EnergyAustralia targets niche created by Liddell closure

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.”

Also:

    “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.

15 thoughts on “EnergyAustralia targets niche created by Liddell closure”

  1. I’ll wait for some commentary to appear before tackling the ACCC report on pricing released today. A big worry in the interim report was that the ACCC had sourced data about consumer electricity bills from secondary sources, for example retailers and regulators, without ‘truthing’ the data with an actual consumer surveys.

    My probing indicated that the ACCC had Queensland electricity bills about 25% higher than they should have.

    I’d be gobsmacked if they have rectified the situation, but if they haven’t I’d find it hard to take the report seriously.

  2. Brian,

    On June 18, I attended a public hearing at NSW Parliament House as an interested observer.

    Following the end of AGL’s testimony, I spoke briefly with Mr Richard Wrightson – Executive General Manager, Wholesale Markets , AGL, outside the Macquarie Room.

    I drew his attention to the recently published BP Statistical Review of World Energy 2018, where it indicates that US proved reserves-to-production (R/P) at the end of 2017 is only 11.9 years (page 26), and the US in 2017 was the world’s largest gas producer (20.0% global share, page 28). I referred to Shale Reality Check 2018, that suggests that US shale oil and gas production is unlikely to continue maintaining current rates of production and are both likely to begin declining soon. I asked him whether he thought AGL’s recently committed 252 MW gas-fired power station, scheduled to be operational at the end of 2022, could become a “stranded asset” in an increasingly likely post- ‘peak gas’ world that would likely push up global gas prices. His response to me was he didn’t think so, as the power station would only operate 3 (or was it 4)% of the time. I gained the impression from that exchange that AGL’s as-yet-to-be-built 252 MW power station will be a ‘peaker’.

    Brian, you say:

    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.

    Leaks, or no gas leakage, we must stop burning gas.
    We must stop burning coal. We must stop burning oil.
    Humanity has used up its carbon budget.

    And gas is no longer economically competitive with renewables (even with storage added) – see South Australia’s project Aurora. I think we need more solar thermal power generators, instead of gas-fired generators, but I think many people in business and politics just aren’t adequately informed.

  3. RenewEconomy article by Giles Parkinson headlined Australia could be at 86% wind and solar by 2050 – on economics only, dated July 10, link here, includes (bold text my emphasis):

    Australia could source 86 per cent of its electricity from wind and solar by 2050, based on economics only and regardless of any climate or emissions policy, according to Bloomberg New Energy Finance.

    The global research and news group says that level of wind and solar could be reached quicker, and will need to in order to match the Paris climate target of 2°C, let alone 1.5°C, but the transition to wind and solar is inevitable.

    That’s because, according to BNEF’s Seb Henbest, wind and solar already provide the cheapest source of bulk energy for new generation, and will soon beat most existing fossil fuel plants on the same criteria.

  4. New fossil peaking gas generators tied to the risks of the spot market seem a risky investment given the effect of batteries on the SA peak price and the potential effects of demand management.
    Then there is the crazy idea of using a spot price market to set peak prices instead of contracts to supply capacity.
    And yes, there is this problem that peak demand occurs on sunny days while the cost of storing power to cover the late afternoon on a hot day is getting lower and lower.
    A company that is seriously talking about new fossil generation needs a new board of directors.

  5. And yet Craig Kelly MP continues to repeat the mantra (hear him on the Radio 2GB podcast, broadcast today, from time interval 2:40):

    “When you do the sums, the most cheapest way that we can generate electricity, on a baseload basis, that can be available 24 – 7, 365 days of the year, is a new coal-fired power station”.

    Then at time interval 3:50, Craig Kelly says:

    “…the reality is, the reason why, that there’s hundreds, if not thousands of these coal-fired power stations being built around the world, and not in Australia, that these other countries are prepared to pay a premium, to get Australian coal into their nation, but we’re not doing it here, is because of the political risk.”

