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Proposed shut down of Loy Yang A could put energy security at risk

Earlier today, AGL announced their intention to take industrial action against the workers at the Loy Yang A power station and associated mine.

AGL informed workers they would be locked out from May 15, 2017. The lock out is in response to the Electricity Trades Union (ETU) announcing industrial action. The disagreement stems from an ongoing dispute over pay and conditions at the Loy Yang A facility.

This is not the first time that AGL has threatened to lock out workers over this dispute. A similar announcement was made in December 2016. However, the union decided to cancel its industrial action at that time, and AGL didn’t go ahead with the lock out.

A closure of Loy Yang A would be devastating to the market at a time when Hazelwood has just been closed. Loy Yang A has a capacity of 2,300 MW and is often operating near its capacity.

Victoria’s total coal generation fleet is 5,055 MW and the market would struggle to cope with the loss of Loy Yang A. The medium term supply / demand outlook from the market operator (AEMO) shows that there is insufficient reserves to meet demand if Loy Yang A comes offline. There is roughly 1,000 MW of spare capacity on May 15 when the lock out is proposed.

Figure 1: Medium Term Outlook for Victoria

Source: AEMO

At this stage AEMO is seeking advice from AGL on the duration of the outage and will update the outlook as soon as they get more information.