Canberra in NSW Hunter Valley gas plant push
The private sector looks to have fallen short committing to replace 1000MW of dispatchable power that will disappear with the closure of AGL’s Liddell coal fired power station.
The federal government looks set to invest hundreds of millions of dollars in a huge power station at Kurri Kurri in NSW with the private sector failing to commit to replacing 1000 megawatts of dispatchable power that will disappear with the closure of AGL’s Liddell coal power station in 2023.
Speaking ahead of the Friday deadline imposed by the Morrison government, Energy Minister Angus Taylor told The Weekend Australian he would not be drawn on how much firm private sector interest has was expecting.
“We will get 1000MW, the question is how,” he said.
“We will get whatever we get from the private sector; we will evaluate that and we will make a decision.
“Obviously time is of the essence. We have to have these projects up and running in time and we are determined to do that.”
If the private sector fails to step up, the government-owned Snowy Hydro will build a 650MW gas plant in NSW’s Hunter Valley to fill the gap.
Mr Taylor confirmed the government would commit to a Kurri Kurri plant to be built by Snowy Hydro but not any other major generation project to bridge the Liddell shortfall, even as critics question the need for a new gas plant in the power grid.
“We have committed to that some time back,” he said.
“There is no ambiguity about that. But I’m not going to speculate on what we are going to see. If the private sector steps up, we will step back; otherwise we will step in.
“Making sure we have got the right balance in our grid between the intermittent renewables we are seeing coming in at record pace and the dispatchable generation is a crucial issue and we have said we will intervene as we need to.”
After delivering an 11 per cent fall in electricity prices over 12 months, the government is keen to avoid a shortfall in reliable power that could lead to higher prices.
Mr Taylor said Australia would lose 1600MW with the Liddell closure, similar to the loss of the Hazelwood station in Victoria in 2017 when a sudden exit saw power prices escalate due to supply shortage concerns.
“We are not going to see a repeat of Hazelwood, where all the experts told us there would be no impact on the price. We saw a doubling of the wholesale price.
“Now we are not going to see that mistake made again and that is why we are going down the path we are.”
There was intense speculation on Friday over any bids that may now be sitting on Mr Taylor’s desk.
For most interested observers, the only credible bid is EnergyAustralia’s Tallawarra B gas generator proposal for 300MW. Another 250MW proposal from AGL Energy for a gas generator in the Hunter Valley is thought to be out of contention.
Both EnergyAustralia and AGL put their projects on pause after a surprise announcement of a new Energy Infrastructure Roadmap in NSW, legislated in December.
The state government said the roadmap would give long-term support for new dispatchable generation but ruled out supporting the two projects unless the state target for energy security was breached.
There is speculation that the NSW government may have shifted position on Tallawarra B.
There is presumably also the prospect of some federal support.
“We have been very clear with the NSW government,” Mr Taylor said.
“We have worked with them on the Liddell Task Force which told us that if we didn’t get the right balance in our system on the closure of Liddell, we would see significant increases in the price and we don’t want to see that.
“We will continue to work with the NSW government to make sure that we have got enough of that dispatchable reliable generation in our system, that we have got the right balance.
“We will do that on the closure of Liddell but we will do that into the future as well,” he said.
Other projects, including the proposed Andrew Forrest-backed Squadron Energy gas and hydro generator, are not expected to meet the 2023 timetable.
“We understand the government’s need for firm, fast and flexible power,” Squadron chief executive Stuart Johnson said.
“We are investing heavily to develop this project.
“We are continuing to do our studies and talking to both state and federal governments.
“We have a good location in terms of grid and network stability.”
The Snowy power station would be located on the site of the former Kurri Kurri aluminium smelter, which ceased operations in 2012.
It has since been demolished.
Snowy Hydro is also considering boosting the size of its two Victorian gas-fired power plants to aid growing renewables generation.
The Australian Energy Council — which represents power giants AGL, EnergyAustralia and Origin — has said the government’s intervention threat may be counterproductive and could deter investment.
