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Update: Potential shut down of Loy Yang A Power Station

Updates have been received following yesterday’s announcement about proposed industrial action at the Loy Yang A power station and associated mine. The market operator (AEMO) has received updated information on the availability of Loy Yang A and the capacity of Engie’s Loy Yang B which takes coal from the mine.

Prior to the announcement and these further updates,  the supply / demand balance was already tight particularly during summer.

Figure 1: Medium term outlook 4 May 2017

Source: AEMO

The updates received from the Loy Yang A and Loy Yang B power stations show reserve shortfalls increasing and a lack of reserve almost every day starting May 10, 2017.

Figure 2: Medium term outlook 5 May 2017

Source: AEMO

The lack of reserves have not flowed into other regions but trading will be affected by the loss of supply in Victoria. At this stage, AEMO is still seeking a market solution to the reserve shortfall which could happen as early as next week. It has said in a statement that it is working with AGL, Engie and the Victorian Government to find a solution.

The Victorian Government has also released a statement advising they will make an application to the Fair Work Commission to seek termination of the industrial action. The negotiations between AGL and the unions have been running for two years and the Victorian Government is urging both parties to resolve outstanding issues.

It is expected that trading across all regions will be affected. The risk of power shortages is likely to increase prices until the dispute is finalised. The last time industrial action was announced, it was called off the next day. It is hoped that the parties can resolve their issues as soon as possible so that normal operation of the market can continue.