Trevor St Baker’s Vales Point calls for regulatory intervention, as Elon Musk’s Tesla questions need for more gas supply

The operator of the Vales Point coal plant in NSW argues reliance on modelling showing an early exit of coal from power will lead to higher household electricity bills.

Trevor St Baker’s Vales Point coal plant in NSW has raised concerns over a 30-year blueprint for the national electricity market.

Billionaire Trevor St Baker’s Vales Point coal plant has called for the regulator to make a dramatic intervention into a contentious national electricity blueprint, questioning modelling showing the early exit of coal from the power grid, while Tesla challenged the need for more gas supply given investments in battery storage.

Vales Point power station near Lake Macquarie, owned by power barons Mr St Baker and Brian Flannery, supplies about 4 per cent of power for the national electricity grid but is worried about an Australian Energy Market Operator scenario that would see coal exit the system three times faster than planned.

“Delta’s concern is that if the modelled integrated system plan outcomes and conclusions are not based on the best available input assumptions, there is a very high risk that these outcomes and conclusions could drive imprudent investment decisions by stakeholders,” Vales operator Delta Electricity said in a submission.

“This will unnecessarily drive-up costs of the power system and increase consumer electricity bills. In particular, regulated transmission investment is very long lived and over-investment will unnecessarily burden consumers for many decades.”

AEMO, which runs the national electricity network, has plotted a draft “step-change” scenario after consultation with industry to guide power grid investment over the next 30 years and ensure Australia hits goals to cut pollution.

AGL Energy conceded last week it may accelerate closure dates for two of Australia’s biggest coal plants again depending on market conditions, underlining the speed of cheap renewables undercutting coal and raising fears of a bumpy transition as the fossil fuel exits the grid.

While the weight of money has already moved away from further investment in coal as cheap renewables take hold, big players are still worried modelling in AEMO’s scheme may be too ambitious and fails to take account of slow progress rolling out new transmission and whether the grid can successfully operate with high levels of clean energy.

Delta called for the Australian Energy Regulator to undertake a review of AEMO’s forecast guidelines noting guidelines that “forecasts should be as accurate as possible, based on comprehensive information”.

It wants to delay publication of a final plan “until the engineering framework has confirmed it is technically and economically feasible for the power system to operate at the very high levels of instantaneous non-synchronous generation over the medium term.”

Elon Musk’s Tesla used its submission to argue the market is now primed for a rapid transition to battery storage systems as a replacement for gas peakers and said AEMO’s assumptions on new gas generation entering the grid was of concern.

There “is unlikely to be further commercial opportunities to deploy gas peakers anywhere in the national electricity market, and to include 9GW in the integrated system plan would unnecessarily embed a clear disconnect between AEMO’s ISP modelling results and a credible deployment outcome,” Tesla said.

The AEMO plan requires a nine-fold increase in wind and solar capacity by 2050 to meet the nation’s net zero emissions targets while some 45 gigawatts of storage across batteries and hydro will be required with 9GW of gas-fired power needed to help firm up ­renewables.

Delta Electricity dumped plans a year ago to refurbish Vales Point in the NSW Hunter Valley because of “changes to electricity industry policy settings” under the Berejiklian government’s energy road map reforms. Vales Point is currently due to shut in 2029.

AEMO said the draft plan reflected Australia’s energy system was undergoing a profound transformation. noting 90 per cent of investment across the grid is in renewable energy, with Australia adding four to five times more grid-scale solar and wind than the European Union, the USA or China on a per capita basis.

“The Draft 2022 Integrated System Plan reflects this, and the continued acceleration industry is expecting over the next 30 years, a point made clear over 18 months’ consultation with industry, consumers and governments,” said AEMO’s executive general manager system design, Nicola Falcon.

“The ISP provides a least-cost, least-regret development plan to efficiently deliver secure, reliable and affordable electricity for consumers, while substantially contributing to national emissions objectives.”

The Clean Energy Investment Group, representing 11GW of renewable energy capacity across 70 power stations, said it supported AEMO’s selection of the aggressive step change scenario but said it was concerned it was not in line with a 1.5 degree climate scenario and did not align with international investor sentiment.

“CEIG recommends that the final 2022 ISP should plan for emissions reduction consistent with maintaining warming under 1.5 degrees. That would align energy investment in the national electricity market with international investor expectations and trading partner actions.”