For over eight years, there has been talk of AGL shutting down Liddell power station. Finally, this will become reality today, with the next Liddell unit being shut down.
Liddell Unit 4 will be shut down today, followed by Units 1 and 4 over the next 10 days. The retirement of Liddell power station will make 10% of NSW’s availability being bid unavailable.
It would be expected that the permanent closure of 10% of NSW’s electricity generation would put the grid at risk and lead to higher electricity prices.
AEMO has alleviated market concerns by saying, “Supply is not at risk”. However, Edge2020 is not ruling out an upward pressure on prices due to a shock to the market, despite the market knowing the Liddell units would be shut down for many years.
The retirement of Liddell power station is the next big step for NSW as the state transitions from scheduled coal-fired generation to intermittent renewable energy and storage.
While the market has known about the retirement of the Liddell power station for years, Edge2020 expects the market to be firm on the reality of the closures. Spot electricity and forward prices in NSW and Queensland may increase in the short term; however, they will settle over time.
Following the retirement of the Liddell units, availability will still be relatively high in NSW. The capacity factors of the remaining coal-fired units will increase, and gas will fill the remaining gaps. As a result of this and generation from neighbouring regions, it is unlikely that the NSW region will incur a significant drop in availability resulting in a Lack of Reserve (LOR) notice from AEMO.
AEMO confirmed in February that the closure of the Liddell units would not breach the reliability standard; however, AEMO’s latest reliability report has raised concerns that reliability risks remain in NSW. AEMO’s biggest reliability concern has been the delayed delivery of Snowy Hydro’s Kurri Kurri gas-fired generator. The Kurri Kurri gas-fired generator has been delayed by 12 months. AGL has confirmed AEMO has not approached them regarding reliability levels following the closure.
Further to alleviate the availability and reliability concerns of the market as we approach to summer is the news that Energy Australia will have the 300MW Tallawarra B gas-fired generator online in December. Additionally, NSW imports additional electricity from Queensland and Victoria via the interconnectors.
AGL has plans to repurpose the Liddell site into a clean energy hub which will include a 250MW battery with room for expansion that could be linked to a nearby pumped hydro project.
After the closure of Liddell 4 on April 19th, followed by Unit 2 six days later, and then finally Unit 1 on April 29th, AGL will start demolition in early 2024.
The next few weeks will be an interesting time in the industry, particularly for NSW politics and the wider NEM. Edge2020 will monitor the market and provide updates over the next few weeks as the final unit retires.
