AGL Energy suffers Liddell coal breakdown, adding to power generation woes
The power giant’s fourth unit at the Liddell coal plant has been taken out of service for at least a week, adding to generation woes.
AGL Energy has lost a third of the capacity from its Liddell coal plant in NSW just weeks after it returned to full capacity, the latest sign of ongoing breakdowns as the fossil fuel generator prepares to shut down next summer.
The power giant’s fourth unit failed on Monday and was taken out of service to repair a tube leak that is likely to keep it offline until next Tuesday.
The Hunter Valley coal station had only just managed to have all its generation back online at the same time after Unit 1 returned to service on July 20 following a generator malfunction two months ago.
Unit 3 was permanently shut down in March as the company edges closer to closing Liddell in April next year and re-purposes the site into a renewable-energy hub.
AGL’s Bayswater coal station, the second-largest power station in the national electricity market, also brought Unit 1 back into service on Tuesday after a tube leak.
Wholesale prices have surged in the power grid over winter after up to a third of coal generation – which normally provides as much as 60 per cent of supply – was cut due to a combination of mechanical faults, extended maintenance and supply issues.
Most of that coal generation has now returned to service and the focus has instead switched to a crunch on gas in southern markets, including Victoria, after the fossil fuel picked up some of the supply gap caused by the absence of coal.
Wholesale electricity prices more than tripled in the second quarter of 2022 to average $264 per megawatt hour, compared with $87 per megawatt hour in the first three months of this year, the Australian Energy Market Operator said, with Queensland and NSW posting the highest prices.
That spike in wholesale prices and gas capped at $40 a gigajoule left the federal government with a major headache, Barrenjoey analyst Dale Koenders said, given that only a portion of the increase has so far been passed through.
“That $40 a gigajoule implies a $400 per megawatt hour electricity price – but the retail standing offer tariff several months ago effectively passed through $85 per megawatt hour of the electricity price and the forward curve is currently bouncing north of $300 per megawatt hour. If that portion of your wholesale bill is going to go up five times, your retail electricity bill could go up by 100 per cent or 150 per cent in 12 months time,” Mr Koenders said. “I don’t think that is palatable for the government.”
Electricity futures did ease this week following the competition regulator’s gas shortfall warning as the market anticipates government intervention to head off a potential supply shortage.
The baseload futures contract for the third quarter of 2022 fell by more than 10 per cent on Monday across NSW, Queensland and Victoria, ASX Energy data shows.
A growing recognition that the LNG export trigger may be activated by the Albanese government was probably behind the fall, according to the University of Melbourne’s Dylan McConnell.
Prices fell by $30-$40 per megawatt hour, back to levels below $300 per megawatt hour after a record spike this year lifted futures to all-time highs. Quarterly prices for 2023 also dropped on Tuesday by 5 per cent or more.
As part of a planned Liddell energy hub, AGL has announced a memorandum of understanding with Andrew Forrest’s Fortescue Future Industries to explore green hydrogen, a 500MW grid-scale battery and a hydro power station.
AGL earlier this year said it would also bring forward the closure windows for its other coal-fired power stations – Bayswater and Loy Yang A – although the results of a strategy review in September may provide further clarity on any closure dates.
The power player’s one-time suitor, Brookfield Asset Management, emerged with a small stake in the company a month ago – with the move rekindling speculation it would be back for a fresh tilt at the company.