Since the Hazelwood coal-fired 1,600 megawatt power station shut down on 31 March, no power has been exported North from Victoria, with the state becoming increasingly more reliant on coal power from the East Coast.
An analysis by JP Morgan has shown that Queensland used to import energy from New South Wales at an average rate of 24% before Hazelwood was mothballed.
Since then, however, the tables have turned and it is Victoria that is now reliant on power exported south by coal-dominated Queensland and New South Wales. The findings also suggest that the power system across the eastern states has become increasingly vulnerable after the shutdown of several base-load stations, which have sent electricity prices soaring.
Coal power needed due to unexpected drop in wind
The matter has been further compounded by an unseasonal slump in wind power in South Australia last month which turned the state back towards gas power generation.
JPMorgan energy analyst Mark Busuttil was quoted as saying that Southern States are becoming increasingly more reliant on Queensland and NSW, describing it as “a warning sign”.
Hazelwood’s closure effectively meant that 10-terawatt hours of energy generation per year were removed from the mix. It was expected that this shortfall would be made up for by coal power in Queensland and NSW, more renewable energy projects and higher output from gas plants.
Coal power from the East Coast flowing to the South
However, the current situation is that Victoria has gone from a net exporter of energy to a net importer. In cases of extreme weather, they will both have to turn to state interconnectors to get power.
This sentiment was shared by the Australian Energy Market Operator in May, when it said that Victoria and South Australia were both expected to rely on imported energy in periods where high demand coincides with poor renewable generation conditions – in other words, when the wind isn’t blowing.
The way things are going is that Queensland’s surplus is being bought up by NSW and this is then flowing to the southern states.
Spot and forward prices for electricity have softened since March and continued to trend lower in June, as reported in our June Rates Review. But JPMorgan says risks remain in the market, driven by the lack of reliability of renewable power.
In June, energy output from South Australia’s wind farms dropped by 50% due to an unseasonable drop in wind.
AEMO chief executive Audrey Zibelman has declared that suggestions the country is heading into another power crisis this coming summer are over-inflated and said that the retention of Hazelwood is “simply not required to maintain power system security.”
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