The ACT has previously rejected the need for fossil fuels to back up renewables.
Bowen this week described the capacity mechanism as a “matter of urgency” and said energy ministers would consider a number of options the Energy Security Board (BSE) had developed.
The BSE has said that states could have different operating principles in their jurisdictions, such as excluding fossil fuels.
Alinta, one of the country’s largest electricity suppliers and owner of the Loy Yang B Brown Coal Power Plant in Latrobe Valley, said harsh energy market conditions meant that “every technology and fuel has an important role to play in maintaining the lights on “.
“So, yes, we need coal and gas to be included in a capacity market,” said Alinta CEO Jeff Dimery. “If you were to exclude about 60 percent of the supply provided by the Latrobe Valley in Victoria, there wouldn’t be much capacity to call.”
Dimery said Alinta did not advocate keeping coal in the mix for “one minute longer than necessary … and we are moving forward with the development of the next generation of energy such as wind and offshore hydraulics.”
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“But they have a critical role to play in the short and medium term,” he said.
Origin CEO Frank Calabria welcomed the “reflective and collaborative” effort between the state, territorial and federal governments to address the challenges facing the energy market, and he said the proposed capacity mechanism should include storage, whirlpool and gas peaks.
Tony Wood, director of energy for the Grattan Institute think tank, said short-burst gas peak plants would be critical to curbing blackouts by backing up long-term wind and solar farms. they work when the wind is not blowing or the sun is not blowing. it doesn’t shine.
But regardless of the rules put in place to make the capacity market work, he added, coal would not be economically viable.
“I don’t know how to back up renewables with other renewables,” Wood said, noting that batteries recharged by wind and solar power still needed to be supplemented with other power generations.
“Even the United Kingdom has part of its capacity mechanism that encourages a reserve of diesel [for electricity generation]. ”
Wood said coal generators would be too expensive to operate and too slow to ignite too soon, to fill network gaps when the weather changes.
“You need a capability that can be activated very quickly and the problem with coal plants is that they are not very flexible.”
Kerry Schott, former BSE president and architect of the capacity mechanism design proposals submitted to Energy Ministers, said that every country that develops a renewable electricity grid has a capacity market and “is one of my great regrets that it took so long to be taken to Australia.
Schott told the Australian Energy Week conference on Thursday that although he had not seen the finalized proposal to be presented to ministers, he thought he could exclude funds for coal but govern gas.
Kerry Schott says one of her “big regrets” is that it has taken so long to introduce a capacity market in Australia. Credit: Oscar Colman
It is expected that there will be two models from which ministers can choose.
In one of them, the operator of the Australian energy market (AEMO) would determine how much distributable power was needed to back up the renewables on the electricity grid and contract to buy this capacity from a number of generators. Electricity retailers would be forced to bid to buy this capacity at an auction, which would be used to fund the necessary power generation projects.
The other model is a market-based mechanism that eliminates AEMO as an intermediary, where retailers must acquire enough available capacity to back up the electricity generation they are buying from power generators. .
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Schott warned that the market mechanism was more complicated, although AEMO was likely to be too negative for risk with capacity reserve and spend more money than needed to buy reserve energy. “Neither is ideal, but we need something,” he said. .
Energy Australia CEO Mark Collette said the orderly transition to coal was the “big challenge of the energy system” and encouraged ministers to prioritize BSE proposals.
“Providing the right investment signals for new capacity is essential to our energy transition,” he said. “Equally essential is an orderly withdrawal of coal generation, scheduled so that the new system is ready in advance.”
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