Hazelwood gone today – Liddell gone tomorrow. Are we ready?

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Early action on transmission should be at the top of the new Energy Security Board’s agenda if we are to connect enough wind and solar and hydro to replace retiring coal generators.

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Figure 1 Liddel median output. Source: NEM Review
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“Don’t know much about history

Don’t know much about biology

Don’t know much about a science book

Don’t know much about the French I took”

(Sam Cooke 1960)

Briefly

The 2GW Liddell coal fired power generator will close in a few years. As yet not nearly enough new supply has been started in NSW to replace it.

Even assuming that enough new wind and solar PV is built between now and then it’s still fair to say that there will  be more volatility in the resulting availability of generation. That’s particularly the case if we considered the combined Victorian and NSW market.

There is therefore going to be an emerging need, a market if you will, for dispatchability or reliability. A price signal for this will emerge in the spot market, but it will probably emerge too late, in the nature of these things, for anyone to do anything about it if we wait until then.

We already know that if Snowy 2 goes ahead, as seems likely, it will require more transmission – $2 bn has been mentioned for transmission just for that. Snowy 2 and transmission will both take a long time to get done, years and years. So early action on the transmission side should arguably at the top of the new Energy Security Board’s agenda.

There is way, way more to say about learnings from this year’s excellent Clean Energy Summit conference and we’ll explore a few that have struck this analyst going forward (and in our weekly podcast).

AGL has given us 5 years notice on Liddell – what it will take to replace it

Liddell has 2GW of nominal capacity but median output is around 1GW.

Figure 1 Liddel median output. Source: NEM Review
Figure 1 Liddel median output. Source: NEM Review

AGL has said Liddell will close in 2022, just five short years away. It is true that in business management is free to change its mind but we think its far better to take AGL at its word.

If we look at Liddell by time of day we get perhaps a more revealing picture of its role in the NSW system. (BTW you have to compliment Microsoft for the charts it lets you make these days)

Figure 2 Liddell by time of day showing average and 1 standard deviation. Source: NEM Review
Figure 2 Liddell by time of day showing average and 1 standard deviation. Source: NEM Review

The data shows that Liddell has a flat (ok, yes baseload) output profile. Its capable of flexing up to 1800 MW but even in this February’s peak didn’t get to its nominal rated capacity of 2000 MW.

The standard deviation for most of the half hours is about 300 MW.

So, it’s output isn’t really that steady. Capacity utilization on average is 50%, but dispatchability is probably quite high when its working.

If we assume an average combined capacity factor for wind & pv of say 30%.

This is a conservative number but doesn’t have much impact on the thrust of this note, we estimate it takes about 3.3 GW of renewables in energy terms to replace Liddell and that’s about 660 MW a year between now and 2022.

Figure 3 New renewables required to replace Liddell. Source: ITKe
Figure 3 New renewables required to replace Liddell. Source: ITKe

Alternatives to new renewables include more exports from QLD and higher output from Eraring. Our guess is that Eraring might be there for power purposes but probably won’t lift energy output that much.

Transmission and network connections will be one bottleneck

We’ve already argued, and we think there is considerable support for the view, that a broader and more committed view of transmission needs to be taken than we have so far seen.

Virtually every renewable developer and contractor we have spoken to cites connection to the distribution and transmission network as their no 1 issue.

We want to stress that word commitment.

Transmission takes longer to build than wind or pv mainly because of the planning and easement, environmental considerations.

Arguably there are also deeper commitment questions about whether a new ultra high voltage DC transmission is required, such as China is installing, or whether more standard technology is best.

The point is building the transmission in front of the generation requires commitment to a vision of the future and the will to make the investment happen. It only requires a small amount of commitment and vision to start with.

We argue that $1 bn of transmission spending in NSW would have a minor impact on bills, but would enable lots of renewable generation. It almost falls into the current buzz of “no regrets” investment.

As NSW is a net importer of electricity and sits in the middle of the NEM it just seems an obvious thing to do.

leith liddellThe NEM has replaced Hazelwoord but Victoria hasn’t

As previously discussed the closure of Hazelwood has lead to open cycle gas setting the price in Victoria most of the time.

This is very unsatisfactory. QLD electricity prices are now typically $65 MWh other than at peak and this flows through to NSW.

But in Victoria prices are $100 MWh most of the time. Our view is that not enough new renewables have been started in Victoria.

As Victoria has relatively weaker insolation it seems likes its more wind that’s required.

As an aside we don’t think the Politicians or even Company management are keeping up with the supply pipeline all that well.

We heard Don Harwin proudly say that NSW is adding more than other States, but we don’t think that is correct on either a MW or TWh basis. Even Frank Calabria was only talking of 3 GW of new supply. But we can identify 4.7GW of committed projects.

I guess it all depends on the starting point and what you call committed.

