You guessed it, he chose the clapped out Liddell coal-fired power plant.
AEMO, the Australian Energy Market Operator, said New South Wales may be short of power when Liddell closes, as scheduled, in 2022, based on known plans and government policy positions, federal and state. AEMO had just published two documents – Electricity Statement of Opportunities for the National Electricity Market and Advice to Commonwealth Government on Dispatchable Capability. Apart from the risk of blackouts this coming summer in SA and Victoria, the next pressure point could be in 2022 in NSW with the closure of Liddell.
As David Blowers of the Grattan Institute said, the second report carried a clear message, though not stated directly – the system is broken a bipartisan clean energy policy is badly needed.
The purpose of both reports was to scope adequacy of supply and to identify for industry where new investment is needed.
Turnbull’s needs were quite different. He needed to show the fossil-loving sectors of the Coalition that he was a genuine coal lover, (see Giles Parkinson Turnbull’s abject capitulation to the coal lobby is now complete) and more proximally, he needed to get the political conversation off Barnaby Joyce and back to electricity, where he is building an image of himself as the friend of the people, a visionary, and a fixer of Labor mess.
His response was immediate. The owners, AGL, must keep Liddell running, and if they don’t want to, they should sell it to someone who will. A man of action, he was straight on the phone to AGL CEO Andrew Vesey before the report was public, and in Michelle Grattan’s account, after some initial reluctance, says that Vesey is willing to talk. However, he should have done his due diligence before investing so much political capital. And unlike Turnbull, Vesey is a man with a plan, one that actually makes a fair bit of sense.
Giles Parkinson relates how the clapped out Liddell power station was thrown in for nothing as part of an asset sale by the NSW Government to AGL in 2014. That is, it was deemed to have no value at all. Parkinson reminds us that Liddell, operating at less than half its nominal capacity of 2000MW, was part of the problem in the heatwave in early February.
The red line shows when the heatwave was at its maximum. Its failure in the heat was why AGL chose to close down the Tomago aluminium smelter rather than turn off the lights in 400,000 homes.
Parkinson shows how for years Liddell had been struggling to operate at half capacity.
Matthew Stevens in the AFR tells why Vesey would not want to sell.
The first reason is that in the next four years Liddell may make more money than in the past 46, given current prices and the shortage of supply.
If the plant is to be sold to be kept open, it should be sold now so that the new owner can plan the refurbishment. Why would AGL hand over that slice of the market to a competitor, without charging a hefty premium?
In fact AGL has been planning to replace the Liddell supply with something more appropriate to the modern world. This is what Vesey recently told the AGM:
- “When Liddell reaches the end of its life in 2022, 1680 megawatts of effective capacity or about 8000 gigawatt hours of annual energy will be withdrawn from the NEM,” Vesey continued.
“Replacement of this energy in the NEM will most likely comprise a mix of energy from solar and wind including the 200MWs we are already developing at Silverton and the 453MWs at Cooper’s Gap.
“Replacement of capacity will likely be provided by a mix of load-shaping and firming from gas peaking plant, demand response, pumped hydro and batteries.
“We assessed the potential scale of investment in these shaping and firming technologies to meet our portfolio needs to be between 500 and 1500 megawatts of peaking plant, representing a potential investment of $800 million to $1.5 billion. We continue to assess the potential to develop gas peaking plants in New South Wales which would be further supported by our gas supply projects.”
On a gas peaking plant he reminded people that AGL are developing a floating gas hub off Crib Point, to import gas if necessary. They believe that this will put a cap on eastern coast gas prices, certainly for AGL and perhaps for the whole market.
Moreover, AGL has plans to clean up the existing Liddell site and turn it into a clean energy hub. It has allocated $898 million for the purpose. 2019 will be the critical decision time when they plan to go to public tender in search for the best way to use the site.
The AFR today says that, hidden from view, the NSW has also had its finger in the pie, suggesting it has not ruled out purchasing Liddell itself, and has not ruled out new ‘clean coal’.
Labor has taken a while to get its act together, but late last night Mark Butler was swinging behind the AGL plan, suggesting Turnbull sort out his own party rather than come forward with yet another market intervention.
In fact, spooking the market once again would be the price Turnbull pays if he succeeds in the Liddell intervention.
Matthew Warren, chief executive of the Australian Energy Council, representing 21 Australian energy companies including coal and gas generators, penned an opinion piece in the AFR There is no reliable power with no reliable plan.
The future of the grid will not be decided by whether or not to extend the life of an old power station in NSW. It will be delivered by the development of a credible, flexible and bipartisan strategy that businesses and governments can invest behind and adapt over the next generation.
Only the brave will invest in a place where the politicians intervene erratically and without warning.
- Bruce Mountain, director of Carbon and Energy Markets, said the government risked upsetting the entire pipeline of investment if it persists in pressing AGL to keep Liddell open.
“It will impact AGL’s proposed investments and operations and all the other market participants will be thinking, ‘what’s the chance that the government will intervene or bring something forward that will affect our proposed investments’,” Mr Mountain said.
“If they are worried about investment certainty they could not be doing more to fan the flames of that particular concern.”
That’s a pipeline recently estimated at $11 billion dollars.