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Australia steps on the gas in tight power market

Australia steps on the gas in tight power market

By Peter Ker

Australia's gas-fired power stations dramatically increased their operating hours in 2017, with some stations quadrupling output as the National Electricity Market adjusted to the exit of Hazelwood power station.

Gas-fired "peaking" power stations have traditionally operated just a few days or weeks each year when demand and prices have been sufficiently high, but Hazelwood's exit in March 2017 ensured market conditions were tight enough for many gas-fired stations to be in the market more often.

One of the closest gas-fired power stations to Melbourne's central business district, Newport Power Station, operated 32.6 per cent of the time in 2017, up from just 9.1 per cent of the time in 2016 and 8.5 per cent of the time in 2015.

Data collected by the Australian Energy Market Operator (AEMO) shows the amount of energy generated at Newport, which Industry Funds Management has reportedly put up for sale, rose by 426 per cent in 2017 to 930.6 gigawatt hours.

Grattan Institute Energy Fellow David Blowers said the trend was a response to the exit of Hazelwood and South Australia's Northern coal-fired power station, and was a factor in pushing up electricity prices.

"This shows what happens when you lose a couple of major power stations from your system, I think the noticeable thing is you have lost them both in Victoria and South Australia and you have seen output from particularly the gas-fired power stations in those states ... they have gone up significantly particularly in the last year and last two years in South Australia," he said.

>Gas sets power price

"Because we have lost baseload everything is kind of shifting down a bit, your intermediate (power stations) are becoming a little bit more like baseload and your peakers are becoming a bit more like intermediate power stations, and because gas is more expensive generally that helps increase the price."

Operating hours at EnergyAustralia's Tallawarra gas-fired power station in New South Wales were 50 per cent higher than in 2016, while the amount of energy generated at Tallawarra rose by more than 92 per cent year-on-year.

Gippsland's Jeeralang B power station increased operating hours by 76 per cent in 2017, while Adelaide's Torrens Island B generated 17 per cent more power despite slightly reducing its operating hours in the year.

The neighbouring Torrens Island A power station was one of the few to reduce both its output and operating hours between 2016 and 2017, but its 2017 output remained higher than in 2015 and 2014, according to AEMO data.

Prices may have peaked

Electricity futures suggest power prices in Australia's eastern states might have peaked, and Mr Blowers said he did not believe gas-fired power stations would maintain recent operating rates in perpetuity.

"A lot of the forecasts are that electricity prices are going to start coming down, and that is partially because we are going to see quite a bit of new generation come in over the next couple of years, mainly through the meeting of the renewable energy target," he said.

"When we get more generation coming into the market you would expect (gas-fired power stations) to go back down again ... it is going to take both the requirement and the money out of the market”

Financial Review

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