EnergyAustralia looks set to sink $400 million into a new peaking gas power station, but have warned that the investment case would collapse if Canberra’s Coalshevik politicians force AGL’s ageing Liddell plant to stay open or if a new coal plant is built.
Their new gas plant will not supply ‘baseload’ power. rater, it will be fast-start and run on demand, operating only at peak times or when other plants suffer outages. This indicates it will mainly operate on the spot market, but in doing so will help prevent spikes up to the maximum $14,000 a megawatt-hour limit.
The new 400-megawatt gas plant will become Tallawarra B, complementing EA’s existing 430 MW Tallawarra generator located near Wollongong where they have grid, gas and water connections already in place. Mark Collette, EA’s head of energy says:
“We do see this is the best power development site in the state and we see it as a core part of New South Wales’ future.”
- “New coal is a bad idea for New South Wales – coal needs to run most of the time to be economic, but the market needs flexibility, not baseload,” Mr Collette said.
“More baseload coal generation will likely force – prematurely – an existing baseload coal plant out of the market. It just doesn’t add up for customers.”
A final investment decision will be made in late 2018 or early 2019.
Given that a national decision was made back in the mid 1990s to privatise the energy markets, the Government should now either nationalise the industry or stay out of it.
Another consideration is that projects of this kind could only be considered by substantial companies. EnergyAustralia has in recent times reviewed its strategies:
- EnergyAustralia has embarked on a path towards more than $1 billion of potential investments in gas power generation and energy storage as it switches focus from underpinning new wind and solar projects to integrating intermittent renewables into its supply at the lowest cost.
That was back in March, when the following outline of projects was given:
- Final investment decisions could come as early as late 2018 on more than 1000 megawatts of new gas-fired plants at Tallawarra and Marulan in NSW, while a new gas generator is possible at the Yallourn coal generation site in Victoria. A $480 million pumped hydro plant is on the cards in South Australia, while EA is also investing in waste-to-energy at a NSW coal plant and in smart energy management systems.
Tallawarra B now rules out an investment in Marulan, which would have been a greenfield site, hence more expensive to connect to the required networks and services.
My main reservation is that I suspect gas will be viewed more negatively in the future as scientists increasingly join the dots and politicians wake up in fright, realising that they should have taken notice of James Hansen when he gave witness to the US Senate in 1988. Andrew Blakers research indicates that potential pumped hydro resources in NSW are around the best in the country.
I also believe that emissions from gas are undercounted compared to CO2 and in Gas has got to go I reported that
If gas power is to have a net climate benefit compared to coal power, methane emissions must be less than 3 to 4% of production (Alvarez et al 2012; Hardisty et al 2012; NAS 2012). When methane emissions from the gas supply chain reach these levels and are added to the carbon dioxide emissions generated from burning gas in a power plant, the greenhouse gas pollution associated with generating electricity from gas is similar to coal. (Emphasis added)
Reports from the US indicate that their unconventional gas leaks 2 to 17%.
We simply don’t know how much gas is leaking in production and transmission in Australia, but where the source is coal seam gas it would be presumed to be on the high side.
Meanwhile the ACCC report on electricity pricing has hit the deck this morning. One of ACCC chair Rod Sims obsessions has been with the market power of the big ‘gentailers’ – EnergyAustralia, AGL and Origin – which have a significant presence in both generation and retailing. The early reports in The Guardian and at The Conversation include:
- The report found there was a case for government funding to support long-term contracts for large commercial and industrial users to bring on new dispatchable generation from players currently without a large market share.
Resources and Northern Australia minister Matt Canavan seized on that, arguing that the recommendation “the government underwrite baseload power investments” had “vindicated” Nationals’ calls for baseload power such as coal.
This triggers alarm bells. The ACCC report may be used an excuse government intervention to subsidize coal.
I find that experts in the electricity market often do not have the skills to assess the profitability of companies. Sims has been complaining of gentailers of ripping off consumers by selling electricity to themselves. In the case of EA, the reason Catherine Tanna was brought in to revamp the company’s Australian arm, ie EnergyAustralia, was that the profitability performance was so poor the Hong Kong owners (Hong Kong-listed CLP Group) could not mount a public offering of part of the company on the Australian share market. Their plan was to do so in order to return capital to the parent entity.
From their perspective, the ACCC report would seem to constitute a new element of sovereign risk.