Extending Liddell could be more expensive than solar plus storage

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RepuTex says extending life of ageing Liddell coal generator would result in higher costs than new large scale solar project with battery storage.

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Liddell Power Station
Liddell Power Station

A new report by energy industry analyst RepuTex says investing to extend the life of the ageing Liddell coal plant would likely result in higher costs than a new large scale solar project with battery storage.

The analysis confirms estimates by the plant owner AGL Energy, which wants to replace Liddell with its own “big battery” and large investments in wind and solar and some gas generation.

The conclusions of the report also underlines why there is such disbelief within the energy industry around why the Coalition could possible argue that extending the life of the ageing and decrepit plant would bring prices down or improve reliability.

“NSW coal is no longer the cheap source of electricity that some remember”, said RepuTex head of research, Bret Harper.

“The fuel cost of coal-fired electricity in NSW has grown to over $60 per MWh, while the long-run cost of recovering any new investment in Liddell could be well over $100-120 per MWh, depending on how often it runs”, he said.

“At those prices, even without valuing a carbon price, the levelized cost of energy is around the same as large-scale solar with storage – like lithium-ion batteries or solar thermal – which could provide similar dispatchable capacity for $80-120 per MWh for the hours when it’s most critical”.

RepuTex also says that extending the operation of Liddell is likely to have a detrimental effect on planned wind and solar investment (which may well be the prime motivation of prime minister Malcolm Turnbull and energy minister Josh Frydenberg).

In turn, Reputex says, the lack of new wind and solar capacity will make NSW increasingly dependent on more expensive gas – leading to higher wholesale prices.

“Directing Liddell to continue to operate could increase uncertainty for strategic investment in renewable projects that would otherwise be likely to go ahead,” Harper says.

“Around 4,000 MW of new generation is already in the advanced stages of development, but has not yet made a final investment decision”. It said this result result in a decrease of about 6,000,000MWh of low-cost renewable energy from the BAU case.

 “Modelling this scenario suggests average wholesale prices will grow above $100 per MWh with Liddell in play instead of low-cost renewables.”

A possible compromise to continuing to operate Liddell as a ‘baseload’ facility may be the mothballing of the plant during seasons when output may be displaced by lower-cost generation, with the plant brought back online back if supply shortages loom, for example, during the hot summer season or when other units are offline.

But Reputex says such a “reserve” model could mean an even higher cost per unit of electricity produced, especially if a business is trying recover the $900 million in refurbishment costs on a plant they may be available only part of the year.

“In such a scenario, we estimate the long-run marginal cost would increase from at least $102/ MWh to $126/MWh if annual output had to be cut from 8,000 to 4,000 GWh.

“At those prices the project would run up into competition from solar thermal, firmed wind, gas and firmed solar, which could all provide greater flexibility over a longer horizon.”

Worse, because of AEMO rules on ensuring sufficient back-up, such as move would still require higher investment in open cycle-gas turbines occurs to ensure sufficient back-up. These plants are bid in at the maximum price levels and earn sufficient revenues to cover their variable and fixed costs.

“In directing Liddell to stay in operation, capacity is therefore maintained in theory, however in reality the system will continue to be reliant on (more expensive) coal- fired generation, backed up by expensive gas capacity to manage the continued risk of unexpected disruptions.”

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14 Comments
  1. solarguy 2 years ago

    On another note, look at how much wind SA and Vic are pumping out. All without a nano gram of CO2 BEING PRODUCED. Now ain’t that a beautiful, sort of turns you on doesn’t it.
    But as you said yesterday Giles, peak stupidity is here!

  2. Jonathan Prendergast 2 years ago

    NSW is currently 3% solar adn 4% wind with GWs of hydro. It won’t need any additional storage for a long time, unlike South Australia which needs it now.

    Think of how much variability there is already in demand, with NSW demand ranging from 5,000 MW to 13,000 MW. NSW already has enough flexibility to meet much greater penetrations of renewables. It just needs more supply, solar and some wind, as soon as possible to bring down prices.

