Don’t extend coal power plants: Origin

Energy giant Origin Energy has made a warning against coal-fired power plants. The company says enough is enough of an ongoing war.

Power giant Origin Energy has warned against extending the life of coal plants without the government providing a ‘‘carbon signal’’ and urged an end to the decade-long energy war to help spur investment and shift the electricity grid towards renewables.

While coal stations face the prospect of being forced out of Australia’s power grid earlier than forecast by the rise of solar and wind generation, the nation’s largest energy retailer said governments should resist “picking winners” in the eventual path to a clean energy-dominated grid.

“We need to recognise that coal is the wrong type of generation to firm renewables and extending the life of old coal plants without a strong carbon signal will extend the uncertainty we are all facing today, while denying the inevitability of the low-emissions future we know we will need to deliver for our customers and the community if we are to minimise the impacts of climate change,” Origin chief executive Frank Calabria will say in a major speech focused on Australia’s path to a 2050 energy market.

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A joint federal and NSW government probe is currently assessing the future of the Liddell coal plant in NSW and the risks to the electricity grid from its planned exit, with Energy Minister Angus Taylor open to consider extending its life beyond a planned 2022-23 retirement. Former AGL boss Michael Fraser said on Thursday the “bottom line” was that Liddell was approaching the end of its engineering life.

“I think what AGL is talking about now is a sensible way of taking it out of the market,” Mr Fraser said.

However, he conceded working out how to make long-term investments in its place remained challenging, particularly given the government’s own plunge into underwriting investments in generation and the impact of the government-owned Snowy 2.0 expansion hitting the market.

“If you’re sitting around an AGL or EnergyAustralia board table, you’d be saying how many of those projects are the government going to be building and that will then inform the mix of what will actually replace Liddell,” Mr Fraser said.

Ahead of the closure of Liddell plant, Mr Calabria said it was critical the government started thinking about long-term solutions to the nation’s policy puzzle, rather than quick fixes.

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“The industry desperately needs a strong signal to invest,” Mr Calabria said.

$7.94 Origin Energy closed up 4¢ p

“We have some hard questions to ask in the coming years with the next tranche of exits coming up in 2022 and 2023.

“Without a market signal in place that will get investment flowing in firming generation, we are unfortunately at the point that we have a range of solutions on the table that try to solve specific short-term problems such as underwriting generation or the default market offer without a long-term view of market design and what we need to do to ensure we have a national electricity market that can serve us for the next few decades.”

The Origin chief hinted at the need for a form of carbon pricing to allow the smoothest transition for the energy grid, but said policymakers seemed reluctant to consider such a move with ­Malcolm Turnbull’s strongly supported National Energy Guarantee dumped last year.

“The push for a market-based mechanism that deals with emissions and reliability seems to have fallen away.

“After a decade-long energy war, it seems to conjure up the ghosts of the carbon tax for some even though they are not the same thing.

“Yet I believe agreement on an overarching, market mechanism that effectively co-ordinates the massive amount of activity that’s happening in the market right now will help to deliver a cleaner, smarter transition in energy at the lowest cost to consumers.”

Origin wants to see Australia introduce a new price ‘‘capacity market’’ mechanism reflecting the important reliability role provided by power stations, which are currently struggling to receive any value for their generation when they get undercut by renewables that can produce at close to zero cost.

“Right now, the price for firming energy is not enough to ensure that what we need to make the system reliable will be built,” Mr Calabria will tell a CEDA lunch in Sydney on Friday. “We would argue that any capacity payments need to go hand-in-hand with a strong carbon signal, to minimise distortion in the market, deferring further investments and increasing the costs to consumers.”

Origin energy says the life of coal power stations should not be extended without a ‘carbon signal’.

The Australian Energy Market Operator and the government-convened Energy Security Board are considering an overhaul of the national power grid to ensure power plants that help ensure security of supply are properly valued in the market.

AEMO chief Audrey Zibelman has held discussions at both a federal government level and with state energy ministers about the importance of pushing ahead with the new pricing proposal, which is expected to be discussed at the first Coalition of Australian Governments energy meeting in December.