    No Craig Kelly, it’s not hundreds of coal-fired power stations – it’s hundreds of coal-fired generator units – 467 generator units under construction globally, and 903 generator units in planning (as at Jan 2018). But just recently, India has shelved its 4GW Pudimadaka Ultra Mega Power Plant project in the state of Andhra Pradesh.
    No Craig Kelly, it’s because new coal is no longer economically competitive.

    Later from time interval 7:11, Craig Kelly calls upon the opposition for bi-partisan support for building new coal-fired power stations. Tell him he’s dreaming.

  6. In today’s online The Australian, there’s an article by Ben Packham & Greg Packham, headlined Pro-coal Nats welcome ACCC call for government to underwrite low-cost power generation, link here, it includes:

    Malcolm Turnbull has signalled support for the competition watchdog’s call for government to underwrite the construction of “firm” low-cost power generation, in a move that could end the energy wars within the Coalition.

    The devil will be in the detail; as in what is defined as “‘firm’ low-cost power generation“.

    Nationals MPs see this as a recommendation for HELE coal-fired generators.

    But per Dr Finkel’s Independent Review into the Future Security of the National Energy Market: Blueprint for the Future, published in June 2017, ultra-supercritical (aka HELE) coal-fired generation average LCOE is $80 -81/MWh. Even ScoMo said recently that HELE power is too expensive at around $75-80/MWh.

    The Australian article reports that the recommendation, to improve competition and generation capacity in the wholesale market, would involve government entering into long-term agreements to purchase power at low-cost (about $45-$50/MWh).

    It will be interesting to see if the rhetoric can match the reality.

  7. Back on April 4, it was reported by Malcolm Farr at news.com.au in an article headlined Treasurer blasts supporters of new coal-fired power station, says it would double power bills, link here, that in reference to his “coal fan club colleagues”:

    The group had not taken into account “an economic fact”, Mr Morrison told a conference organised by the Australian Financial Review, pointing to a key “difference between old coal and new coal”.

    “Old coal bids into the energy grid at around about $30 per megawatt hour wholesale up to $40. It can be lower than that,” he said.

    “A new HELE plant, five, six or seven years down the track it is estimated it would be bidding at around $70 or $80.

    But ill-informed ideology trumps facts, right, especially when taxpayers foot the bill? When are the Australian people going to wake-up to these apparent con artist politicians?

    John Davidson (Re: JULY 11, 2018 AT 1:19 PM):

    A company that is seriously talking about new fossil generation needs a new board of directors.

    The company shareholders need to make it clear that directors will be out if they do, or failing that, shareholders sell/divest their shares, and the company gains the dubious distinction of reaching “junk status”.

  8. This morning, on Radio 2GB, Federal Resources Minister Matt Canavan, told guest host Michael McLaren, link to podcast here, that (from time interval 5:44):

    “Our focus is laser-like on getting power bills down.”

    From time interval 8:13, Canavan said:

    “…so we do need to now reset and rethink ah… what we have been doing. Ah… we are… Ah.. I’m a member of the Nationals Party. We have been calling out for months, the need ah… to consider ah… incentives to invest in baseload power, ah… in power that can be on full-time. Our economy cannot run on part-time power sources, like wind and solar alone, ah… and this report has vindicated that view, and… and now we need to get on with the job of trying to… to fix, what is, as you’ve said, a broken system.”

    No, Matt Canavan, we don’t need baseload power – Australia needs new ‘dispatchable’ power. Coal-fired power is not ‘dispatchable’ power. And new HELE coal-fired power is too expensive, as ScoMo said in April.