    As Amory Lovins says: “A portfolio of variable renewables, properly designed and run, probably requires less storage and backup than utilities have already bought and installed to manage the intermittency of their big thermal units,”

    • JonathanMaddox 2 years ago

      Where “and backup” unfortunately in this case mostly refers to *other* big thermal units. NSW does have enough flexibility for the moment, but much of it is coal and gas. Even the Snowy is not so big that it will be able to absorb an entire state’s worth of intermittency. Just as SA clearly needs additional storage now, NSW will probably need more in the not so distant future if it is to continue to reduce its dependence on fossil fuels.

  3. Patrick Comerford 2 years ago

    We surely are well past the point of this Turnbull government having any relevance or credibility in the energy debate. They have proven beyond any doubt to be unfit to have any control over our energy future. Fortunately big buisiness has now given up resisting a renewable energy future after delaying and destructive tactics ever since the climate wars began a decade ago. The pain they are now beginning to experience due to the high cost of their energy requirements is entirely self inflicted and get no sympathy from me whatsoever. Still they have finally realized that their own buisiness and shareholder interests depend on a transition to renewable energy. You might say better late than never, but the damage they have inflicted on themselves and the Australian public will be hard to gloss over.
    The move towards a clean green energy grid is now unstoppable IMHO. But we will still have to persevere with this energy nonsense a while longer until this government is kicked out. The complicit MSN who also with the Turnbull government are to blame for this energy crises will be deservedly keeping each other company in the dustbin of history.

    • Joe 2 years ago

      Lets not forget that it was the business lobby that went hand in hand with the Abbott in campaigning to repeal Labor’s ETS. Business always does what it does best, go to where self interest can be maximised. First job was to repeal the ETS and now the retreat with full steam ahead to ‘cheaper’ RE…you just have to laugh at these wankers.

      • John Saint-Smith 2 years ago

        And then cry as the government bails them out with tax-payers money, because, “We can’t afford to lose these important job creators.”

    • solarguy 2 years ago

      Loved it Patrick, well said!

    • Tommy Griffiths 2 years ago

      Patrick, To further your point.
      Big business has a lot to answer for too.
      In the beginning, they were very good at pointing the finger at RE. Now they are not wanting to take any responsibility for the mess they created.
      They helped shape the politicians policy i.e. Look at the donations that Abbott received for his campaign to scrap the tax.
      For reference to the hypocracy reference this article.
      http://www.smh.com.au/business/energy/brickworks-boss-lindsay-partridge-has-no-faith-government-will-solve-energy-crisis-20170921-gylt8r.html

  4. John Saint-Smith 2 years ago

    Another factor to be considered is that these demand peaks that the government is so worried about have a side-effect on the very thermal generators that they are so determined to put forward as the ‘only reliable source of electricity supply’ – they tend to fail in hot weather.
    How dumb can a bunch of politicians be, to think they know better than the experts? On Q&A on Monday, Matt Canavan said Finkel was flat-out ‘wrong’.

    • Joe 2 years ago

      Yep, ‘Italiano Matteo’ he is pure genius…NOT. The Govt asks Dr Finkel to do the enquiry and then when it comes to The CET….nah…Matteo & co reckon it’s all wrong. COAL Energy Target is the answer and ‘The New Liddell’ is the future.

  5. Robert Westinghouse 2 years ago

    I keep telling my Federal/State members to read what Amory Lovins says…. they say who?? They are dumb…but they still hiding the under the tables deals. Why else would they persist with something my 9-year old would not suggest…. Even gran gets it….

    • Joe 2 years ago

      I love your Gran’s thinking, she is always on the money.

      • Robert Westinghouse 2 years ago

        Thanks Joe…we need good people like you to keep banging the drum…eventually the politicans may get it…perhaps they will die…let hope…ebola in their lunchean meat

        • Joe 2 years ago

          …I think they have a vaccine for the Ebola now, so perhaps new tactic required.

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