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AGL: Still too much base-load in NSW after Liddell closure

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Liddell Power Station

AGL, the biggest coal generator in the country, says there will still be too much baseload in New South Wales, even after the planned closure of the ageing Liddell coal plant in 2022 – and it questions the need for significant amounts of storage without a big increase in wind and solar.

AGL economist Tim Nelson, in a blogged summary of a paper that he presented in The Electricity Journal, highlights how divergent the thinking has become between big utilities like AGL, and the rhetoric laid down by the federal Coalition government.

AGL has vowed to replace Liddell with a mixture of wind, solar, battery storage, demand management, a new generator and an upgrade of the Bayswater coal fired power station.

Federal energy minister Josh Frydenberg, whose government tried to force AGL into keeping Liddell open, appears unconvinced, reportedly telling an AFR conference last week that AGL’s plans would not make up the shortfall.

Nelson’s piece, however, suggests that it wrong to think that future energy challenges resolve around “baseload” generators, as many in the Coalition appear to insist, when flexible capacity is needed to meet the demand peaks.

Nelson makes it clear that the most economic form of energy production in Australia is now wind generation, with a long-run marginal cost of around $60 per MWh.

This, along with falling costs of solar, their ability to be installed in smaller, more modular formats, declining overall energy demand, and climate change considerations, would drive a shift in generation investment.

“The combination of stable or rising peak demand, declining underlying energy demand and increased output from variable renewable generators has distinct implications for the type of investment required to replace the Liddell power station,” Nelson writes.

“The amount of energy served by ‘dispatchable’ generation is decreasing as a result of falling energy demand and increased output from variable renewable resources.

“Given the same (or even an increase in) capacity is required but the amount of energy needed from ‘dispatachable’ generation is lower, the type of complementary plant is likely to shift from inflexible coal plant to more ‘flexible’ gas-fired plant, better suited to operating at a lower capacity factor.

“This is reinforced by the increasing need for plant to ‘complement’ variable renewable resources when they are not producing due to a temporary lack of wind or solar resources.

“Given these changing market dynamics, an ‘optimal plant mix’ can be used to determine the incremental investment required given the closure of the Liddell power station in 2022. ”

Nelson notes that even with the closure of Liddell, there is still nearly 1,000MW of “excess” base-load capacity in NSW.

This, he says, supports AGL’s decision to close Liddell and the need for more peaking generation. He puts the figure at around 1,000MW – around the same estimate made by the Australian Energy Market Operator.

Nelson says that energy storage – via batteries, pumped hydro or renewable-based hydrogen could be a better long term alternative to gas peaking plants, but says this is unlikely to be the case as long as the renewable energy penetration in NSW is not sufficient to meet minimum demand.

Nelson does not name it, but it would seem to question the wisdom, or the need, for the $6 billion Snowy 2.0 pumped hydro scheme, given that NSW has relatively low levels of renewable energy – and seems a long way off wind and solar reaching minimum demand.

“Given renewable penetration in the NSW market is not sufficient to meet minimum demand, there is not as much benefit to deploying energy storage as in other jurisdiction,” Nelson says.

“However, this may change as greater levels of investment in renewable energy may see renewable production capacity exceed minimum demand at some point in the future. At this time, storage would be a direct substitute for gas-fired generation.”

He also notes that aggregated demand response are more economic than constructing and operating new peaking generation, but was not included in this analysis for the sake of simplicity.

   

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  • Joe

    Hasn’t this summer shown, with the 40 plus trip events by coal power generators, that Joshie’s beloved Coalers can no longer be labelled ‘Baseload’. …intermittent and unreliable are the more accurate descriptions. In a heatwave the Coalers just pack it in but the Sun still shines and PV comes to the rescue of Joshie’s ailing ‘Baseload Coalers’.

    • Dee Vee

      Funny how unreliable these have become since the likes of AGL say they are going to shut them down and move to “reliable” renewals eh?. That happens when you stop maintaining them, and barely keep them on lifesupport.

      AGL have proven time and again they are a “greed is good” enterprise with no interest in providing a reliable or affordable service to the public.

  • Ken Dyer

    NSW has indicated that it will start closing coal fired power stations by 2022 according to this Climate Council release.

    https://www.climatecouncil.org.au/uploads/7b40d7bbefbdd94979ce4de2fad52414.pdf

    I think it highly unlikely given the penetration of the LNP Federal COALition in New South Wales, not only in politics but with all the cronies defending the coal industry.