    Then from time interval 10:14:

    “Well look, I think the report’s, like… the accuracy is right, we should be… Like, I don’t really care whether it’s coal, or gas, or chook poo. I don’t really… ah… Whatever’s cheapest…”

    New coal, gas, and probably “chook poo“, are electricity generation technologies that can no longer compete economically with renewables. Solar thermal technology, in particular the South Australian project Aurora, should demonstrate by the end of 2020, that affordable ‘dispatchable’ electricity is possible without using fossil fuels, and it’s the only affordable ‘dispatchable’ renewable technology that can still be deployed in time to replace Liddell before 2022 – new coal cannot do that. Unless Canavan can acknowledge these facts, he’s not fair dinkum.

  9. Would someone explain how dispatchable dispatchable power needs to be to meet the current definition of “dispatchable”. Like baseload it seems to have become another emotional word that may, or may not, have much relevance to the power supply we need for the future.

  10. John Davidson (Re: JULY 12, 2018 AT 2:35 PM):

    Would someone explain how dispatchable dispatchable power needs to be to meet the current definition of “dispatchable”.

    From Wikipedia, re Dispatchable generation:

    Dispatchable generation refers to sources of electricity that can be used on demand and dispatched at the request of power grid operators, according to market needs. Dispatchable generators can be turned on or off, or can adjust their power output according to an order.[1] This is in contrast with non-dispatchable renewable energy sources such as wind power and solar PV power which cannot be controlled by operators.[2] The only types of renewable energy that are dispatchable without separate energy storage are biomass, geothermal and ocean thermal energy conversion.[3]

    Dispatchable plants have different speed at which they can be dispatched. The fastest plants to dispatch are hydroelectric power plants and natural gas power plants. For example, the 1,728 MW Dinorwig pumped storage power plant can reach full output in 16 seconds.[4] Although theoretically dispatchable, certain thermal plants such as nuclear or coal are designed to run as base load power plants and may take hours or sometimes days to cycle off and then back on again.[5]

    The attractiveness of utility-scale energy storage is that it can compensate for the indeterminacy of wind power and solar PV power. During 2017, solar thermal storage power has become cheaper and a bulk dispatchable source.[6][7][8][9] Earlier, affordable large-scale storage technologies other than hydro were not available.

    Reference [6], dated 22 Sep 2017, includes:

    The price records for dispatchable solar broken this year:

    TuNur proposed shipping solar from Tunisia at 10 cents/kWh
    In May, Dubai’s DEWA received a solar bid at just 9.4 cents/kWh.
    In September, DEWA awarded a new low contract for solar at just 7.3 cents/kWh
    In August, SolarReserve won a solar contract at 6.1 cents/kWh.

    This kind of drop in price is astonishing for an innovative technology that has barely started. While more are in development, so far there is only a handful of solar thermal energy plants operating worldwide that include the thermal energy storage that makes this kind of solar dispatchable any time, unlike solar PV.

    The last sentence is on the mark:

    When will a mainstream news source connect the dots on the world’s cheapest prices for solar thermal energy with thermal energy storage: the dispatchable solar?

  11. John, Geoff, this article in The Conversation from September last year has a swag of definitions.

    I think in our context ‘dispatchable’ means able to supply spot demand at 5-minute intervals on the NEM. At that time it was gas and hydro.

    Google threw up this article by Giles Parkinson from about the same time featuring AEMO stressing dispatchable rather than baseload.

    He mentions also demand response and batteries in homes. To that we’d need to add grid-scale batteries, pumped hydro and molten salt. Not coal, ever.

  12. Brian (Re: JULY 12, 2018 AT 10:57 PM):

    The Conversation article you referred to does not mention solar thermal, even though in August 2017, SolarReserve won a solar contract at 6.1 cents/kWh for project Aurora. That’s an extraordinary price for dispatchable solar.

    The RenewEconomy article you referred to highlights an AEMO report that says:

    “These dispatchable resources could consist of generation on the grid, storage, demand resources behind the meter, flexible demand, or flexible network capability. However, given the increasing variability on the power system, dispatchable resources that are more flexible in capability, such as starting and stopping, or ramping up and down quickly, will provide additional benefits.”

