New AGL unit outage adds to energy pain
AGL Energy has lost another major coal unit at its Loy Yang A plant in Victoria, as soaring wholesale power prices raise concerns over household retail tariffs.
AGL Energy has lost another major coal unit at its Loy Yang A plant in Victoria, a second unplanned outage in as many weeks, as soaring wholesale power prices ignite tensions over household retail tariffs.
The 180-year old power giant, which faces a critical shareholder vote in June over its planned demerger, lost supplies from Unit 1 at Loy Yang A on Thursday night, sources told The Australian.
The outage means Victoria’s largest power station, which provides 30 per cent of the state’s power needs, is now without half of its capacity just nine days after an electrical fault knocked out Unit 2 at the power station.
AGL confirmed a “minor tube leak” had forced Unit 1 offline, underscoring concern among energy users over the reliability of coal plants which still supply about 60 per cent of generation for the national electricity market.
“Loy Yang unit 1 was taken offline last night due to a minor tube leak and is expected back online early next week,” an AGL spokesman said on Friday night.
The Australian understands Unit 3 of Loy Yang A is currently scheduled for maintenance from May 6 to May 27 although that work may be put on ice given the need for AGL to run the rest of the station near capacity to meet demand.
Coal outages contributed to wholesale power prices surging by two-thirds in the first quarter of 2022, with the steep rise sparking calls for the default market offer to be raised to accommodate cost inflation. There are worries the huge wholesale price bump, if prolonged, will filter through to higher household bills.
The default market offer includes a price cap on what retailers can charge customers on standing offers but some power companies are arguing a huge spike in wholesale prices means the DMO should be raised to ensure retailers can recoup their costs.
“The DMO should capture the most recent data on rising costs, and the regulator has to strike the right balance of finding a level that allows for healthy competition in the energy market while protecting vulnerable and disengaged customers,” Alinta chief executive Jeff Dimery said. “The decision-making must remain transparent, independent and strike that critical balance.”
Origin Energy said on Friday that wholesale power prices have more than doubled in the last year amid high energy costs while heavy rain dampened solar output.
Wholesale electricity spot prices surged in the first three months of 2022 to average $90 per megawatt hour across the power grid, Origin data shows.
That marks a 150 per cent bounce from the first quarter of 2021 when prices were just $36MWh and a 58 per cent jump from the last three months of 2021 where prices averaged $57MWh.
Origin, which has accelerated the closure of Australia’s largest coal plant by seven years to mid-2025, said elevated coal and gas fuel costs were partly to blame after Russia’s invasion of Ukraine roiled international commodity markets and created a new squeeze on supplies.
A volatile La Nina summer also played its part. While hot weather saw Queensland hit record market demand on March 8 and NSW surge higher in February, the two states were also hit with lower solar production as extreme rainfall in March dampened output.
Coal outages in Queensland also hiked pressure on the power grid while Origin called out periods of high South Australian prices driven by choppy renewable generation and interconnector constraints which curbed electricity supply from Victoria.
Origin also pointed to a slump in coal output from its own giant Eraring coal plant, down 16 per cent for the financial year to date due to coal delivery constraints from its main supplier.
High coal prices and breakdowns of coal units underscored the need to speed up a move to renewables, The Australia Institute said.
“Coal prices are set by global markets. When the coal price rises due to international conflicts, so do our electricity bills,” The Australia Institute’s Richie Merzian said.
“While we remain dependent on coal we will always be at the mercy of high coal prices and outdated and unreliable coal power stations.”
Greenpeace said the market was showing the risks of AGL Energy proceeding with a planned demerger in June.
“The AEMO update shows AGL, Australia’s biggest climate polluter, is hurtling down a path to failure through its obsession with expensive and unreliable coal, which it will attempt to cover up through its proposed demerger,” Greenpeace said.
More Coverage
