Origin gas deal brings mothballed Pelican Point back online

The South Australian gas power generator that might have, but did not, come to the rescue of South Australian homes and businesses during black-outs earlier this month, will be returned to its full capacity, off the back of a deal between the plant’s owner Engie and Origin Energy.

French-owned Engie announced on Wednesday – just as its Victorian coal generator, Hazelwood, was being switched off, for good – that Pelican Point’s mothballed 240MW second unit would return to operation from July, taking the plant to its full capacity of 479MW.

As we have reported, the Pelican Point gas generator, a relative newcomer to the NEM that was built 17 years ago, was mothballed because its owners saw bigger profits selling gas into the export market.

One unit was switched back on last July, in response to pleas from the South Australian government, but the second unit had remained on ice – even during this summer’s supply crises – with Engie claiming it couldn’t find any gas to buy.

Now, however, Pelican Point’s re-boot, which will include a $40 million upgrade of the facility, will be underpinned by a three-year power off-take deal with Origin, which will see Origin provide gas to Engie in return for access to 240MW of fixed-price electricity, which will be used to supply its South Australian customers.

The deal is well timed, coming two weeks after the South Australian government’s announcement of a $500 million energy security scheme, including a tender for 100MW of grid-scale battery storage and a new 250MW government-owned gas-fired generator to act as an emergency back-up.

That energy plan also included a proposed Energy Security Target, which will require all retailers to source at least 36 per cent of their demand needs by local “dispatchable” generation, rising to 50 per cent by 2025.

An Origin spokesperson told RenewEconomy the company was “seizing the current opportunity” to bolster energy security in the state, by providing another 240MW of “firm capacity” to existing customers, while also growing Origin’s market share in South Australia.

Currently, the company services around 185,000 electricity customers in South Australia, a retail load that Origin says is more than covered by its generation, from assets including the Osborne gas power station (180 MW); the Quarantine gas-fired plant (224 MW); the Ladbroke Grove Power Station, also gas (80 MW); and renewable PPAs of 732MW (predominantly wind in both VIC and SA).

“The power outages in South Australia reinforce the need for sufficient gas-fired power generation to be readily available, especially when wind and solar energy is not available,” Origin CEO Frank Calabria said in a company statement on Wednesday.

“Energy security is critical to our customers and the state. These agreements are examples of immediate steps industry is taking to safeguard electricity supply and make sure more natural gas will be available to meet the needs of customers.”

Elsewhere in the state, Origin has also recently sealed a power purchase agreement with the 220 MW Bungala solar farm in Port Augusta – a project that Calabria says will also play an important role in underpinning state system security.

“Right now there’s a national need for the industry and government to work together to make sensible – and swift – decisions to provide energy security, for the benefit of all Australians,” he said.

“To do this, we need to give some certainty to investment, so we can achieve the equally important objectives of making energy affordable, and moving Australia towards a cleaner supply.

“It’s really important to understand our energy market is in transition as are energy markets around the world.

“If industry and government work together, we believe we can restore the balance between energy security, affordability and sustainability in Australia.

But what the Engie-Origin gas deal means for the Weatherill government’s newly announced plans to build its own gas peaking plant remains to be seen.

Some renewable energy advocates are claiming it as a win for solar thermal generation, as an alternative to building new fossil fuel generation.

“Premier Weatherill must seal the deal for a clean, reliable South Australian power supply by using his government’s power purchase to make solar thermal with storage happen in Port Augusta, not another new gas plant,” said Repower Port Augusta campaigner, Dan Spencer.

“We know the government is currently considering solar thermal or new gas and today’s announcement by Pelican Point means the Premier must rule out propping up another gas plant and back solar thermal,” he said.

“The Premier can ensure new competition and cleaner energy for South Australia by providing a clean on-demand competitor to South Australia’s gas plants that isn’t linked to skyrocketing gas prices.

“Building a solar thermal plant will create new jobs for Port Augusta, new manufacturing opportunities for SA with former car industry suppliers already involved in making solar thermal mirrors for export, reduce pollution and give new secure generation from the sun day or night. You won’t get those benefits with another gas plant.”