.

“Our team is working to safely resolve this short-term issue and resume full gas production as soon as possible,” the company said. “We are working closely with AEMO and our customers to minimise any potential disruptions to their operations as a result.”

Longford processes most of the gas extracted from the Bass Strait and supplies a large portion of Victoria’s winter heating demand. The facility also provides gas for power generation and interstate pipeline exports. Any extended disruption could force the state to draw more heavily on gas stored at the Iona underground storage facility. Levels at the start of winter were at record levels, providing ample capacity.

Michael Gatt, executive general manager of operations at AEMO, said gas is playing a critical role: “Recent conditions in Victoria highlight the role gas plays in the [National Electricity Market] as the ultimate reliability backstop when ageing power station unavailability coincides with low renewable output,” he said.

“At present there are sufficient electricity reserves to meet forecast demand in Victoria, while gas storage levels remain high, having started the winter at record levels.”

Victoria is accelerating the closure of its coal-fired power stations and increasing its reliance on renewable energy backed by storage. But the system remains vulnerable to periods of low renewable output combined with ageing thermal assets prone to unreliability.

The Albanese government has championed renewables as central to its net zero ambitions, with a target of 82 per cent renewable energy across the National Electricity Market by 2030. Victoria has set a more ambitious 95 per cent renewable target by 2035, and Loy Yang A is scheduled to close in 2035 and Yallourn by mid-2028.

However, grid operators and market experts have warned that without firm capacity — including batteries, pumped hydro and fast-start gas — Australia’s power system will face challenges.

Originally published as Victorian grid under pressure as coal and gas outages hit supply