A Morrison government decision to proceed with the construction of a new gas fired power station in the Hunter region is expected to be announced imminent, despite the proposal being labelled unnecessary and likely to be rarely used.
Last year, prime minister Scott Morrison and energy minister Angus Taylor set a deadline, of the end of April, for the energy market to make firm ‘final investment decisions’ to construct at least 1,000MW of new capacity to replace the soon to retire Liddell power station.
If the private market failed to come forward with proposals to its satisfaction, the Morrison government threatened to directly intervene in the energy market, directing government-owned Snowy Hydro to build a 750MW gas generator at Kurri Kurri in the Hunter region.
It is understood that with this deadline looming, the Morrison government is readying to announce that it will proceed with the Kurri Kurri gas generator. The NSW government has previously committed to fast track the planning approvals process for the project.
The anticipated decision to green light the Kurri Kurri project has been met by opposition from market analysts and environmental groups, who argue that a new gas plant is unnecessary and will only work to prop up the fossil fuel industry.
“Building a gas-fired power plant with public money would be a counter-productive, risky and unnecessary intervention in Australia’s electricity market,” climate program manager at the Australian Conservation Foundation, Gavin McFadzean, said.
“Gas is a polluting fossil fuel, which should have no place in our future energy grid.”
“A new gas generator, propped up by the government, would be a very poor use of public funds and an intervention that could inhibit new renewable energy investment. Any new coal or gas-fired power station will inevitably be a stranded asset,” McFadzean added.
Federal independent MP Zali Steggall called on the NSW government to step in and refuse planning consent for the project.
“NSW Energy Minister Matt Kean has made it clear that the planned Kurri Kurri gas-fired power station in the Hunter region is not needed or desirable for NSW’s energy future,” Steggall MP said. “This intervention in the market is anti-competitive and counter-productive to a sustainable, low-cost energy future for the state.”
“The Federal Government is interfering in the market and backing expensive, carbon intensive energy over cheap clean energy. This decision by the Morrison government to choose the technology of gas has been widely condemned by scientists, economists and investors.”
The Coalition government has threatened to intervene in the energy market following AGL Energy’s announcement of its intention to close the Liddell power station.
The government initially threatened to acquire the Liddell power station itself, or to pay to keep it operational. But a government commissioned review concluded that trying to keep Liddell open for longer was the least attractive option due to the power station’s age.
With the taskforce finding that keeping Liddell open for longer was unviable, the Morrison government has instead threatened to build a new gas-fired generator in the Hunter region if the market did not commit to building at least 1,000MW of new dispatchable generation capacity.
There has been a mass of announcements of new major battery projects since the start of the year, in New South Wales, including confirmation of AGL’s own plants for a battery of up to 500MW at Liddell, and other investments, a 700MW plan by Origin Energy to build a battery at the site of the Eraring power station, Neoen’s commitment to a 500MW battery at the site of the former Wallerawang power station, and CEP’s plan to build a massive 1,200MW big battery in Kurri Kurri itself.
However, officials from the Department of Industry, Science, Energy and Resources told a Senate estimates hearing in March that they considered that just 30MW of suitable new generation capacity had reached a firm investment decision – an upgrade to an existing coal-fired power station.
“The only thing that has been firmed today is a 30-megawatt upgrade to the Mount Piper coal power station, and so the government remains committed to stepping in should the private sector not step up and commit to building that 1,000 megawatts themselves,” head of the department’s electricity division, Rachel Parry, said in March.
With Snowy Hydro CEO Paul Broad sharing the view that gas generators and battery projects were participating in different parts of the energy market, and not necessarily in competition with one another, it suggests that the Morrison government is almost certain to sign off on the construction of the proposed Kurri Kurri gas generator by Snowy Hydro.
Snowy Hydro is entirely owned by the federal government, and when queried about its stance on the Kurri Kurri plant, representatives from Snowy Hydro declined to give comment, saying it was a matter for the federal government.
Snowy Hydro is understood to have delivered its business case for the gas power station to the Morrison government at the end of March, with Broad telling Senate estimates shortly beforehand that Snowy Hydro’s analysis suggested there was a “very, very strong financial case to invest”.
According to Broad, the cost of the new gas generator is expected to fall between $600 and $650 million and will almost certainly require an injection of new funds by the federal government, with Snowy Hydro already committing considerable cash reserves to the construction of the Snowy 2.0 expansion.
Such an injection of fresh funds could be a feature of the next federal budget, to be handed down in mid-May.
According to reports in the ABC, the Morrison government has also been in active negotiations with EnergyAustralia to construct an additional 350MW gas generator in the Illawarra region in partnership with Andrew Forrest’s Squadron Energy.