May-21 Energy Market News

EnergyByte
EnergyByte
May-21 Energy Market News

This month has been significant in the industry with many events occurring.

This month has been significant in the industry with many events occurring. Below are the key highlights for the month:

Highlights

  • Federal Government announcing taxpayers will fund a new 660MW Kurri Kurri gas powered generator in NSW to replace Liddell Power Station in 2023
  • AER approving the EnergyConnect connector between NSW and SA which is expected online in 2023
  • Callide C unit 4 exploded causing a fire, tripping about 2,200MW of baseload power stations and forcing load-shedding in Queensland for 470,000 customers
  • The NSW Government, which is the second biggest consumer in NSW, has signed a 10-year off-take agreement with Shell and Edify using renewable projects supplemented with a new battery all located in the Riverina region

Renewables

  • Vertical wind turbines more efficient (6 May) Researchers at Oxford Brookes University in England have raised the possibility that traditional propeller wind turbines be replaced by more compact and efficient vertical wind turbines. The research found that when vertical wind turbines are set in pairs, they can increase each other’s performance by up to 15%.
  • Minister vetoes loan to Queensland Kaban Green Energy Hub (6 May) Federal Resources Minister Keith Pitt has made an extraordinary intervention to veto a proposed $280 million loan from the Northern Australia Infrastructure Facility for the Kaban Green Energy Hub which is a 157MW wind project south-west of Cairns, to be built by French renewable energy developer Neoen. “I am not convinced that the project will result in lower energy prices,” Pitt wrote in his rejection letter. Minister Pitt has been a loud critic of renewable energy and a strong supporter of fossil fuel projects.
  • Re-birthing lithium batteries (6 May) Scientists led by Finland's Aalto University investigating the aging mechanisms affecting today’s lithium-ion batteries observed that the loss of lithium over time is one of the main causes of performance loss. With this in mind, they developed and tested a “relithiation” process that promises to eliminate much of the cost and complexity from recycling battery components and materials.
  • Global wind and solar supplies grow at fastest rate since 1999 (12 May) Whilst rooftop solar installation remains strong in Australia, global supplies of wind and solar grew at their fastest rate in two decades in 2020, giving the market more reasons to be optimistic about climate goals.
  • Treasury Wine Estates announce sustainability goals (10 May) Treasury Wine Estates has used its Sydney Investor Day to announce the bold steps the company will take towards sustainability leadership in the global wine industry with the aim of achieving net zero emissions by 2030 and 100% renewable electricity by 2024.
  • Uungula Wind Farm progresses (13 May) Construction of the 400MW wind farm with battery storage received development approval from the NSW Department of Planning, Industry and Environment.
  • Hunter Valley green strategy (17 May) A $2bn plan to fast track Australia's first hydrogen valley has been devised by a consortium of major domestic and international energy players. The plan will harness renewable energy to build an export industry in NSW with a boost to employment in the Hunter Valley region.
  • NSW 600MW solar energy hub gets approval (17 May) Lightsource BP has received approval to develop a 600MWdc solar PV hub in central western NSW aiming to make it the largest renewable energy power hub in the state.
  • 10GW goal of green power for TransGrid Lumea (17 May) In a move to accelerate a shift to lower emissions and cleaner energy, TransGrid's new business, Lumea plans to deliver 10 gigawatts of renewable power moving towards a system of renewables backed by fast-start generation, gas, batteries and pumped hydro.
  • 20 Big Batteries proposal by Powercor (19 May) With a plan to strengthen the grid and deliver on Victoria's renewable energy target, network operator Powercor, is proposing to install up to 20 big batteries totalling more than 1.1GW at key network centres throughout the state.
  • Australian first as green hydrogen flows into gas grid (19 May) For the first time in Australia, hydrogen based on renewable energy is being fed into the gas distribution grid with a landmark project in Adelaide. Ben Wilson, chief executive of Australian Gas Infrastructure Group, lauded the project as the start of the transition that we are looking to make.
  • Clean Energy Council (21 May) RATCH-Australia Corporation Pty Ltd announced the successful opening of the 214MW Yandin Wind Farm, Western Australia's largest wind energy project.
  • Kaban Hub kicks off (21 May) Construction of the Kaban Green Power Hub commenced with contractor Vestas.
  • Jemena calls for renewable gas target to mirror RET (25 May) Sydney's biggest gas distributor Jemena, is calling for a target for "renewable gas" that mirrors the Renewable Energy Target to help Australia save as much as $14 billion, to better utilise existing gas infrastructure to meet net zero emissions.
  • Ad hoc energy intervention end is nigh: Angus Taylor (25 May) In a bid to spur investment in on-demand generation, as proposed by Jemena's push to pursue a renewable gas target, the Morrison government has signalled an end to ad hoc energy market intervention.
  • First hydrogen investment for CEFC (26 May) The Clean Energy Finance Corporation is poised to take on its first investment in the hydrogen sector with a deal expected in the coming weeks.
  • $68m Hydrogen Industry Mission launched by CSIRO (28 May) The CSIRO has launched a collaborative style mission, at a cost of $68 million with the aim of driving down the cost of hydrogen production to under $2/kg and pushing Australia towards being a hydrogen super player by 2030. Working with collaborators, Toyota and Hyundai and including an array of partner operators, CSIRO believes this style of "unique mission-based partnership" is the way forward for both Australian domestic and export use.
  • Trial success of flexible rooftop solar could be reality (30 May) A trial in South Australia has found that virtual power plant participants were able to export more than the state's 5kW limit without compromising grid stability paving the way for the introduction of flexible rooftop solar exports for households and businesses as early as the second half of 2020.
  • Concerns arise over new connection rules (31 May) New "one at a time" connection rules, proposed by the Australian Energy Market Operator (AEMO) are causing concerns with Australian solar and wind farm developers fearful new projects could face lengthy delays with the process of "sequencing", forcing them to miss deadlines in their power purchase agreements and potentially losing finance.
  • Wind-solar hybrid project pushes ahead (31 May) Australia's largest combined wind and solar projects, near Port Augusta in South Australia will commence operation before the end of the year, according to Infigen Energy. With around 100 MW of solar generation and coupled with 210MW of wind capacity it will allow Infigen to coordinate the supply of power from the respective wind and solar farms through shared infrastructure.

