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Take over power station, EDB advises State Govt

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The State Government's key economic advisers have told it to buy or lease a gas-fired power station as well as invoke emergency measures to provide security and stability to South Australia's electricity system.

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In an insight into the State Government’s so-far mysterious promise to intervene “dramatically” in the electricity market, the Economic Development Board (EDB) told parliament’s Statutory Authorities Review Committee late yesterday that it had offered a range of proposals to the Government, including taking over a gas-fired power station such as Pelican Point.

The EDB also revealed it had warned the State Government in July last year that South Australian business lacked confidence in the electricity market and that the state’s power grid was at risk of being “islanded” as a result of a “non-credible continuous event”.

Just a few months later, the EDB’s fears were realised with South Australia plunged into a state-wide blackout following furious storms.

The EDB’s Goran Roos told the committee yesterday that the board gave new advice to the State Government last month about how to fix SA’s electricity problems in the short and medium-term.

Roos’ comments give insights into Premier Jay Weatherill’s  promise to intervene in the electricity market – a vow he made the day after “load-shedding” cut power to 90,000 South Australian properties in early February. Weatherill hasn’t yet outlined his preferred course of action, instead saying that all options are on the table.

The EDB, however, gave him some detailed advice in late February which Roos outlined yesterday.

Roos said the short-term option to mitigate load-shedding would be to invoke state emergency measures – presumably via the Emergency Management Act – to bring gas generation online in very short order. This would require getting the Governor to sign off on emergency action.

The medium-term option – in the next one to two years – would be to take back direct control of electricity generation by either buying or leasing the second 1600 megawatt gas turbine at Pelican Point, currently operated by a private company, Engie.

The emergency measures would be invoked in times such as extended periods of very hot weather, or if storms interrupted the electricity supply, and if the Government believed the Australian Energy Market Operator (AEMO) wasn’t taking sufficient action to protect the state’s supply.

“These measures can include guaranteed gas supply to operate electricity-generating units and ensuring that additional generation supply will be capable of being brought online within 30 minutes,” Roos said.

“It is anticipated that the duration of these measures would not exceed six hours unless this is a result of long-term generator or interconnector outages. These potential emergency government intervention measures do not reduce AEMO’s primary responsibilities to balance the demand and supply of electricity by dispatching the generation necessary to meet demand and are only invoked if the government considers that additional protection is required to ensure electricity supply security for the state.”

The option of buying or leasing Pelican Point’s second generator was put to the Government, Roos said, because the EDB believed the power station was being underutilised.

“In the medium term—which is one to two years—the South Australian government should consider direct control of electrical generation facilities either through acquisition or leasing arrangements coupled with long-term back-to-back take-or-pay contracts with end users,” he said.

“A suitable facility could be the second 1,600 megawatt Pelican Point gas turbine which is operated by GDF Suez Australian Energy, a subsidiary of ENGIE, which owns 72 per cent with Mitsubishi owning the other 28 per cent.

“The second unit at Pelican Point was seldom operated from 2013 until the weather and operational events in the second half of 2016. A gas supply contract would need to be secured to operate the facility, and this could be offset through back-to-back take-or-pay contracts with end-users.”

Pelican Point power station. Image: Peripitus/Wikimedia Commons

Pelican Point power station. Image: Peripitus/Wikimedia Commons

Roos revealed the EDB had predicted huge risks to the state’s electricity supply in July last year – two months before the September storms brought down power lines, leading to a cascading series of faults in the South Australian electricity grid which eventually caused a statewide blackout.

Its advice to the Government in July came as a huge price spike caused widespread consternation among local businesses.

The main conclusion of that July report was that the State Government’s focus should be on securing changes to the electricity market at a national level, particularly federal coordination of energy and climate policies.

However, the “strong bipartisan federal leadership” needed to achieve this didn’t eventuate and the EDB believed SA must make its own “independent arrangements” to secure electricity supply for the state.

“In addition to the main conclusion and the need for coordinated federal long-term planning, the July 2016 report commented on the absence of South Australian business confidence in the electricity market, the lack of capacity for the market to correct itself, the potential need to secure energy capacity or stability provisions, and the risk that South Australia might be islanded as a result of a non-credible continuous event,” Roos said.

The longer-term measures include accelerating gas exploration to increase the supply of affordable gas to local generators which would put downward pressure on electricity prices, as well as support for energy storage options.

“Investigation into the development of grid scale energy storage options to the deliver dispatchable power from intermittent generating units, such as wind farms or solar …, should be an initiative supported by the government,” Roos said.

“This support could include government facilitation of storage initiative grants to develop technology and a partial funding of pilot scale applications.”

Opposition energy spokesman Dan van Holst Pellekaan said he supported the long-term measures proposed by the EDB.

He also saw value in the short-term option of invoking emergency powers when needed, although he warned the Government would need to consider carefully the circumstances in which it would use that measure.

However, he said he would want to see the cost-benefit analysis on taking over Pelican Point before making a decision on whether to support that measure.

“This advice started to be delivered in July last year and a full report was delivered in February,” he said.

“It’s been working its way through for eight months from the EDB to the government. What costings have they done?”

van Holst Pellekaan said the private owners of Pelican Point had been operating the facilities in the most commercially advantageous way possible, so he presumed there would be an additional cost to the Government – and therefore taxpayers – to run the power station in a way which benefits consumers.

“If the net cost to the taxpayer (for example) is zero, then you would probably say it’s a good thing because it would stop the blackouts,” he said.

Energy Minister Tom Koutsantonis said the Government had been working on a package of interventions for the energy market for several months.

“Mr Roos is one of many experts that has provided advice to the State Government during the formation of the energy plan, which will be announced soon,” he said.
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