Australia shortlists power projects

26 March 2019 - 12:00 am UTC

The Australian government has shortlisted 12 projects for financial assistance to provide new, cheap, on-demand power to industrialised areas of the country.

It will now assess which will qualify for its Underwriting New Generations Investment Program, according to an announcement. If all were built, they could collectively generate 3,818MW of power.

The projects are:

  • Alinta Energy’s gas-fired projects in East Gippsland, Victoria and at Reeves Plains, South Australia;
  • Quinbrook Infrastructure Partners’ proposed 1,000MW gas-fired power station in Gatton, Queensland;
  • APA Group’s gas-fired project in Dandenong, Victoria;
  • Australian Industrial Energy’s gas-fired project at Port Kembla, New South Wales;
  • Sunset Power and Delta Electricity’s 230 MW Goat Hill pumped hydro project near Lincoln Gap, South Australia;
  • Rise Renewables’ pumped hydro project at Baroota, South Australia;
  • UPC Renewables’ pumped hydro project in Armidale, New South Wales;
  • BE Power Solutions’ pumped hydro project in Cessbrook Reservoir Crows Nest, Queensland;
  • Hydro Tasmania’s Battery of the Nation pumped hydro projects in Tasmania;
  • SIMEC Zen Energy’s renewable pumped hydro project in Eyre Peninsula, South Australia; and
  • An upgrade of Delta Electricity’s existing 1,320 MW Vales Point coal-fired power station at Lake Macquarie, New South Wales, which is due to close in 2029.

Australian Industrial Energy, which is backed by iron-ore billionaire Andrew Forrest, is also planning to build a AUD200-300m (USD 142m-214m) LNG regasification facility at Port Kembla, which will import 100 petajoules of LNG.

“It was a recommendation of the [Australian Competition and Consumer Commission] (ACCC) in a report that I commissioned as Treasurer that came back and supported the view that the government should move to seek to examine projects where they would be in a position to underwrite – I stress not invest in, not provide money to, not provide any taxpayers funds to – but seek to underwrite the price position for particular energy projects that would be necessary to shore up their finance, to allow those projects to proceed,” Australian Prime Minister Scott Morrison told reporters, according to a transcript of his comments.

Morrison noted that the coal project is very small.

The technology-neutral program, which is centred around heavily industrialised areas, is designed to reduce wholesale prices for power and to respond to fears that renewable power’s rapid growth in Australia could lead to intermittency issues by delivering 1-2 GW of new, on-demand power at a cost of less than AUD 60 per MW hour. 

Competition regulator
Australia’s competition regulator recommended that the government run a program that excluded the country’s three dominant gentailers — AGL Energy, EnergyAustralia and Origin Energy — to avoid too much market concentration.

The government winnowed down 66 submissions to come up with the shortlist, according to the announcement.

It factored in the emissions intensity of individual projects when finalising the shortlist. The weighted (by capacity) emissions profile of the shortlist is around 0.27 tonnes of CO2-equivalent per MWh, compared to the 2018 National Electricity Market (Eastern seaboard grid) average of 0.82 tonnes of CO2-equivalent per MWh.

Support for projects may be in the form of a floor price on the sale of electricity from the generator, loans and small grants for new developments, cap and floor contracts, and underwriting cap contracts that producers of peaking power normally use.

Applicants were required to make an effort to secure project financing before approaching the government, even if they were not successful.

Australia’s Liberal-National coalition government wants to slash power prices by procuring new power plants to increase the supply of electricity in the grid and encourage competitors to the big three power companies. 

The move comes after it scrapped plans to introduce a National Energy Guarantee (NEG), which includes a mechanism to ensure power comes from reliable sources and leads to a cut in emissions.

Feasibility studies
The government also announced it would spend AUD 10m over two years on feasibility studies looking at building new coal, gas, pumped hydro and biomass plants or upgrading existing plants in North and Central Queensland. It specifically said this could include a new “high efficiency, low emissions” (HELE) coal plant near Collinsville, about 1,200km north of Brisbane.

In addition, the study will look into new power network requirements and long-term contracts for “trade exposed energy users” to ensure they remain competitive.

Local media have reported that the feasibility study for new power stations in Queensland is aimed at appeasing National Party members of the government that have demanded new coal-powered plants be built there. 

The opposition Labor party has said that if elected at the general election due by 18 May, it will restore a parliamentary vote on the NEG.

The NEG comprised plans to boost the reliability of the electricity system as well as lower emissions to meet the country’s targets under the Paris Climate Agreement.

The ACCC suggested in June 2018 that the government underwrite new firm power proposals from non-major power companies for years 6 to 15 of their operations, at a price of about AUD 45 to AUD 50 a megawatt-hour.

It is envisaged that the program will run until the 2022-23 financial year.

 

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