Storage

  • Wallerawang power station repurposing works underway (7 May) The defunct Wallerawang coal fired power station near Lithgow, central western NSW, is to take on a new look as a multi-purpose industrial area and renewable energy battery storage facility. The Wallerawang Battery Project, to be developed as a flagship project of Greenspot, would have a capacity of 500 megawatts and 1,000 megawatt hours of storage, costing less than $500 million and possibly ready by 2023.
  • Australian Renewable Energy Agency (21 May) Construction of Australia's first pumped hydro energy storage system (PHES) is set to begin construction following financial close by Genex Power.
  • Landmark big battery storage for NSW (29 May) In a landmark electricity supply agreement with the NSW government, Shell Energy and Edify Energy will build a big 100MW, two-hour battery storage facility in the Riverina region of the state increasing the availability of clean, green, low cost, dispatchable electricity.
  • Energy providers fearful of "Yak01" community battery, despite its small stature (26 May) Following a growing trend in the energy storage space, Yackandandah's 274 kilowatt-hour battery Yak01, housed inside an old sawmill on the edge of the town, is causing ripples for power companies as smaller communities embrace the technology in their desire to be self -sufficient and tap into environmentally driven solutions for their energy needs.
  • Battery storage announced by Stanwell (28 May) Pushing its renewable energy strategy one step further, the Queensland Government announces the development of the state's largest battery, the 100MW/150MWh Wandoan South Battery Energy Storage System (BESS) on the Darling Downs.

