Alinta seeks biomass options for Loy Yang B, says capacity market for coal could end in 2029

Alinta Energy – the operator of what will be one of the last coal generators operating in the grid – is arguing for short term capacity market for coal that could still see all brown coal capacity exiting the market within a decade, but provide an option to keep them going if needed to keep the lights on.

Alinta CEO Jeff Dimery made the proposal public late last week amid renewed controversy over the possible shape of a capacity market, amid fears it could lock in coal and gas and lock in unnecessary payments. Many suggest that if such a market is created, existing fossil fuel generators should be excluded.

However, in an interview with RenewEconomy before leaving for Europe, where he will be looking at biomass options to replace the brown coal burned at Loy Yang B in the Latrobe Valley, Dimery says a capacity market could still be framed in a way to support emissions targets.

He suggests a market that could include coal companies “up to 2029” to ensure emissions targets are met, along with AEMO’s ambitious “step change” scenario that assumes the exit of all brown coal generators in a decade.

However, he points out that if not enough new capacity has been built to replace coal, then the option will remain to extend the capacity payments to coal generators for a few more years, until there is sufficient capacity.

It is unlikely to be welcomed by those parties who argue that capacity markets are not needed, or who worry about the waste in such markets both in Australia and overseas.

See: Capacity mechanism isn’t the right fix to this energy crisis

And: Chris Bowen needs flexibility to avoid capacity market trap set by fossil fuel lobby

Dimery, insists, however, it will not result in higher costs to consumers, because the capacity payments will be offset by lower wholesale prices. And he says recent low and high priced cycles have not been sufficient to provide the right investment cycles.

Capacity payments, he insists, will drive investment through those cycles. In a way his proposal is a flexibility market of sorts, not in the nature of technologies that could be rewarded, but in the flexibility over which technologies are chosen.

And Dimery insists that Alinta is looking beyond coal for Loy Yang B. One option is to convert it from brown coal to biomass.

“I’m heading off to Europe, pretty much when I get off this call. And I’m going to talk to overseas companies that are converted from coal to biomass,” Dimery told RenewEconomy.

“So we’re not waiting around we too want to transition away from coal, right? The difference between us and some of our competitors is we’re not telling our employees we’re shutting down or bringing forward closure.

“We’re saying to them, we’re going to investigate all plausible opportunities …. I’ve been doing this for 30 years, as I sit here and look at, there’s not enough wind, solar and battery to get us through.

“We have to have an alternative. Some might say nuclear and I sort of say well, good luck to you, people. That’s, you know, pie in the sky. But there are other alternative fuels like biomass that have been successfully integrated overseas.”

RE asked if it was a similar proposal to that of Drax in the UK, the best known of the coal generators that have turned to biomass, albeit with much questioning about whether it has an impact on actually cutting emissions, and on forests in the US, where much of its feedstock is sought.

Dimery refused to comment on which companies he is planing to meet with, other than to say that was the point of his visit, to find out.

See full transcript of the interview here: Q&A: Alinta’s Jeff Dimery on the short term merits of coal, and switch to biomass