AGL to shutter 480MW of South Australia gas power plant

AGL Energy says it will mothball more than one-third of the capacity of its 1,280MW Torrens Island power station in Adelaide in 2017, just 10 years after it bought the ageing natural gas plant for $417 million.

AGL said on Wednesday that it would shutter four out of eight of power station’s generating units – a group of the plant’s “older units” (built nearly 50 years ago) known collectively as ‘A station’, with an aggregate capacity of approximately 480MW.

“Based on the current market outlook AGL has decided that the Torrens Island A station will be mothballed in 2017,” said AGL Group general manager of merchant energy, Anthony Fowler, adding that the decision would be reviewed if those conditions – including rising gas prices – changed materially.

But beyond the relentless surge of gas prices, Australia’s energy market outlook has changed a great deal since AGL bought the plant back in 2007 – 40 years after A it was completed in 1967 (the ‘B station’ would be completed in 1976).

In South Australia, in particular, there has been a huge shift in electricity distribution patters and peak demand due to record-breaking contributions from the state’s wind farms and rooftop solar households – a contribution that will only increase with the Labor government’s newly boosted renewables target.

In September, Premier Jay Weatherill announced South Australia would increase its renewable energy target to 50 per cent by 2025 – up from the 33 per cent target that it has already met, six years ahead of scheduled date of 2020.

Weatherill said the ambitious target was essential to help the state reach its target of $10 billion investment in “low carbon” generation by 2025.

Back in 2007, however, AGL boasted that the purchase of Torrens Island added “substantially” to its “growing fleet of low carbon emission generating plants,” and accelerated its four corner strategy of rapidly developing generating capacity to meet rapidly growing demand.

And in 2009, when AGL announced an $800 million expansion to the plant, to increase its total generation capacity to 700MW during periods of peak demand, the move was welcomed by then SA Premier Mike Rann as a guarantee of further security of electricity supply – especially during the state’s notoriously punishing summer heat waves.

What they didn’t foresee, was that the expansion of rooftop solar in the state – South Australia has well over 560MW of it by now – and wind energy would have a huge effect on electricity supply (not to mention wholesale prices) and virtually remove the need for peaking plants powered increasingly expensive gas.

On September 30 South Australia electricity generated by wind and solar managed to meet all demand for most of the day, and electricity prices went negative for a considerable period that morning.

And with the November launch of the Snowtown II wind farm north of Adelaide, the state is now expected to get 40 per cent of its electricity needs from wind and solar.