Generation

  • Liddell first Unit to close in April 2022 (1 May) The Australian Energy Regulator (AER) received an application from AGL seeking exemption from the generator notice of closure obligations to bring the closure date of Liddell power station Unit 3 forward a year to 1 April 2022. Contingent on exemption being granted, AGL will subsequently delay the closure date of Liddell power station unit 4 to 1 April 2023. AGL has indicated that it believes unit 4 to be a more reliable generating unit than unit 3. The AER will publish its decision in July 2021.
  • Closure of Yallourn increases risk of blackouts (10 May) The earlier closure of the Yallourn coal plant, now slated for 2028, will leave both Victoria and South Australia exposed to higher risks of blackouts unless there is further commitment of dispatchable energy, according to AEMO's chief system design officer, Dr Alex Wonhas.
  • Callide power station fire and explosion results in widespread power outage for Qld (26 May) A turbine fire at the Callide power station near Biloela, resulted in power being cut to hundreds of thousands of homes and businesses throughout the state with a 550 metre exclusion zone set up to assist with firefighting operations.
  • Qld power station unit offline for a year (27 May) The explosion and fire at the Callide C coal fired power station in Central Queensland, which plunged the state into a state wide blackout and sent power prices soaring, is expected to result in the generating unit being out of action for up to 12 months according to CS Energy.
  • Qld power station disaster sees turbine parts fly hundreds of metres (27 May) Union officials are describing the fire and explosion of the Callide C power station, as a catastrophic failure and saying it was a miracle that no one was hurt when parts of the turbine flew hundreds of metres in the air at the height of the disaster.

We have written a special article on the Callide C Catastrophic Failure and below is a chart of the generation and consequential spot price on 25 May-21.



Gas Market

  • Origin's gas deal puts pressure on Port Kembla (7 May) Origin Energy’s new east coast gas deal with APA for an additional 91 petajoules of gas from January 2022, may have set off alarm bells for the Port Kembla import terminal project. While the project remains the frontrunner among the half-dozen developers racing to bring new volumes to market, Origin was widely regarded as an anchor customer for the facility.
  • Morrison to provide gas project funding (7 May) The Morrison government will announce a $58.6 million package to underwrite Australian Industrial Power, to build a gas import terminal and power station at Port Kembla.
  • Australian LNG industry fears amidst China/Canberra tension (10 May) Bloomberg News reports that some smaller Chinese importers of Australian LNG have been told to avoid buying new cargoes as tensions between Canberra and Beijing worsen. This follows the decision by China to suspend an economic accord, The China-Australia Strategic Economic Dialogue indefinitely.
  • Insufficient gas supplies greater threat to LNG exports than China (14 May) Research firm EnergyQuest believes that declining gas supplies will be more of a threat to Australia's world-leading exports of LNG than any threat posed by China. Nonetheless, the market needs to be mindful of the worsening tensions with China as LNG buyers look elsewhere.
  • Newly funded Kurri Kurri gas plant "unhelpful and unnecessary" according to Clean Energy Council (19 May) A decision by the Federal Government to build a new gas fired power station in NSW is reckless, according to the Clean Energy Council, who believe that the decision undermines Australia's efforts to deliver lower cost power, reduce emissions and build a reliable energy system.
  • Tomago Aluminium backs Snowy gas but buckles under price spikes (19 May) Australia's biggest electricity user, Tomago Aluminium has lent its backing to the decision to build Snowy Hydro's new gas plant in the Hunter Valley. The backing comes as the aluminium producer reveals it was forced to halt production three times in the last week due to skyrocketing power prices a result of unreliable generation and huge price volatility.
  • Shell climate ruling could impact Australian gas (27 May) The Australian government's "gas led recovery" from the pandemic could be seriously hampered by a landmark Dutch court ruling against oil giant, Shell to make faster and deeper cuts to its carbon emissions.

We assessed the Federal Government announcement that taxpayers will fund the construction of the Kurri Kurri Gas Power Station  where we concluded ... "Justifying investing taxpayers funds into Kurri Kurri gas-powered generation based on an alleged shortage of capacity and the desire to keep prices down, is misguided and misleading."

