AGL Energy keeps SA gas-fired power open

AGL Energy has reversed a decision to mothball four ageing gas turbines at Torrens Island in a bid to maintain reliable power and stable prices in South Australia’s heavily wind and solar-driven electricity market.

The decision by AGL not to shut down the four ageing gas turbines comes just a month after West Australian retailer Alinta Energy closed its Northern and Playford B coal-fired power stations in South Australia.

Alinta’s withdrawal left the state’s electricity market dependent on solar and wind power for more than 40 per cent of its generating capacity, with an interconnector to Victoria’s brown coal power stations covering only about a quarter of demand.

AGL’s reversal on Torrens Island preserves about 180 jobs and is a win for the Labor state government of Jay Weatherill, whose big leap into renewable energy exposed it to charges that it had moved way ahead of the grid’s capacity to maintain a reliable supply.

The government still has to ensure the grid can provide reliable and affordable electricity for industrial users such as stricken steelmaker Arrium and Nyrstar, the Belgian metals company redeveloping the Port Pirie smelter at a cost of more than $500 million.

The SA government is underwriting a large part of the investment in both cases, and electricity prices will be a key determinant of their viability.

AGL chief executive Andy Vesey said two weeks ago at Energy Networks 2016 in Adelaide that “South Australia – with all compliments to policy here – has driven way out on carbon abatement”.

“You are having impacts here which I think you can work through, but there’s a lot of pain here in this market,” Mr Vesey said.

The decision affects the four older gas turbines known as Torrens A, with a combined capacity of 480MW, just over a third of the Torrens Island complex’s combined 1280MW capacity.

AGL announced in December 2014 it would close these turbines by 2017, because gas-fired power was being pushed out of the National Electricity Market by wind and coal, which have a cheaper marginal cost of production.