Should CS Energy bother repairing Callide C?

Dramatic events unfolded on Tuesday evening in Queensland, as a fire broke out in CS energy’s Callide C coal-fired power plant. Fortunately, no-one was injured as a result, although the unit was severely damaged. While the loss of a large coal unit is a major shock to the system it is the kind of situation that the system and its operational processes are designed to deal with. However, 20 minutes later, some transmission lines tripped off, as did some more large generators. This caused the system frequency to dive, which activated under-frequency load shedding – or blackouts to the layperson – across SE Queensland. Fortunately, the processes designed to help the system recover from this kind of event kicked in: the QNI transmission line linking Queensland with NSW automatically reclosed, bringing the two regions back in sync and allowing NSW to help supply Queensland with power. The Stanwell coal plant tripped to “house load”, i.e., the relatively small amount of power needed to keep its own systems running, which made it much easier to ramp the plant back up again. The blackout, which in terms of numbers affected, may be Queensland’s worst, was thus mercifully short-lived.

No doubt AEMO will report in due course on the detailed sequence of events and whether any specific action is required, but in the meantime the Queensland power system is largely back to normal, albeit with a lower level of coal plant than before as the entire 1500MW Callide complex is offline.. Prices are spiking to $200-$300/MWh in the early morning and evening while falling to $30-$40 during the middle of the day, much like in the days leading up to the fire. In other words, the market isn’t really missing Callide C’s 420MW unit C4. That’s just as well, since while the other unit of Callide C and the two units at neighbouring Callide B are expected to restart early June, (at which point AEMO will breathe a sigh of relief) C4 is currently scheduled to be offline for 12 months while the company repairs what the CEO described as a “Catastrophic failure” of the turbine.

It seems likely that the unit will be repaired. As a relatively new coal plant (commissioned in 2001), it could in principle be less than halfway through its working life, so it ought to be a straightforwardly commercial decision to bring it back online. Cash is unlikely to be an issue as long as CS can cash in on the insurance policy.

On the other hand…Queensland is targeting 50 per cent renewable energy by 2030. It’s some way off, but a handful of large scale solar farms are already in the pipelines (682MW committed, 500MW “probable”) according to the Clean Energy Regulator. They also expect 1,247GW of wind farms to be  built, and Queenslanders are adding around 600MW annually of rooftop PV to their homes and businesses. This will put the squeeze on traditional generation sources, unless there’s a big new lick of demand added to the system. While gas is more expensive it’s also more flexible, and Queensland’s coal fleet (which still contributes about 80 per cent of the state’s power) is going to start feeling the pinch, especially in the middle of the day. So it would be tempting to maybe just pocket the insurance cheque and not rebuild. In general, there’s no technical barrier to leaving one unit of a plant offline while the other one keeps running. It would also at the margins improve the economics of the rest of CS Energy’s portfolio.

CS Energy’s owner, the Queensland Government has said it will not close any coal plants any time soon, but maybe they could just not restart this one unit? More speculatively, as suggested by our friends at WattClarity, they could repower with a big battery. This could potentially store excess output from the other unit during the solar-saturated daytime and release it into the market in the more lucrative evening peak. It may not be the first coal plant to do so, as Stanwell announced this week it was running the numbers on a potential 150MW, 2 hour battery at its Tarong Power station. Of course, battery announcements come thick and fast these days…

However, it’s more complicated than that. The politics of Queensland state-owned coal plants is all about low prices and union jobs, so the government is likely to hold the line and keep everything open, including returning C4 to service until the losses become too much for the Treasury to bear. Plus, uniquely among the state-owned plants, Callide C is a joint venture with privately-owned Intergen who also own and operate Milmerran coal plant. So the two owners would have to agree on a way forward. Assuming they proceed with the repair, they will be hoping it doesn’t turn into the money pit that the WA government-owned synergy had when they brought back the (admittedly much older) Muja A and B for over $300m, only to close the plant within three years.