Wholesale power prices to rise after delays at Callide coal-fired power station

Wholesale power prices will increase and more pressure will be placed on Australia‘s energy grid because of maintenance delays at one of Queensland’s biggest coal-fired stations, deputy premier Steven Miles says.

Deputy Premier Steven Miles joins Premier Annastacia Palaszczuk on Tuesday. Picture: Liam Kidston

Wholesale power prices are set to increase and more pressure will be placed on Australia’s energy grid over summer because of maintenance delays at one of Queensland’s biggest coal-fired stations.

State-owned CS Energy announced on Tuesday that the trouble-prone Callide C power station, near Biloela in central Queensland, would not be fully operational until mid-2024.

One unit was taken offline after a fire in May 2021, an outage that has contributed to recent increases in wholesale electricity prices, while another part of the station was shut down last October when a cooling tower collapsed.

Wholesale prices – the cost ­retailers pay to procure electricity to meet customers’ needs – have been steadily rising in recent months amid a global power crunch and renewable energy ­developments struggle to keep pace with the retirement of coal power stations. The increase in wholesale prices in 2022 was a key driver in the decision of the Australian Energy Regulator to approve power bill increases of up to 25 per cent from July 1 for much of the country.

Authorities had hoped the return of Callide C would lower wholesale electricity prices, which in turn would limit any increases to household bills in 2024.

But Callide’s return-to-service date keeps getting pushed back, with CS Energy on Tuesday saying the C4 unit will not be at capacity until July 6 next year. The C3 unit, which was scheduled to return to full capacity on December 31, will now return at 50 per cent capacity on January 7 and full capacity on February 18.

Queensland Deputy Premier Steven Miles confirmed the repair delays “will increase wholesale power prices”. “There is not a ­direct link between wholesale ­prices and retail prices that households will pay, they are calculated up across longer-term contracts, so it’s harder to draw a direct correlation,” he said.

“The wholesale price explains about 40-45 per cent of the retail price. But of course those users who do pay wholesale power prices will inevitably pay these higher costs and some of them will flow through consumers as well.”

CS Energy acting chief executive officer Andrew Varvari said the repairs were highly complex and the task was complicated when Genuity – which owns 50 per cent of Callide C – was placed into administration in March.

“(We) are doing everything we can to have the units safely back up and running as soon as possible,” Mr Varvari said.

The cause of the 2021 fire is still unknown, with an independent ­report still yet to be published, but the delays in returning Queensland’s fourth-largest coal generator is a blow to efforts to depress electricity prices.

Cost of living is at the forefront of minds of many Australians struggling under soaring inflation and rapidly rising interest rates.

The federal government in its May budget said it would deliver energy bill relief to some 5 million households. Queensland Premier Annastacia Palaszczuk has also flagged more energy rebates in the upcoming state budget after ­state-owned generators delivered a $175 power rebate to all households last year.

Wholesale electricity prices have in recent weeks begun to trend upwards as traders digest the recent closure of AGL Energy’s Liddell coal power station and worry about the impact of the scheduled closure of Origin Energy’s Eraring coal power plant in 2025.