NSW is at risk of long-term blackouts unless energy company AGL firms up its commitment to replace the Liddell coal-fired power station, the federal government has been advised.
The Australian Energy Market Operator said in a report released on Friday an extra 850MWs of power are needed to ensure reliability in NSW following the closure of Liddell.
It noted that if all three stages of AGL’s proposed post-Liddell plan are delivered “the resource gap will be eliminated”.
However, given that AGL has only firmly committed to installing 100MW of additional generation “there remains a significant resource gap of 850MW”.
AGL welcomed the confirmation from AEMO that its NSW Generation Plan addresses the potential shortfall after the closure of Liddell.
“AGL is already implementing our NSW Generation Plan, which proposes a mix of high-efficiency gas peakers, renewables, battery storage and demand response as well as the efficiency upgrade at Bayswater Power Station,” it said in a statement on Friday.
“Decisions for the investments are staged to enable flexibility to respond to the changing needs of the market and improvements in technology over the next five years.”
In December last year, AGL outlined plans – at the request of the prime minister – to address a predicted 1000MW gap in electricity capacity following the closure of the 1970s-era power station in 2022.
The plan would be delivered over three stages and includes the 100MW Bayswater upgrade, and a mix of solar, wind, pumped hydro and battery storage, as well as gas peaking plants.
AGL says this will cost $1.36 billion and provide electricity at $83/MWh for up to 30 years.
By contrast, keeping Liddell open for just five years would cost $920 million and provide electricity for $106/MWh. AEMO chief Audrey Zibelman said in her review of the plan, if only the first stage of AGL’s proposal was delivered there would still be a gap of 590MW “exposing the power system to a high risk of involuntary load shedding”.
“AEMO can only include those resources for which there is a clear commitment to construct,” she wrote.
She said the solution lay in the federal, state and territory governments reaching an agreement on the national energy guarantee by the end of 2018.
However, if the national agreement could be not reached a specific market mechanism should be put in place, in consultation with the NSW government, to find enough generation to replace Liddell via other projects.
Energy Minister Josh Frydenberg said it would be preferable for AGL to commit as soon as possible to stages two and three of its plan.
”The existence of a major shortfall in dispatchable power following Liddell’s closure would clearly present an unacceptable situation undermining the stability of the system,” Mr Frydenberg said.
The situation made it all the more important for the national energy guarantee to be endorsed by all governments, he said. Energy ministers will meet in April to discuss the NEG.