Blackouts risk to force states’ hand on coal

Tougher energy reliability standards could trigger legal obligations on states to source more power from coal, gas and hydro.

Energy Minister Angus Taylor. Picture: AAP

Energy Minister Angus Taylor will demand tougher energy ­reliability standards in a move that could trigger legal obligations on major retailers in some states, including Victoria, to source more power from coal, gas and hydro.

The intervention comes with the market regulator already warning of blackouts this summer in Victoria, which is under pressure to meet the current standard and will likely be forced to again seek emergency reserves during periods of high demand, with 1.3 million households forecast to be at risk of power outages.

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Mr Taylor told The Australian that he would be asking for agreement on the tougher standards at a Council of Australian Governments meeting of his state and territory counterparts on Friday.

Victoria, which has placed a strong focus on renewables, has said it would agree to revised standards but wants to include a strategic reserve. The federal government claims this would risk pushing up prices.

Mr Taylor said the current reliability standard was too weak.

According to the Australian Energy Market Operator, under a revised standard Victoria would have a capacity shortfall of more than 435MW — the equivalent of a new gas-fired power plant — triggering a mechanism called the retail reliability obligation (RRO), which requires retail electricity companies to hold contracts or ­invest in generation to maintain reliability. South Australia is also likely to suffer supply issues this summer although it has moved to increase gas generation following statewide blackouts in 2017.

According to the Australian Energy Market Operator, under a revised standard Victoria would have a capacity shortfall of more than 435MW.

NSW faces a similar shortfall after the closure of AGL’s Liddell power plant in 2023.

“As an energy minister with a strong focus on reliability and the price impacts of a shortage of ­reliable generation, I can tell you my tolerance is tested,” Mr Taylor will say in a speech to an energy summit in Sydney on Tuesday.

“Over the last year, my view has hardened. My view is that we haven’t got the reliability standard right. The system inherently ­accepts too much risk and relies on too many contingencies.

“In addition, given shortages in supply in many states at crucial times, well-targeted supply should reduce prices. I think we need to strengthen the standards, and quite likely trigger the RRO in a number of jurisdictions. In a world of limited resources, it is clear that Victoria is a state that needs the most reliable investment.

“SA has obviously had challenges but is now on track to recovery, and we’re seeing that in their falling prices. It is also clear that NSW, if not managed properly, could have gone down the wrong path.”

The Ararat wind farm in Victoria.

Mr Taylor repeated his claims that the problem was “starkest in Victoria” and said its shortfalls could have national flow-on effects.

He accused Victoria of seeking to blame others for its problems and said the Andrews Labor government had failed to replace ageing infrastructure and address price and reliability issues.

The AEMO had already warned that Victoria was not expected to meet reliability standard this summer. “Most announced new-generation projects are variable renewable energy generators, which often do not generate at full capacity during peak demand or may be positioned in a congested part of the network,” it said. “While providing significant extra energy during many hours of the year, these projects are forecast to only make a limited contribution to meeting demand during peak hours.”