Power players say they’re confident about supply when Liddell plant is turned off

The closure of AGL’s Liddell coal-fired power generation plant in a fortnight won’t cause any electricity supply shocks, say retailers and energy officials.

The looming shutdown of AGL Energy’s Liddell coal-fired power station in NSW will not increase the risks of supply shortages to the electricity grid, according to retailers and energy officials, even as the market is cautious about not enough replacement supply being delivered over the next few years.

Australia’s biggest electricity generator switches off the Hunter Valley power plant for good – a long forecast move – on April 28 after a half century of operations.

The longstanding move has sparked concern in some quarters over the supply outlook for the broader system as Liddell produced 10 per cent of NSW’s grid demand in the past year – although this has fallen to 5-6 per cent at times of peak demand, consultancy EnergyEdge said.

The Australian Energy Market Operator, which runs the power grid, said it was confident over the outlook through to 2025 – the year when Origin Energy’s Eraring coal plant may also be shut down.

“The notification of Liddell’s retirement has allowed the market to respond, with NSW forecast to meet reliability measures until at least 2025,” AEMO executive general manager of system design Merryn York said.

AEMO executive general manager of system design Merryn York.

“NSW has a strong pipeline of proposed generation and storage projects, totalling more than three times today’s generation capacity, as well as essential transmission projects. Delivering these investments to schedule will offset planned generation retirements, such as the Eraring power station.”

NSW Energy Minister Penny Sharpe said this week she expected there would be no “immediate impact” from the decision to switch off Liddell.

AGL also said it forecasts no “reliability” problems within the system.

“The market operator has not approached AGL with concerns about reliability following the closure of Liddell and their latest report identifies that risks remain within their reliability measure,” an AGL spokesman said.

Generators have responded to the closure with new supply coming online, including new gas-fired capacity at Tallawarra and Kurri Kurri, renewables, battery and transmission developments, according to the Australian Energy Council which represents retailers.

“The Australian Energy Council does not anticipate supply issues as a result of the phased closure of the 50-year-old Liddell Power Station, which was announced eight years ago,” AEC chief executive Sarah McNamara said.

NSW Energy Minister Penny Sharpe. Picture: Gaye Gerard

“Reliability forecasts show further opportunities for investment after the expected Eraring closure in 2025 and there remains time to address this. We see no reason, based on assessments by the market operator, why the state can’t continue to meet reliability standards,” she said.

“The plant’s closure has long been factored into future contract prices.”

The issue of any hit to either wholesale or retail prices is less certain even though the NSW government said it expected no effect on prices.

EnergyEdge said financial markets have known about the exit of Liddell for more than seven years and built its exit into trading expectations.

Futures prices for the third quarter of 2023 in NSW have fallen to $168 per megawatt hour from peaks a year ago, but still remain higher than the same time in 2021 where prices were just $80MWh.

AEC chief executive Sarah McNamara.

“From that information, the exit of Liddell is not really a concern. The exit of Eraring is the real concern in terms of impact,” EnergyEdge managing director Josh Stabler said.

The NSW government is expected to hold talks with Origin Energy over the option of keeping the Eraring power station open past its scheduled close date in August 2025. The coal-fired plant accounts for 25 per cent of the state’s electricity needs.

A further crunch point may await if not enough renewables is built to replace the outgoing coal stations.

Analysts WattClarity point to a key risk for prices as the potential for “unexpected developments that would contribute to a tightening of the supply-demand balance – such as delays to the development of dispatchable capacity seen as replacement.”

NSW premier Chris Minns has acknowledged that the government might have to buy back Eraring, saying taxpayers had been “fleeced” by its sale.

An alternative being privately discussed by senior Labor figures involves offering financial assistance to Origin if market conditions dip below an agreed point.

Originally published as Power players say they’re confident about supply when Liddell plant is turned off