SA electricity crisis: Government unveils $550 million power plan

THE State Government has unveiled its $550 million plan to fix SA’s power woes — including the construction of a new emergency gas-fired power station.

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TAXPAYERS will fund construction of a new emergency gas-fired power station and support the construction of the nation’s largest battery in a $550 million plan to fix the energy crisis.

Premier Jay Weatherill and Treasurer Tom Koutsantonis today revealed the long-awaited scheme, which they say will also result in the construction of a new privately owned power station.

Federal Energy Minister Josh Frydenberg is seeking legal advice on whether the decision by the State Government to “go it alone” breaches national electricity market rules.

The six-point plan includes:

BUILDING a State Government-owned, fast start gas-fired power station that can come on when the market does not provide enough energy to keep the lights on. It is expected to cost about $360 million. No site has yet been selected. It would be 250MW, enough to deliver close to 10 per cent of SA’S peak demand.

SUPPORTING construction of Australia’s biggest battery as part of a $150 million spend on a new renewable technology fund.

ENCOURAGE the construction of a new privately-owned power station using a Government bulk buy power contract.

INCENTIVISE the extraction of more gas for use in SA power stations, through a taxpayer-backed exploration fund.

GIVING the SA energy minister powers to override other regulators and force power stations to fire up in times of need.

CREATING an “energy security target”, which requires retailers to buy 36 per cent of their power from baseload sources in SA.

Jay Weatherill and Tom Koutsantonis' power plan for SA

“The State Government recognises the need to have our own back-up generation in place to serve the needs of the SA public,” Mr Koutsantonis said.

Mr Koutsantonis stressed that the 250MW gas-fired station will not participate in the national market, rather it will be switched on when local demand is forecast to outstrip supply.

“We are not competing with AGL, Origin, and the other retailers. What we are offering is back-up generation as part of an emergency response.

Expected to cost around $350 million, the procurement process is expected to commence in the near future.

Possible sites are already being assessed.

Federal Energy Minister Josh Frydenberg said it was a “$550 million admission of failure” by the Weatherill government and that it could be in breach of national electricity market rules.

Premier Jay Weatherill and Treasurer Tom Koutsantonis at today's press conference on SA's power. Picture: Mike Burton

“We are seeking advice on whether the decision today by South Australia to go it alone is in breach of the national electricity market rules which has kept the system together for the last 20 years,” Mr Frydenberg said.

“Going it alone created South Australia’s problems and going it alone won’t fix South Australia’s problems.

“In fact, the measures announced today will only increase electricity prices for South Australians.

“It has the potential to increase prices for Victorians, for people in New South Wales and in Tasmania.”

The federal minister cited the South Australian Labor government’s “poor track record” on energy as evidence for why the plan would drive up prices.

He also said the plan went against the national energy market model which had been in place for two decades and warned any bid by South Australia to direct the Australian Energy Market Operator to direct power volumes could change the balance in other states.

“These 50 per cent renewable energy targets will get you into trouble,” he said.

Mr Frydenberg’s comments came as he and Prime Minister Malcolm Turnbull prepared to meet with gas industry chiefs in Canberra on Wednesday to discuss an imminent shortage.

AGL chief executive Andy Vesey quickly took to social media to share his support of the State Government’s plan.

“Strong reform package from @TKoutsantonisMP & @JayWeatherill — recognises role of gas in transition to #renewables & increases reliability,” he said on Twitter.

Federal Opposition Leader Bill Shorten said the announcement from his SA Labor colleagues showed that renewable technology could help secure the nation’s power supply.

“Jay Weatherill is getting on with it,” Mr Shorten said.

“Five weeks ago Mr (Malcolm) Turnbull was doing everything he could to say that renewable energy is the problem.

“Now, what Jay Weatherill is doing is making renewable energy part of the solution to secure supply for South Australia.

“The real question here is, why is Mr Turnbull spending so much of his time as Prime Minister bagging out Labor and bagging out the states when we have got a national energy crisis?”

But Federal Greens energy spokesman Adam Bandt criticised the SA Government energy for bankrolling gas instead of solar thermal.

“Jay Weatherill has caved into the Turnbull renewables scare campaign by shifting to gas instead of building solar thermal in Port Augusta” Mr Bandt said.

“There is no need for more gas plants. A cleaner and cheaper energy future lies with renewables and storage not more gas.”

The Climate Council said the battery storage policy was a positive step — though it criticised the plan’s reliance on gas-powered emergency supplies.

“Smart, clean renewable energy coupled with storage technology is the future of Australia’s energy system. Renewables and storage technology means zero emissions, affordable power and electricity that’s available every hour of every day,” said Climate Council CEO Amanda McKenzie.

“Australia’s energy system is ageing, inefficient, polluting and is not coping as extreme weather events worsen. This significant increase in battery storage would build resilience into the South Australian grid, while maximising supply.”

The SA Chamber of Mines and Energy said the plan addressed many of the concerns SA businesses have as they attempted to remain competitive and welcomed its use of gas and battery storage.

The energy market regulator predicts a shortage of gas could lead to widespread power shortages as soon as next year.

The peak body for the industry blamed state governments, telling a gas outlook conference in Sydney that local supply was weak because of development moratoriums and regulatory costs.

Why SA needs a power fix

Earlier, Premier Jay Weatherill told The Advertiser the power fix would reduce bills and blackouts while also creating renewable energy jobs, but he conceded it would come at “substantial” cost.

He said it also would set up SA as a global target for new green investments.

Market experts have blamed the lack of a national carbon price for creating industry uncertainty which results in the closure of coal power plants and little new investment to replace them.

It comes as a new Grattan Institute report to be released today recommends state governments consider re-regulating power prices to stop electricity retailers from gouging customers.

“The way retailers advertise their discounts is confusing and possibly deliberately misleading,” Grattan Institute researchers Tony Wood and David Blowers argue.

They find SA could face similar problems to Victoria where consumers were paying $250 million too much each year due to high profit margins unless there is more market competition.

A wind farm near Lochiel. SA is heavily reliant on wind power.

— with AAP

The six-point plan to fix SA's power crisis. Supplied by SA Government

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Originally published as SA electricity crisis: Government unveils $550 million power plan