“It will be the last to close:” Loy Yang owner plans syncon and batteries but is in no hurry to shut down coal plant

The owner of the Loy Yang B coal fired generator in Victoria plans to build a synchronous condenser at the site and a 500 megawatt battery, but is in no hurry to lock in an early closure date for the coal generator itself.

Alinta Energy announced on Friday that it will be bought out by Singapore’s Sembcorp in a $6.5 billion deal, but there are no obvious plans to accelerate the rollout of renewables or bring forward the closure of the 1.2 gigawatt (GW) brown coal generator in Victoria’s Latrobe Valley.

Alinta CEO Jeff Dimery, who will remain in the role after the takeover is complete in the New Year, says there are plans to construct a synchronous condenser at the site – to help with grid security.

There are also plans for a 500 MW, likely four hour battery (2,000 MWh), following in the footsteps of virtually every other coal generator in the country.

Loy Yang B currently has an official closure date of 2047, way after the closure date assumed by the Victoria government given its target of reaching 95 per cent renewables by 2035.

The owners of the other two brown coal generators in the Latrobe Valley – Yallourn (EnergyAustralia) and Loy Yang A (AGL Energy) have struck deals with the Victoria government over closure timings and support for maintenance up till those dates. Or at least it is assumed as there are no details on the contracts.

Alinta has not struck a deal.

“What’s happening is that previously announced coal closures are being pushed back a little bit, and that’s just the world we live in today,” Dimery told Renew Economy in an interview on Friday after the announcement of the Sembcorp deal.

“Our focus is on not what we take out today, it’s what we can bring in. It is the cold, hard reality of where we find ourselves.”

Dimery says Loy Yang B accounts for one quarter of the company’s overall income, has underpinned the company’s growth from zero to 700,000 customers on the east coast of Australia, and – he says – it is the lowest cost and more reliable generator in Victoria.

“It’s underpinning the investments that we can make in in this transition. It’s funding the battery developments. It’s helping fund the onshore wind farms that we’re looking to announce over over the next little while. And so it is an integral part of where we’re at today.

“Alinta were (one of) the first ones to close a coal fired power station in this country. We closed our Flinders operation. The asset itself was crying out. It was time to go.

“And South Australia was, you know, well progressed in its transition to renewables back then, the asset was unreliable. The coal supply was really poor quality. It was expensive, and quite frankly, it got into an age where it was quite dangerous to operate.

“And so and I think there will come a time, and it’s not about sticking a pin in a calendar of 2047, we will know the market will tell us there will be a time to close Loy yang B

“And it’s not about, you know, we can come out and rush forward an announcement and then go through this charade of pushing back, pushing back, negotiating with government. It’s not our style. We just get on and do things that make sense.”

Dimery says Alinta is hopefully obtaining AEMO funding (presumably a contract) and says the Loy Yang battery would add flexibility to the portfolio. Dimery says Loy Yan B itself is flexing to half of its output when rooftop solar output is strong.

“It is flexible. It is accommodating other forms of renewables coming into the market. And you know, just because of the condition of the asset and the financial performance of the asset, it will undoubtedly be the last coal fired power station to close in Victoria.

“Does it close in 2047? Look, if I asked you what the market was going to look like back in 2005, would we have forecast 4 million solar panels on rooftops? Would we envisage that we’ve got the world leading penetration of that particular asset, home storage, etc.

“I don’t know is the short answer when it (Loy Yang B) will close. But I’ll tell you what, if we don’t maintain it, we won’t do the community or the market any favour if it becomes unreliable in the shorter term.

“Because what I’m 100% certain of is critical infrastructure in the next little while, and if it’s not there, I dare say it would lead to a loss of the right to transition this industry.

“Because if we’re not there, and prices go up, and security of supply and availability is that question, then there are those that would want to come in and put a halt to this whole transition.”

Has Alinta had its own discussions with Victoria energy minister Lily D’Ambrosio about a closure date?

“Every time I catch up with the Victorian State Government, all Lily wants to know about is what projects we’re bringing online, what new capacity we’re adding to the system, and obviously, with a strong leaning to that being renewable.

“So Lily wants to talk to me about that synchronous condenser. Lily wants to talk to me about the battery energy storage project. In large part, she’s got a free option, really with us. She’s obviously nailed down with the other guys a position.

“We didn’t need an agreement with the government in South Australia (to close Flinders and Northern). We just knew when it was time to close, we’ll make that same decision around Loy Yang B.

“We’re just acknowledging that if we need it (to stay open till 2027), we’ve got the right programs and maintenance and CAPEX structures in place that we could get there. Whether we get there or not is an entirely different thing.”

The Loy Yang battery is not the only battery on Alinta’s plans. Like most other big retailers it is focused on battery storage, including the delayed Wagerup battery in Western Australia, and the Reeves Plains battery in South Australia.

The Wagerup battery – 100 MW and 200 MWh in its first stage – has been delayed and new contractors appointed and legal action taken in court against the past contractors. Dimery says that remediation works at the battery are being worked on and the battery should be ready by April next year.

Construction has started on the first stage of the 250 MW, 1,000 MWh Reeves Plains battery, and is also looking at a separate 50 MW, 400 MWh (eight hour) battery at Reeves Plains to fit in with the state’s firming needs and its new firming tender.

On renewables, Dimery says the company is getting close to reaching financial close on the 550 MW Marri wind project in Western Australia, and is also working on the Spinifex offshore wind farm in Victoria and the Ovens Mountain pumped hydro project in NSW, but says these are more challenging.

Dimery says the company also has onshore wind projects in Queensland and NSW, and will be looking to develop those with the help of Sembcorp. “They are bringing the muscle to help us get ahead of the curve in Oz,” he said.

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