Another unplanned coal plant failure triggers price spike fears and supply warning

An unplanned outage at the ageing Vales Point coal fired power station on the central coast of NSW has triggered fears of a significant price spike in that state, and triggered warnings of a potential supply crunch from the market operator.

The 660 megawatt Vales Point unit 5 has only just completed a major $40 million planned maintenance program, that it owner Delta Electricity says would help “ensure the ongoing safety and reliability of the station” to meet NSW energy needs.

But on Monday night there was another unplanned outage at VP5 – Delta described it as a “short maintenance outage” – which triggered a “lack of reserve 2” notice from the market operator for Wednesday evening, and a spike in expected wholesale prices to more than $20,000 MWh.

The potential supply crunch is worsened by the absence of one of a 720 MW unit at Origin Energy’s newly extended Eraring coal fired power station, but is typical of the sort of outages that causes most concern for the Australian Energy Market Operator as it seeks to manage the grid.

On its website, Delta said that VP5 would return to service around 3pm on Tuesday, but 24 hours later it had still not resumed activities.

And although the market operator cancelled its LOR2 warning for NSW, the market was still betting on short periods with prices of $9,000/MWh or more – albeit considerably cheaper and for shorter durations than was expected a day earlier.

Still, the situation also highlights the vulnerability of the grid to coal and transmission outages, made worse by the problems at the Waratah Super Battery and the failure to bring in new wind and solar generation which has been used as an excuse to twice delay the Eraring coal generator closure date.

Last week, wholesale electricity prices surged to more than $20,000 because of a transmission outage around Marulan, resulting in generators on one side of the outage having their output sent to Victoria, causing an oversupply and negative prices, but still getting paid the NSW spot price.

ITK principal David Leitch, who is also co-host of Renew Economy’s weekly Energy Insiders podcast, has documented last week’s events in this graph below that highlights some of the vagaries of the electricity market, and puts the hang-wringing about variable wind and solar output in some context.

Last week, wholesale electricity prices surged to more than $20,000 because of a transmission outage around Marulan, resulting in generators on one side of the outage having their output sent to Victoria, causing an oversupply and negative prices, but still getting paid the NSW spot price.

ITK principal David Leitch, who is also co-host of Renew Economy’s weekly Energy Insiders podcast, has documented last week’s events in this graph below that highlights some of the vagaries of the electricity market, and puts the hang-wringing about variable wind and solar output in some context.

At the very least it is a case for more batteries.

In his comments to the market after announcing the company’s half year results on Wednesday, AGL CEO Damien Nicks noted that the last six months had lacked the usual volatility, with prices hitting the market cap on just 4.4 hours. But that had already occurred over 4.7 hours in the month of January.

Nicks expects that volatility to continue as coal fired generators are finally phased out, one by one, but it will be interesting to see how the growing portfolio of home batteries and grid batteries moderates that volatility in coming years.

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