Financial

  • New Energy Solar expects to complete sale by mid year (6 May) New Energy Solar says it is on track to secure a sale of 111MW Beryl and 55.9MW Manildra solar farms by the middle of the year as the company moves to focus its investments on overseas projects.
  • Gupta puts up Cultana Solar farm and Playford Big Battery for sale (7 May) Sources suggest GFG may struggle to realise a full valuation for the assets, given the increasingly crowded renewables market, despite the conditional 10-year supply deal signed with the South Australian government that comes into play when they are built at an estimated cost of $660m.
  • Budget 2021 plan to pay big carbon emitters to reduce output (12 May) Federal Government Energy Minister, Angus Taylor has outlined a $280m scheme to pay Australia's biggest carbon polluters to reduce their carbon output. The new scheme will be rolled out over the next 10 years in a bid to encourage Australian corporate giants to adopt new technology to reduce emissions.
  • Spotlight on Origin as potential deal looms (17 May) Speculation is mounting that Origin Energy, with its languishing share prices, is considering a major announcement of sorts, with lots of work going behind the scenes. Despite chief executive Frank Calabria declaring a month ago, that the company was not considering a demerger there is renewed talk that something is pending.
  • 150 job losses following ExxonMobil refinery shutdown (19 May) The shutdown of ExxonMobil's refinery in Melbourne has resulted in the loss of 150 jobs and partial closure of petrochemical manufacturing plant, Qenos which will close one of its two ethylene units at Altona as well as one of two units that make basic plastic polyethylene.
  • Demerger doubts arise forcing AGL to consider raising equity (24 May) Analysts have warned that AGL Energy may well have to raise more than half a billion dollars in equity or worse still, sell off parts of its retail business arm in order to carry outs its planned demerger as wholesale power prices fall and shares in AGL hit a 17 year low last week.
  • Commodity slump sees Shell and Arrow Energy in $1.2bn writedown (24 May) With losses nearing $9bn since 2010, energy giants Shell and PetroChina have been hit with a $1.2bn write-down on their Australian gas business due to a commodity price slump.
  • Buyer appetite tested as Rest considers SEA Gas pipeline options (25 May) Superannuation fund Rest is considering options for its 50 per cent stake in SEA Gas, which owns the Port Campbell to Adelaide 700km underground high pressure natural gas pipeline and transmission system.
  • Buyers sought by Elliott Green for $600m Australian solar portfolio (31 May) Elliott Green Power have engaged corporate advisory firm Azure Capital and the Bank of America to assist in finding buyers for its $600 million portfolio of Australian solar assets including the Susan River Solar farm and the Childers solar farm in Queensland and the Nevertire Solar farm in NSW.
  • "Transformational" new link approval sees new boost for solar, wind and storage (31 May) The critical new 900km transmission link to South Australia has been boosted by a $1.82 billion spend by NSW transmission company, TransGrid accelerating the state's transition to 100 per cent renewables and unlocking significant spending for new wind, solar and storage projects.
  • CBA deal provides upstart Amber with funds and customer base (31 May) A new partnership with the Commonwealth Bank has seen new kid on the block, Amber completed a successful $20 million series B investment allowing the innovative electricity retailer to fund a significant expansion push and to grow its customer base.
  • Victoria's EV road tax passed into law (28 May) Failure to comply with a controversial new road user charge, could see Victorian electric vehicle owners have their registration cancelled. The new road user tax which will come into effect from July 1, passed the state upper house in late May forcing EV owners to keep a record of the kilometres they travel over each year through odometer readings and provide that information to authorities by the years end.

The AGL and Origin share prices are shown tracking the adjusted prices for dividends over the last 12-months. AGL has declined 50% and Origin has declined by 32%.  



Power Purchase Agreements

  • NSW Government sign $3.2bn deal (15 May) A $3.2bn NSW government electricity contract will help foster renewable energy in the Riverina region. The 10-year contract was awarded to Shell Energy and Edify Energy and will result in a 100MW battery being built alongside Edify's Darlington Point Solar farm, which began operations earlier this year. The agreement covers schools, hospitals, traffic lights and tunnels.
  • Victorian Local Councils sign PPA (18 May) Forty-six Victorian councils have signed up to a new partnership that has resulted in them pooling their energy contracts to source all their electricity needs from Dundonnell and Murra Warra 2 wind farms. This follows on from 13 Victorian Councils signing up to a PPA facilitated by Procurement Australia last year using Bald Hills wind farm with Alinta Energy.

Policy & Regulation

  • AER approves EnergyConnect (30 May) The AER approved the NSW - SA EnergyConnect transmission line project is expected to cost $2.28bn. TransGrid have agreed to fund $1.82bn after the Clean Energy Finance Corporation stepped in to solve its financing issues. ElectraNet is yet to formally approve its $457m contribution.


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