    • Peter F

      The market will do it for them.
      Before Hazelwood closed, NSW coal plants averaged about 62% CF. Between rooftop PV wind and solar farms there will be 8-10 GW of new renewables just in NSW, Victoria and Queensland by 2022. SA will continue to be a growing net exporter and Tasmania may well return to net exports, so about 25-30 TWh of new supply will become available to the Eastern mainland states. Hazelwood and Liddell between them only generated about 16 TWh

      Both Queensland and Victorian coal plants are cheaper to operate than NSW plants so most of the 10-15 TWh will come out of the hide of gas and NSW coal plants. Gas will definitely decline in Victoria but probably not much in NSW, so unless there is some unprecedented shock to the system there is probably 8-10 TWh lost between the remaining plants.

      That will push the average Capacity Factor of the remaining 8,600 MW of coal plants below 50%. They cannot be economical at that level so either 1 or 2 units at Bayswater or Erraring will have to be mothballed or Vales Point or Mount Piper will have to go

      • Ken Dyer

        And capacity will drop further with ongoing failures and dropouts as is happening in the old Victorian generators.

  • bedlam bay

    Team Turnbull continues their mendacity and sophistry despite all the evidence against their lies.

  • Peter F

    This simply can’t be right, don’t you know we need more coal just ask all those state and federal National Party MP’s

  • Malcolm M

    Both Tumut 3 and Snowy 2 are clearly in the wrong market. Without a lot of investment they could be switched into the Vic market, which would provide much greater returns. How ?
    1. Change the Murray-Tumut 3 transmission line (capacity ~600 MW) from the NSW to the Vic market, so the market boundary is instead at the Tumut 3 switchyard.
    2. Tumut 3 (and later Snowy 2) would then be able to bid on either the Vic or NSW markets. There is a precedent in the power station at the Hume Weir, which bids into the higher-priced market.
    3. There would still be limitations on transfers between the Vic and NSW markets because of frequency considerations, which would be invoked between the Vic and NSW side of the Tumut 3 switchyard.
    4. Two pump-generators (of the 6 x 300 MW generators) would be switchable to the Vic market, and would thus bypass the transfer limitations between Vic and NSW. This would provide 600 MW of pump and 600 MW of generation into the Vic market.
    5. Due to line limitations within Vic, the sum of generation from Murray and Tumut 3 (Vic) would need to be ~1500 MW,but it would provide Vic with access to both pumped storage and once-through hydro.

    In the Vic/SA market with a lot of current renewable investment and auctions for 650MW of new capacity per year , it won’t be long before the 500 MW of buffer through Basslink is insufficient to stabilise the market.

    soon be in much greater need of pumped hydro. With relatively small investment some of Tumut 3’s capacity could be made available to stabilise the Vic market:

    • BushAxe

      I can’t see how moving the market boundaries is going to change the physical limitations of the network, Snowy2.0 will still be stranded with high output from Murray. Victoria would be better off encouraging PHES in it’s eastern region to make use of existing transmission and offshore wind potential.

      • Malcolm M

        The Vic-NSW inter-connector is typically constrained to ~700 MW in each direction, which is much less than the transmission line thermal limits (Murray-Lower Tumut ~600 MW, Murray-Upper Tumut ~600 MW, Murray-Guthega ~200 MW, Wodonga-Jindera ~700 MW, Red Cliffs-Buronga ~200 MW, total ~2300 MW). The market is constrained to much less than the physical limits so there is redundancy in case of line trips, but there is much more redundancy at the boundaries between regions to prevent cascading trips within each region. If the boundary were moved to the Tumut 3 switchyard there may need to be additional protection measures to limit cascading line trips, but these measures are much simpler if only a couple of Tumut 3 generators are involved than if it extends to the whole NSW market.

  • Ian

    That’s all nonsense, pumped hydro, coupled with coal, and the frequent down time of clapped out coal power stations can closely approximate the variability of wind and solar, all be it at a much higher price. A special subsidy for coal and gas can level that playing field and make these competitive with wind power. No need to build out wind and solar generators in NSW when the existing FF generators and Snowy 2 can be made to look and behave like wind and solar. Snowy 2 can, of course, launder CO2-intensive coal electricity by making it “hydro” and thus “renewable”. A lot of political patronage has been invested in companies like AGL , so they better not complain when they are asked to keep their old clunkers going for the good of humanity and for the good of the coal industry.

    • neroden

      OK, this is the funniest thing I have read in weeks:

      “pumped hydro, coupled with coal, and the frequent down time of clapped
      out coal power stations can closely approximate the variability of wind
      and solar, all be it at a much higher price”

      Thanks 🙂

    • Lachie

      That is brilliant, Ian! Are you one of the scriptwriters for Utopia by any chance?

  • Dee Vee

    “AGL says we need less baseload”. Well, lets keep the bastards honest, like they keep telling us they are.

    AGL can shut down as much baseload as they like, as long as any outages, or lack of capacity in the network has them heavily fined ($5 million per event, and say another 3 million dollars for every minute of outage) for the shortfall. Not rewarded like they are now to provide high cost “emergency” capacity in the event of a shortage.