Tuesday, 15 January 2013

EnergyAustralia puts gas-fired plant on hold

28 Dec 2012

Energyaustralia has shelved plans for a $1.3 billion Victorian power station that had been slated to replace some of the big Yallourn brown coal plants in the Latrobe Valley. The gas plant, which had originally been planned as a baseload power station, would potentially have replaced two of Yallourn's four brown coal power units, Yallourn's Hong Kong-owned operator TRUEnergy said in 2010.

EnergyAustralia, the rebranded TRUEnergy, has now told the Victorian government it has put the big project on hold because of a drop in wholesale energy demand and prices. The shelving also comes as a combination of higher east-coast gas prices beyond 2015 -driven by $70bn of coal seam gas export projects being built at Gladstone--and lower expected carbon prices make gas-fired power less economically viable than coal.

Yallourn is currently operating only three of its units after lower demand meant it did not restart a unit that was shut down this year because of flooding. EnergyAustralia's head of markets, Mark Collette, said a new power station may not be needed until much later this decade. "We are seeing further deterioration in the energy market and wholesale prices, and we don't expect conditions to improve in the foreseeable future", he said.

The federal government's abandoning of plans to pay for closure of brown coal power stations has also meant there is little chance EnergyAustralia will look at closing more units at Yallourn.

In documents submitted to the federal Environment Department in 2009, TRUEnergy said the 1000 MW combined-cycle gas turbine plant would "allow for a transition over time from existing coal-fired plant to flexible, economically viable, low-emissions technologies". "The introduction of the (gas) plant is largely dependent on the electricity market and impact of a scheme that places a value on carbon emissions", the submission said.

High gas prices and the linking of Australia's carbon tax with subdued European prices have greatly improved the relative economics of brown coal stations. Earlier this month, GDF Suez--which owns Hazelwood, the nation's dirtiest power station--said high gas prices and lower carbon had improved the outlook for its Australian business.

The date for first gas-fired power from Yallourn had slipped from 2013 to 2017 in documents submitted to the Victorian government in June. In those documents, CLP Group quietly downgraded its plans from a combined-cycle to an open-cycle plant. This meant it would supply just peaking power, rather than baseload, but could be upgraded at some later stage to replace the coal-fired units.