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SA gas plant to fire up as Port Augusta offer surfaces

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South Australia’s rapidly reshaping electricity system took another turn today, with the owners of the Pelican Point gas plant unveiling a deal to return the facility to full capacity by July this year.

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The move came as a document emerged today showing the owners of the now defunct coal-fired Northern Power Station in Port Augusta offered to keep the plant open for three years at a cost to the taxpayer of $24 million.

The state Opposition, which released the “leaked” letter, reacted with outrage, while the Government asserted that if the station had remained operating, today’s Pelican Point announcement would not have happened.

Pelican Point owner Engie announced today it would return the station to its full available capacity of 479 megawatts from July 1, thanks to it securing gas supply and signed contracts.

Engie Australia chief executive Alex Keisser said work would start immediately on a fast-tracked $40 million upgrade of the plant’s second gas turbine to improve its efficiency and reliability.

“We will be able to offer an additional 240MW of energy to the South Australian market, while also creating short-term economic activity through the turbine refurbishment program,” Keisser said in a statement.

“With the availability of the capacity of Pelican Point at full load, together with Engie in Australia’s wind and peaking generation assets, we have a flexible and sound commercial base with which to run our energy portfolio in SA.”

Keisser said recent events in South Australia highlighted the challenges of the National Electricity Market.

He said bringing on extra capacity at Pelican Point would alleviate some of the supply pressures experienced during times of high electricity demand.

Origin Energy is the key partner in the deal. Under an agreement with Engie, Origin says it will supply gas to Pelican Point and for a fixed charge will gain access to 240MW of electricity production, which will be used to supply its customers in South Australia.

Pelican Point was opened in 2000 with a capacity to provide about 25 per cent of South Australia power needs.

But in 2015 Engie made a commercial decision to remove one of the station’s two generation units from the national market. The second unit has been utilised on a limited basis since then, including at least once this year when electricity demand spiked during heatwave conditions.

However, it became the centre of controversy in February when it was not asked to turn on by the Australian Energy Market Operator on a day of extreme demand, leading to 90,000 properties in SA being “load shed”.

The announcement came as the State Liberals released a 2015 letter to the Government from Alinta, offering to keep the Port Augusta coal-fired power station open until 2018 at a cost to the taxpayer of $25 million.

The Government rejected the offer. Alinta subsequently shut down the Leigh Creek coal mine and Northern Power Station, which was followed by a number of shocks to the SA energy market including a massive price spike last July and the statewide blackout in September.

Premier Jay Weatherill flatly denied two weeks ago the Government had received an offer from Alinta, before quickly clarifying that the company did not make an offer that met his Government’s needs.

Despite the fact that the letter shows an offer only until 2018, Liberal leader Steven Marshall said today the Alinta proposal would have circumvented the need for Weatherill’s $550 million energy plan, which includes the construction of a new gas power plant and battery storage.

“Had Jay Weatherill put just $24 million on the table, South Australian household’s annual electricity bills would be hundreds of dollars cheaper and there would be no need for his $550 million patch-up job,” he said.

However, the Premier and his energy minister, Tom Koustantonis today claimed that if the Northern Power Station remained open, then it would have crowded out room in the market for the return of Pelican Point to full capacity.

“There’s absolutely no doubt about that,” Weatherill told a press conference near Pelican Point.

He said Alinta had offered no guarantee that it would have remained open for an additional three years and the Government was not interested in “temporary plans” that would have crowded out investment in newer, more efficient energy generation.

“There was no guarantee to keep operating,” Weatherill said.

“What we were being asked to do is to throw taxpayers’ money at an old coal-fired power station with no guarantee we’d save them for any period of time.

“It’s just simply not a proposition we could seriously entertain and to suggest that this is the future when it would have displaced the very gas generation that’s being turned on behind us just demonstrates the poverty of thinking in the policy sense from the Liberal Party.”

The Government is investing taxpayers’ money in a state-owned gas plant, as part of the $550 million energy plan.

It is seeking expressions of interest in building the $360 million plant, which will have a capacity of up to 250 megawatts and will operate as an emergency back-up.

Koutsantonis said today the new plant was still needed, despite the Pelican Point announcement today.

“We are (still) going to be short – we need to make sure that we have sufficient supply and that’s why we’re building a brand new back-up generator,” he said.

InDaily asked Koutsantonis whether there would be sufficient gas supply to power the government’s new plant.

“The state-owned gas generator is for use in emergency situations to provide backup power to the grid, so it will not require significant amounts of gas,” he replied.

“However, a key focus of our plan is to drive greater supply of gas to local generators, through grants for new projects, new areas for exploration, and a royalty sharing program for landowners.”

Today’s announcement comes as the Hazelwood coal-fired station in Victoria – which contributes to SA’s supply via the interconnect – progressively shuts down.

The final two generators at the station will go offline today, marking the end of 50 years of power generation at the site.

Three were shut down on Monday and another three on Tuesday. The entire station will close on Friday.

– with AAP

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