The Federal Government is trying to find a buyer to prevent the closure of AGL’s New South Wales coal-fired Liddell power station in 2022. AGL has repeatedly stated that it is “getting out of coal”.
Prime Minister Malcolm Turnbull has opened negotiations with AGL Chief Andy Vesey and it is understood that an in principle agreement has been reached to sell Liddell power station to a third party which would be willing to keep it open for at least five years beyond 2022.
The Prime Minister is desperately trying to avoid a similar situation to the one that presented itself when Victoria’s coal-fired Hazelwood plant was mothballed earlier this year. The intervention comes as the Australian Energy Market Operator issued its Electricity Statement of Opportunities report for AEMO also warned that there was neither the time nor market incentive to build new coal-fired power stations.
Mr Vesey made it clear on Tuesday AGL would not extend the life of Liddell power station, taking to Twitter to say that the company was “getting out of coal” and was “committed to the closure of the Liddell power station in 2022, the end of its operating life”.
Mr Turnbull rang him directly seeking clarification because he felt the declaration was at odds with what Mr Vesey had told him in a conversation earlier in the day. AGL also released a media statement about the agreement and Mr Vesey followed up by Tweeting the link to a blog which he recently wrote to explain why AGL was getting out of the coal-fired energy market.
AGL would sell Liddell power station to ‘a responsible party’
Mr Vesey reassured Mr Turnbull that AGL would be prepared to sell the power station to “a responsible party” who would continue to run the plant for profit alone.
AEMO says the rapid transition to wind and solar energy “can provide low-cost energy” and “help meet environmental goals” but could not guarantee reliable baseload power at all times.
The report it is scathing of the current state of energy policy and what it has done to deplete the provision of reliable baseload power saying that there is not enough incentive for owners of flexible and dispatchable resources to either increase their capability or invest in new resources,” it says.
“We note that absent to changes, we face an increasing and unacceptable risk that there will be insufficient capability in the system to meet National Electricity Market reliability standards. In turn, this exposes consumers to a heightened risk of involuntary and unacceptable load shedding.”
AEMO recommendations if Liddell power station closes
AEMO makes two key recommendations to the government. First, that a strategic reserve be developed to help prevent blackouts over summer and other times of high demand until 2021-22.
These providers could be mothballed diesel or gas generators paid to be on standby and not participate in the National Electricity Market. AEMO said it was of the opinion that consumers would be willing to pay an extra $25 million to $50 million a year for the reserve if it avoided load shedding, or forced blackouts.
The second recommendation is for the government to have an energy policy in place well before 2021-22 to ensure the industry once more starts investing in generation, bringing down prices and improving supply.
AEMO also pointed out that the scheduled closure of Liddell in 2022 would leave a shortfall of 1000 megawatts in generation capacity in NSW and Victoria.
Not enough time or market value for ‘clean coal’ technology
AEMO said there is not enough time nor market value for new projects involving so-called clean-burning coal technology.
The report states: “Time is of the essence to obtain the appropriate level of resources to support overall system reliability. Keeping old coal plants open won’t deliver the reliable, affordable energy our customers need.”
It said that given the short time available to bring new resources online, the value of avoiding unnecessary investment in new power plants with uncertain long-term business viability, and the value of maintaining fuel diversity to manage price risk, consideration should also be given to the possible extension of the capability of some existing resources to support the energy transition underway.
“This could take form of life-extension or investment to increase the flexibility of current dispatchable resources, and thereby improving their business viability and extending their life in the market.” Another option to keeping to Liddell power station open could be to extend and expand the strategic reserve to cover the shortage. The other is for the planned expansion of the Snowy-Hydro scheme to be online by 2023. That would generate an extra 2,000 megawatts, twice that of Liddell.
Chief scientist backs use of Liddell power station as short-term fix
Chief Scientist Alan Finkel, who modelled a Clean Energy Target for the government, backed the Coalition strategy. “There is some advantage in investing in existing coal generation to give us time to bring on the batteries, the pumped hydro and the other support systems we need to make the wind and the solar work with the maximum effectiveness for us in terms of security and low cost,” Professor Finkel said.
“We’re trying to balance three different outcomes: security, reliability and emissions. Yes, it makes one of those three things more difficult but you get benefits on the other two.” Professor Finkel said that turning around the “supertanker” of Australia’s power supply system required decades to get right in the most cost-effective way, and keeping coal plants open would help with the task.
Labor urges government to ‘get on with it’
Opposition Leader Bill Shorten told the government to get on with it and do its job. He was quoted: “The number one problem contributing to energy prices in this country, out-of-control energy prices, is the absence of proper national policy,” he said.
“Mr Turnbull has got to stare down the knuckle draggers in the right-wing of his conservative coalition and let’s get on with having a clean energy target.”
He said that the Labor Party is open to doing a deal on a clean energy target which includes coal because it believes no one will ever build a new, coal-fired power station anyway.
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