When AGL gives journalists a tour of its ailing Liddell power station next week, they can expect the reverse of your typical corporate junket.
Rather than showcasing the engineering marvels of the Hunter Valley coal-fired plant, the energy giant will likely highlight why the station is among the most unreliable generators in the country.
AGL Energy’s Liddell power plant, with Lake Liddell in the foreground, and Bayswater power plant behind. Photo: Simone De Peak
That’s despite AGL planning to spend another $160 million to keep the 46-year-old plant running until its planned closure in 2022.
It has already outlayed $120 million since buying it and its neighbour Bayswater power plant from the NSW government in 2014.
Each of Liddell’s four units has been downgraded by almost one-fifth from their original 500-megawatt capacity.
Two of them were unhelpfully offline with equipment failures during this February’s record-breaking heatwave that pushed NSW to the brink of blackouts.
Tuesday’s visitors may get to see the tricky welding jobs needed to repair the hundreds of kilometres of boiler pipes, or to inspect one of the transmission units that has blown up. Or see a demonstration of “creep time” measurements that show the many valves or pumps edging ever closer to costly replacement.
Would that a few members of the federal Coalition demanding AGL extend the plant’s life out to 2027 – led by Prime Minister Malcolm Turnbull or his deputy Barnaby Joyce – tag along on a tour that could include a peek at Lake Liddell.
Back to the future: AGL’s pilot solar thermal plant on the Liddell site with the power station in the background.. Photo: Supplied
The lake, which substitutes for cooling towers that are absent at the power station, is now off limits to the public after the discovery of a brain-eating amoeba, naegleria fowleri, thought to be nurtured by artificially warmed waters.
What’s transpired in the past week is what one senior energy industry executive describes as “mind numbing”: government attempts to bully an ASX-listed company into selling an asset it bought from the state just three years ago if it would not commit to running it for another 10 years.
‘Playing by the rules’
On Monday, as AGL chief Andy Vesey prepared to explain why it made no sense to keep the plant going, the Turnbull government announced it had sicked the Australian Energy Regulator on to AGL and other big NSW power firms to “make sure electricity generators are playing by the rules”.
Environment and Energy Minister Josh Frydenberg later defended the move, saying the request was “an extension of the work already under way” as part of AER’s review of the National Electricity Market (NEM) following the abrupt closure of Victoria’s Hazelwood power station in March.
But the AER itself later confirmed to Fairfax Media the request arrived on Friday – after Vesey was summoned.
The Berejiklian government, which should have the most interest in any rorting of NSW consumers, is understood not to have been consulted about the sudden AER interest in NSW generators.
“This was not our idea,” one staffer said. “It was a shot across the bows [of AGL].”
Vesey’s encounters with politicians haven’t gone well of late. In March, a media event in Adelaide descended into farce when South Australian Premier Jay Weatherill gatecrashed to confront Frydenberg over the Coalition’s incessant attacks on his state’s energy policies.
And it was at a Turnbull-ordered summit in Canberra last month that Vesey said Liddell might be sold to “a responsible owner”, even the government.
Vesey would come to rue those words when a month later Turnbull flung himself into the fray, personally calling the chief and micro-managing the push to keep Liddell going.
Huge extension, rehab costs
Monday’s gathering was described by one of those present as two meetings over 90 minutes: each side making their case and ignoring the other’s in turn.
Despite initial government spin, AGL stood its ground, committing to deliver a plan within 90 days on how it would make up a market shortfall “once the Liddell coal-fired power station retires in 2022“.
It is understood that AGL estimates the cost of keeping Liddell going for another five years at as much as half a billion dollars – money that could be better spent elsewhere. Rehabilitation costs for the site are roughly another $450 million.
AGL has said it wants to create a so-called synthetic baseload plant on the site combining gas and renewables. It already operates a pilot concentrated solar power plant there.
The energy executive noted the period is less than the government has had to consider Alan Finkel’s review of energy security.
The independent study by Australia’s Chief Scientist laid out 50 recommendations, 49 of which were readily endorsed by Turnbull. These included a demand operators give at least three years’ notice before closing a plant; AGL gave seven.
While criticised for its low emissions target for the electricity sector, the report released in June at least offered the possibility of a so-called Clean Energy Target – the 50th recommendation– that might close the bipartisan gap on climate and energy policy.
Three months on, though, there are increasing signs the government will baulk at a target high enough to align energy policy with Australia’s Paris climate commitments to cut 2005-level emissions 26-28 per cent by 2030.
Dr Finkel is understood to be growing more and more exasperated by the direction of debate.
Business groups, too, know that, without a policy that can withstand the election cycles, investors are going to hold off on the long-term investments needed to provide the more reliable, cheaper and cleaner energy Australia needs.
Joyce fuelled those concerns this week by declaring on ABC’s 7.30 on Wednesday, that subsequent reports by the Australian Energy Market Operator (AEMO) had superseded Finkel.
“Without trying to be too prophetic, I was quoting John Maynard Keynes this morning who said, ‘When I get new information I change my mind, what do you do?'” Joyce said, adding that AEMO had warned “we’re going to be, you know 1000 megawatts short” this summer.
Turnbull chimed in during question time, too, saying that AEMO’s reports “shocked many people”.
Well, perhaps, those who wanted to be shocked.
One report was AEMO’s latest “statement of opportunities”, which as usual identified potential shortfalls that it hopes will jolt extra supply. There was also a special report on risks from the exit of Australia’s ageing thermal power plants.
The latter was seized on by those mistaking “dispatchable” to always mean “fossil-fuelled baseload power”.
Dylan McConnell, an energy researcher at Melbourne University, notes how fast-response batteries are far more instantly dispatchable than a coal-fired power plant.
The unplanned loss of a large unit at, for instance, Liddell during a late summer heatwave in February 2016, can also suddenly strip out a huge slab of supply – more abruptly than a drop in wind for a windfarm or a cloud passing over a solar farm. (See chart of Liddell’s power supply on February 29, 2016.)
AEMO’s energy statement, meanwhile, raised the issue of the risk of Victoria and South Australia having outages this summer.
Its conservative estimates, though, exclude many of the measures already being undertaken by both states, agencies such as ARENA’s trial paying consumers to power off during peak times, and most of the extra renewable energy coming on stream during the second half of the year.
Solar panels are going up at the rate of about 100MW a month, and will probably set an annual record of about 1300MW including plants this year, said Ric Brazzale from Green Energy Markets.
Notably, the prediction that NSW might suffer shortages in 2024-25 was used by many to call for Liddell’s extension. But that AEMO alert was based on the “loss of an additional major power plant in NSW after Liddell withdraws” – not just Liddell itself.
And how big a risk of outages? A 29-46 per cent risk that “could last for two to six hours, depending on demand and supply conditions”.
“It’s so far out and so small,” McConnell said, adding: “AEMO was not telling you anything you didn’t know.”
Just as lost in the squabble was AEMO’s clarion call in the very first paragraph of its report: “The overall responsiveness and resilience of the system is at risk from increased vulnerability to climate events, such as extended periods of high temperatures, and the risk of loss of, or reduction in output of, major generation units.”
That’s worth keeping in mind when one considers how the owners of Delta Electricity – the only company to make even a vague offer of interest in taking over Liddell – fared during this year’s February heat wave.
As AEMO noted in its incident report, Vales Point units came “within one degree of reaching their absolute outlet temperature limit”.
Two gas-fired plants in NSW failed that hot February afternoon too. Keep that in mind when politicians necessarily equate fossil-fuel plants – particularly if nearing the end of their design life – to baseload reliability.