Included in Victoria is the massive, by renewable standards, 0.5 GW Stockyard Hill windfarm. It won’t be up and running for a while yet.

We don’t believe the industry has yet come to terms with the impact of this project or how it has reset price expectations.

We think that the scale of the project and the fact that Goldwind is the turbine manufacturer has allowed Goldwind to take seemingly well judged risks that others could not take.

An example might be electrical contracting where Goldwind might assume the principal contracting role itself.

But in any event as Goldwind has another 300MW almost sure to get the go ahead in Victoria we think the industry needs to sharpen the pencils (again).

The scale and vertically integrated supply chain synergies have other implications.

For instance some other regions, eg Tasmania, might have a better wind resource but may not be able to achieve the same scale benefits.

The same goes for WACC. Someone like a Goldwind just has a lower WACC than most of the other players.

Goldwind has a low WACC not just because of its access to capital but because it can couple that capital with specific knowledge of supply chain costs and risks.

Reverse auctions with State Govts enable smaller developers to access that same low cost of capital and enable the State Govt. through the auction process to discover the developer with the overall lowest cost project.

We still don’t think that the policy makers, including Finkel, paid enough attention to the State targets and advantages.

They are just regarded as a “nuisance factor” typically dismissed in a paragraph or two or as a footnote.

However the States can play a central role if they are so minded.

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16 Comments
  1. George Darroch 2 years ago

    We’ll need most of this generation capacity. But we’ll also need a substantial investment in demand reduction through efficiency.

    A huge amount of Australia’s electricity simply goes out the windows – literally.

    • solarguy 2 years ago

      Ah, yep that can’t be denied, but energy efficiency will be a bit delayed I feel.!

    • suthnsun 2 years ago

      And we will be surprised how large scale fast response storage dampens ‘demand’ .

  2. Andrew Thaler 2 years ago

    Liddell could last for a long time yet.. there are still ongoing upgrade and maintenance programs.. don’t be surprised if it stays running for as long as Tomago does.. they are intrinsically linked.
    and it runs well on shit coal… which we have plenty of..

    • MrMauricio 2 years ago

      all coal is shit-we need to move on FAST!!!

    • MG 2 years ago

      Media reports from the 10 March load shedding would indicate Tomago’s supply is linked with Bayswater (not Liddell) but I suppose they’re both AGL so it may be same/same

    • david H 2 years ago

      By 2022 Liddell PS will have been operating for 40 years and will still require major expenditure on life extension programs and it will still be a 40 year old PS. I doubt it will be a good business case for AGL. In any case we we put the required amount wind and large scale solar PV we will not need to keep Liddell going.

  3. Peter F 2 years ago

    I think you are right about NSW and Victoria, particularly if their peaks were to coincide, but I think it is faster and cheaper to build excess renewables, some storage and institute an agressive demand response program.

    • solarguy 2 years ago

      I like you thinking Peter. Time to cracking on this now!

  4. BushAxe 2 years ago

    There also needs to be more encouragement for large scale storage like PHES to maximise the utilisation of the remaining FF plants providing a buffer for the peaks and longer term as the renewables storage.

    • solarguy 2 years ago

      As an interim solution, gets my vote until, a critical mass of RE comes online to take FF place.

  5. MG 2 years ago

    It’s not often this website gets excited about building more poles and wires! But it would seem that’s what it’s going to take to enable the quantity of large scale renewables we need.

    Someone should write an article about the big transmission the Texans put in to connect their wind. Would be interested in what kind of social/political willpower went into making that happen. If a state full of conservative Americans can get a project like that over the line, maybe there’s hope for the NEM yet.

  6. Brunel 2 years ago

    Should just bite the bullet and build an UHVDC line from QLD to NSW to Vic to SA.

  7. Ray Miller 2 years ago

    Thanks for the article David, in summary you are saying there is no plan, and this is the fundamental problem.
    In my view AEMO is the key player or ‘conductor’ and should have a broader input into the whole dynamic energy picture, which must included end use efficiency and demand management. As you are implying any large player should inform the manager of any future changes so they are forewarned to take action on replacement strategies as needed.
    Yes I agree the transmission network (highways) need to be built AHEAD of need but only planed and built on robust independent evaluation to suit a long term strategy. For example the North Queensland transmission link.

  8. Sally Noel Triggell 2 years ago

    The idea of even more investment in our already gold plated grid is not the way to go. Why not invest in producing energy where it is used, at homes and businesses. Makes sense to me. Micro grid and generation where it is used. Cheaper and more reliable and robust.

  9. neroden 2 years ago

    Given the complete lack of planning at the grid level, I recommend that all Australians who can do so, first superinsulate their buildings and switch to efficient heat pumps, and then go off the grid. It will help, and even if there are still problems, *you* won’t have to deal with them.

    This is what big industrial sites are doing.

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