EnergyAustralia approves NSW gas plant expansion

EnergyAustralia’s move to expand its Tallawarra gas power plant has stoked debate over whether the grid needs more supply.

Picture: iStock

The government-owned Snowy Hydro has staked a claim for pushing ahead with its controversial Hunter Valley gas plant even as rival power generator AGL ­Energy said government intervention had stalled its planned gas peaker in Newcastle.

EnergyAustralia’s decision on Tuesday to expand its existing Tallawarra gas power plant in NSW’s Illawarra with a 300MW facility has stoked debate about whether more supply in the power grid is needed before AGL’s 1680MW Liddell coal plant closes in the 2022-23 summer.

But Snowy chief executive Paul Broad said adding more “firming” solutions, including gas and hydro supply, was crucial to back up intermittent renewables amid expectations that the company’s planned Kurri Kurri plant will receive the green light from the federal government.

Source: ESB

“You’ve got to have these plants lined up,” Mr Broad told The Australian. “To think you can just throw more and more renewables as coal closes and have some magic pudding at the end of it and all is going to be well doesn’t add up. Without someone making a conscious decision to invest heavily in firm generation, it just isn’t going to work.”

Scott Morrison told companies to commit 1000MW of new supply by an April 30 deadline or the government would build its own 650MW plant through Snowy Hydro at Kurri Kurri.

But the interventionist move — and concerns over a NSW government plan to underwrite supply — forced AGL to pause plans to invest in its own gas plant in Newcastle, with the issue still rankling the power giant.

“It created a significant amount of uncertainty about that investment,” interim AGL chief executive Graeme Hunt said.

EnergyAustralia had stretched out a decision on pushing ahead with the $400m Tallawarra B ­expansion amid heightened uncertainty over the threat of state and national government interventions in the energy sector.

However, an $83m funding agreement with the NSW government sealed the deal, with the EnergyAustralia plant set to be operating by the 2023-24 summer, a year after Liddell closes, in a move that also boosts the state’s hydrogen ambitions.

EnergyAustralia’s executive for energy Liz Westcott said it was focused on its own project rather than Snowy’s Kurri Kurri plant.

EnergyAustralia boss Catherine Tanna says the expanded plant “will help to kick start the green hydrogen industry”. Picture: AAP

“Our project will be up and running for the summer of 2023. I’m not aware that Snowy has capability to be there for 2023,” Ms Westcott said.

There has been considerable debate within the industry over whether an extra 1000MW of new supply is needed once Liddell shuts, given that official forecasts by the Australian Energy Market Operator indicate a shortfall of less than 200MW.

“There is a range of numbers for what NSW needs post-­Liddell,” Ms Westcott said.

“It will be up to the federal government to decide how they wish to spend the taxpayers’ money in supporting the NSW energy solution. Whether others believe more is needed in the market, we’ll just wait and see.”

Federal Energy Minister Angus Taylor has been concerned that the power grid would lose 1600MW with the Liddell closure, similar to the loss of the Hazelwood Power station in Victoria in 2017, when a sudden exit saw power prices rise due to supply shortage concerns.

The federal government made the move after accusing the private sector of only committing to a single 100MW expansion of dispatchable generation since April 2015, when AGL gave notice of plans to close its Liddell plant.

Other projects, including the proposed Andrew Forrest-backed Squadron Energy 650MW gas and hydro generator, are also in the mix but have yet to be signed off.

Tallawarra B will be Australia’s first net zero emissions ­hydrogen and gas-ready power plant, with direct carbon emissions from the project offset over its operational life.

Under the funding pact, EnergyAustralia will offer to buy enough green hydrogen equivalent to more than 5 per cent of the plant’s fuel use from 2025 — equivalent to 200,000kg of green hydrogen a year — and will offset direct carbon emissions from the project over its operational life.

EnergyAustralia will also invest in engineering studies on the potential to upgrade Tallawarra B so it can use more green hydrogen in its fuel mix in the future.

Originally published as EnergyAustralia approves NSW gas plant expansion