Gas crunch adds to Yallourn pressures

Plans to extend the life of the Yallourn coal power station in Victoria would allay a fresh warning over gas supplies amid concerns over reliability gaps in the power grid.

Minerals Council of Australia chairman Andrew Michelmore holds concerns over Victoria’s energy system

The extension of EnergyAustralia’s Yallourn coal power station in Victoria’s Latrobe Valley would allay a fresh warning on a gas supply crunch amid concerns over reliability gaps in the power grid.

The Australian Energy Market Operator, which has cautioned over ­insufficient electricity capacity in Victoria should Yallourn exit in 2028, has detailed a flow-on hit on gas supplies should the plant exit as planned.

The Australian reported on Tuesday that talks had been held between AEMO and Victoria’s Department of Energy, Environment and Climate Action over a mooted Yallourn extension for up to four years.

While Victorian Energy Minister Lily D’Ambrosio denied any talks between top officials at the bodies had taken place, sources confirmed the future of Yallourn was discussed in meetings between the two agencies.

AEMO said that from 2028 to 2029, gas-powered generation demand was forecast to increase following coal-fired generation retirements including the exit of Yallourn, according to its annual Victorian gas planning report.

“This forecast highlights an increased reliance on gas-powered generation following coal power station retirements during periods of lower renewable generation output, particularly in winter,” AEMO said.

Maximum gas demand is forecast to increase to 528 terajoules a day in the 2028 winter, resulting in total demand above a supply capacity forecast under sustained high gas use conditions, it noted.

Ms D’Ambrosio has already led a push for federal and state authorities to unite on solving the gas shortfall problem by underwriting LNG volumes into Victoria and NSW.

Gas & Energy Transition Research Centre director David Close said AEMO should be engaging all state governments and major generators to understand the uncertainty around current forecasts and planning mitigations to address risks to electricity supply. “It would be prudent for AEMO and the Victorian government to meet and discuss what level of certainty they would need by when to allow Energy Australia’s clearly communicated closure plan to progress on schedule,” he said.

Consultancy firm ACIL Allen said there was the potential to extend Yallourn due to the uncertain outlook for transmission, even as its current base case remains for the plant to shut in mid-2028.

Coal fired powered station at Yallourn in Gippsland. Picture: NCA NewsWire / Andrew Henshaw

The Victorian government’s VNI West electricity transmission project bringing green energy into the state is unlikely to be online until the end of the decade, raising fears of an energy shortage should Yallourn close as scheduled in 2028.

“I’ve always maintained the view that closing it ahead of VNI West was going to be challenging for all parties. 2028 wasn’t just plucked out of the air, it was to coincide with transmission developments which have now slipped,” ACIL Allen director Owen Kelp posted on LinkedIn.

Grattan Institute energy and climate change director Tony Wood said it represented an “insurance policy” for the Victorian government to consider an extension of Yallourn. “It would seem entirely appropriate that the parties involved would be monitoring how things are going,” he said. “This is not drama, this is just sensible risk management.”

Mr Kelp said: “Of course these discussions are being held. When reliability is in question, all options need to be on the table. Closing a major coal plant is difficult.

“Engineers and politicians are very risk averse and inherently biased towards playing it safe.

“If you allow Yallourn to close and something goes wrong, well you don’t want to be the one who signed off on that.”

Minerals Council chairman Andrew Michelmore said on Wednesday that Victoria was planning to shut its century-long Latrobe Valley brown coal advantage without a viable or affordable replacement in store.

“The state seems blissfully unaware of the rapid decline of its foundational energy strengths,” he told the Melbourne Mining Club. “Plans to develop offshore wind are in disarray.

“Land conflicts over solar, wind, and transmission projects are stalling progress. And after discouraging gas development for over a decade, Victoria is now pushing for expensive LNG import terminals and seeking costly gas from northern states – when it could have developed its own supply.

“ This is a warning for the rest of Australia.”

The Mining and Energy Union’s Victorian District also urged the Victorian government and EnergyAustralia to “come together in productive and transparent discussions” over the future of Yallourn Power Station and its workforce.

Originally published as Gas crunch adds to Yallourn pressures