EnergyAustralia plagued by Tallawarra B gas station delays

Technical issues with construction have been blamed for delays at EnergyAustralia’s new $300m gas power station in NSW, with doubts it will open in time for any winter months.

EnergyAustralia managing director Mark Collette opens Tallawarra B gas-fired power station in February. Picture: Arsineh Houspian

EnergyAustralia has suffered months of delays at its new $300m gas power station in NSW, with the state’s first new gas plant in a decade yet to deliver supplies to the national electricity market due to technical issues.

The construction problems mean EnergyAustralia is still waiting for developer GE to release the Tallawarra B gas power plant in NSW’s Illawarra region, despite the facility opening in February. When the facility was opened, Australia’s third largest electricity and gas company said the plant was then in the last round of commissioning tests.

But sources familiar with the matter told The Australian that ­issues were subsequently discovered at the power station, which has received $80m of federal and state government funding.

While EnergyAustralia is not responsible for the delays, they are a hammer blow to the company – which was positioning the peaker to capitalise on periods of intraday price volatility.

Since February, NSW has ­experienced sustained periods of high wholesale electricity prices, when EnergyAustralia could have fired up the facility and dispatched electricity to the grid and earned lucrative returns.

An EnergyAustralia spokeswoman confirmed the delays, but said the company hoped to dispatch electricity to the grid from June 21. She declined to comment on the nature of the issues discovered, but sources told The Australian issues included the need to replace a key component that had to be shipped from the US.

A GE Vernova spokesman said all requests for comment on Tallawarra B should be directed to EnergyAustralia.

Sources also raised Tallawarra B’s unique fume as another area that had experienced delays. The EnergyAustralia spokeswoman said the fume, which had been specially designed so as not to ­disrupt the operations of a neighbouring airport, was experiencing no issues.

“We can confirm there is no issue with the exhaust stack plume. It recently successfully passed a plume guarantee test, and EnergyAustralia will implement an ongoing monitoring program,” the spokeswoman said.

The fume has been specially designed to disperse the plume from the stack sideways initially, which would then slow the upward velocity so as not to interfere and endanger aircraft using the nearby Shellharbour Airport.

EnergyAustralia will be desperate to overcome the issues and begin commercial operations. The Australian understands the plant has met commissioning ­obligations with the Australian Energy Market Operator.

Should it begin this month, EnergyAustralia will at least be operational during some of the winter months when demand for electricity spikes and renewable energy output can be unpredictable.

Underscoring the importance of gas in safeguarding electricity supplies, EnergyAustralia secured $80m of federal and state government funding to support Tallawarra B. A portion of the funds were also granted to ensure it could run on hydrogen as well as gas.

The NSW state government and AEMO will also be keen for additional generation capacity. If Tallawarra B is available during periods of high demand, it can help stabilise the state’s grid and help bring down wholesale electricity prices. Households and businesses do not experience the impact of high wholesale electricity prices but they eventually work through to bills.

Gas is playing an increasingly important role in underpinning Australia’s national electricity market, especially in winter when plants can be fired up on short notice when there are spikes in demand such as during cold weather or depressed power supplies during so-called renewable droughts.

Such periods can be extremely lucrative for gas power station ­operators, which EnergyAustralia could have benefited from.

The power giant in August 2023 announced half-year losses as it continues to feel the toll of a $1.55bn loss during the same six-month period one year earlier.

EnergyAustralia got caught by the global energy crunch triggered by Russia’s invasion of Ukraine, which sent prices soaring for commodities such as coal.

Coal is the dominant source of electricity in Australia and, while EnergyAustralia profited through its ownership of two coal power stations, generators entered into supply contracts that saw the country’s energy industry suffer significant losses.

EnergyAustralia was also forced to settle forward contracts that could not be covered because of reduced generation at its two coal power stations. Sustained losses have stoked concerns about the capacity of EnergyAustralia to find the much-needed funds to rapidly ­reshape the business towards ­renewable energy.

Tallawarra B is a key pillar in EnergyAustralia’s plan to accelerate its turnaround, but the site has been plagued by delays.

It was initially commissioned in 2021 but the collapse of developer Clough and Covid-19 supply chain disruptions substantially slowed work before EnergyAustralia’s Mark Collette opened the facility in February 2023 when he hailed the role of gas.

“There is a very big role for Tallawarra B to step into creation before the next round of coal-fired power stations close and that is a benefit that all taxpayers receive,” Mr Collette told reporters.

Originally published as EnergyAustralia plagued by Tallawarra B gas station delays