    Grid-scale batteries can be deployed within a year, can respond in milliseconds, but are still expensive compared to PHES, usually supplementing wind and solar-PV , can only sustain energy delivery for several minutes, and probably have an operational life of 5 – 15 years.

    Solar thermal can be deployed in 2.5 – 3.5 years, can respond in minutes, is now cheaper than existing gas and new coal, and can sustain energy delivery for more than several hours to days, and can have an operational life of 40 – 50 years.

    Pumped-hydro can be deployed in 4 to 6 years, can respond in tens of seconds to minutes, has known cost, usually supplementing coal, nuclear, solar-PV and wind, can sustain energy delivery for days to weeks, and can have an operational life of more than a century.

    New coal requires 6 – 9 years to deploy, requires several hours to respond, is now uncompetitive on cost, and humanity has exhausted its carbon budget.

  13. Can take that definition (your post at 10.23pm) of “dispatchable” as a dictionary definition, GeoffM.

    But in the Australian energy market, notice what Brian found. A five minute “power up” window because that’s the way the current “spot price” system works on the NEM.

    Entirely defined by whoever designed and/or agreed to that market mechanism. Perhaps related to industrial preferences? Or the timescale of domestic power demand changes as folks arrive home? Perhaps mediated by the switching on ability of some generators? Or the decision processes of humans controlling power output?

    Whatever.

    Not purely technological.
    Not purely financial.
    Not entirely political.

    But eminently capable of improvement, in the public interest…
    to save money and reduce emissions.

    By the way, the recent pricing of solar with thermal storage is excellent news, GeoffM, John and Brian!

    Hope ScoMo can explain some arithmetic to the dunces.

  14. Ambigulous (Re: JULY 13, 2018 AT 1:11 AM):

    A five minute “power up” window because that’s the way the current “spot price” system works on the NEM.

    Technologies that can meet the five minute ‘dispatchable’ window:

    Batteries: response time in milliseconds (from ‘cold’ start), variable output to match load;
    Hydro & PHES: response time in tens of seconds to minutes (from ‘cold’ start), variable output to match load;
    Solar thermal with storage: response time from several minutes for hot start to full power, from 50 minutes for warm start to full power, from 100 minutes for cold start to full power (see here, figure 3.5);
    Open-cycle gas turbine (‘peaker’): response time in minutes (from cold start), variable output to match load;
    Diesel: response time in tens of seconds, variable output to match load;
    Combined-cycle gas-fired (‘intermediate’): response time in a few minutes (provided the boiler is up to operating temperature and the gas and steam turbines are hot for standby), variable output to match load, start-up from cold requires a few to several hours notice.

    Nuclear, and coal-fired generators take tens of hours to reach operational condition from cold start, and normally can’t vary output rapidly once operational – that’s why they are called “baseload” generators.

    But humanity must leave petroleum oil, fossil natural gas, and coal, before 2050, to mitigate dangerous climate change.

    By the way, the recent pricing of solar with thermal storage is excellent news, GeoffM, John and Brian!

    Yep, even better than I thought, if the 6.1 cents/kWh is the new benchmark for solar thermal, and I suspect if bigger (e.g. 200+ MW) and more storage (e.g. 16 – 17 hours) capacities and multiple units built concurrently are done, I think the pricing is likely to fall further together with long-term supply contracts – let’s hope the 5 cents/kWh barrier can be broken. Better than Professor Blakers’ current figures for wind + solar-PV + PHES + batteries + HV-inter-connectors + demand management as the alternative ‘firmed’ renewable generation option. And I think solar thermal with storage can be deployed far sooner than Blakers’ full 100% renewable solution (but I’m not suggesting Blakers’ solution be dismissed – there’s room for a mix).

    So when will the media, business and politicians connect the dots that solar thermal is the most affordable, ‘dispatchable’, large MW and MWh capacity option to meet the ACCC recommendation, that can be deployed in less than 4 years?

Leave a Reply

Your email address will not be published. Required fields are marked *