National Energy Guarantee would help deliver investment in coal power stations

The Turnbull government's National Energy Guarantee could help deliver increased investment in a fleet of mid-life coal-fired power stations to provide further stability in the National Electricity Market, according to federal Energy Minister Josh Frydenberg.

With the federal government still putting pressure on AGL Energy over its plans to close the Liddell power station in NSW by 2022, Mr Frydenberg has asked the Australian Energy Market Operator to conduct an audit of younger coal-fired power stations to be delivered to the government by May.

Under fire from conservatives on his own backbench, Mr Frydenberg argues a NEG will ensure coal stays in the national energy mix for longer than under alternative plans, such as the Finkel Review's Clean Energy Target that was rejected by the Turnbull government.

Mr Frydenberg, who is also trying to win over state and territory governments to sign up for the NEG, said it would encourage further investment in 20 existing coal-fired power stations, which have an average age of 27 years, to ensure they are able to last their full life rather than be closed early.

"Unlike Bill Shorten, the Coalition understands that coal has a future in Australia," Mr Frydenberg told The Australian Financial Review.

"The economics would indicate there is more of an incentive to upgrade existing coal-fired power stations than build new ones. Under the NEG there is a premium on reliability – this will create an incentive to upgrade existing dispatchable generators like existing coal-fired power stations where it is cost-effective to do so."

An AEMO report last September also backed an upgrade to existing power plants as one way to boost dispatchability in the NEM and, in turn, deal with the retirement of older coal-fired power stations as they reached the end of their 50-year life.

It comes as pro-coal businessman Trevor St Baker said existing coal-fired power stations should seek permission from the federal government before they are allowed to shut down.

Mr St Baker – who confirmed Delta Energy was also interested in buying the ageing power plant – signalled his intentions to build a new high-efficiency, low-emissions coal plant to replace the Hazelwood coal-fired power plant in Victoria's Latrobe Valley, which closed in March last year.

Mr St Baker said the federal government should have the ultimate say on whether coal-fired power stations should close, saying low-cost continuous base-load power was essential to Australia's continued prosperity.

"My view is that no such power station should be allowed to close or be deliberately shut down without government approval under the very planning approvals which it was permitted to be developed and connected to the electricity supply grid," Mr St Baker said.

"This would leave only options for such base load coal-fired power stations to be maintained efficiently or sold to a purchaser prepared to take on such obligations."

Mr St Baker has already flagged Deltra Electricity will extend the life of its Vales Point coal-fired power plant in NSW beyond its estimated closure date in the early 2030s.

But AGL chief executive Andy Vesey said the company intended to stick to its original plans to shut down the ageing Liddell in 2022 and re-vamp the site with a combination of other energy sources, including renewables. AGL says it would cost up to $1 billion to keep Liddell open after it turns 50 years old early next decade.

Prime Minister Malcolm Turnbull and Mr Frydenberg have been pressuring the AGL board to either extend the life of Liddell or sell it to its competitors to keep the coal-fired plant open for potentially another five years.

A handful of other energy companies, including Alinta Energy, have expressed interest in buying Liddell, but AGL is unlikely to buckle to pressure to sell because it stands to make significant revenue from Liddell over the next four years.

Mr Frydenberg on Sunday said he had no concerns with the Hong Kong-based Chow Tai Fook Enterprises, which bought Alinta last year, from buying Liddell.

He said it was different from the federal government in 2016 blocking the sale of NSW electricity network Ausgrid to Hong Kong and Chinese investors citing national security concerns, saying Alinta already had 1 million customers in Australia via a number of assets.

"I'm not going to go into the entrails of a decision of the Foreign Investment Review Board other than to say the broad point which is that there is a difference between the nature of certain energy assets," Mr Frydenberg told ABC TV on Sunday.

The Energy Minister was unabashed about contacting AGL directors to put the case for a sale.

"We've made it very clear that it's in the interests of the company to consider this offer," he said.

Let's block ads! (Why?)