Tomago Aluminium says NSW power grid in crisis

UNHAPPY: Tomago Aluminium chief executive Matt Howell, unhappy at NSW power shortages this week.
UNHAPPY: Tomago Aluminium chief executive Matt Howell, unhappy at NSW power shortages this week.

TOMAGO Aluminium says the electricity grid is at “crisis point” after power shortages this week led to it shutting off its potlines for an hour at a time to keep the state’s lights on.

Its power supplier, AGL, says Tomago voluntarily reduced its electricity load as part of its commercial supply contract but the smelter, which uses 12 per cent of the state’s power, says it had no choice in the circumstances.

The power shortage arose after shutdowns of various units at the Bayswater, Liddell and Vales Point power stations, as well as restrictions on the transfer of electricity from Victoria, because of demand from South Australia.

Tomago lost a third of its power on Tuesday night and Thursday night and the Australian Energy Market Operator – which oversees the National Electricity Market – was forecasting power shortages again for much of Friday.

Although Tomago buys its electricity from AGL, chief executive Matt Howell made it clear he blamed the broader state of the grid, rather than AGL itself, for the problem.

Mr Howell said Australia was at a crisis point with our energy system.

Price and demand information from AEMO on Friday morning, showing a spike in prices on Thursday night.

Price and demand information from AEMO on Friday morning, showing a spike in prices on Thursday night.

“This is not summer with extreme demand,” Mr Howell said.

“This is the likely future of our energy grid as once reliable baseload generators exit the National Energy Market and are mostly replaced with intermittent wind and solar projects with no practical storage to speak of.

“If we want to be a nation that makes things, rather than one that imports all of its needs, we must have internationally affordable and reliable energy: a system that can reliably deliver, independently of the weather.”

Renewables advocates described this week’s generator problems as proof the technology was outdated but others say it’s a lack of investment in letting them run down.

“The energy system is undergoing unprecedented transformation,” AEMO said.

“With the recent exit of almost 5000 megawatts of generation in the past decade, Australia does not have the energy reserves it once had to lean on in times of need.

“As the market and system operator, we plan for extreme conditions and ensure our plans address most foreseeable events.”

It said this included using contingency arrangements such as its “reliability and reserve emergency trader” to ensure security of supply.

AGL said its contract with Tomago was commercial-in-confidence but it argued it did not have the power to “curtail” the smelter’s power if supply was short.

AGL head Andy Vesey recently explaining his company's post-Liddell generation plan.

AGL head Andy Vesey recently explaining his company's post-Liddell generation plan.

AGL said Tomago paid a fixed price for electricity except when certain “trigger points”, such as a statewide shortage of power, were reached.

In this case, Tomago could continue to have all the electricity it needed, but it would have to pay much higher prices.

With the spot price of wholesale power rising from a typical cost of about $80 a megawatt/hour up to as high as a cap of $14,000, the Newcastle Herald understands it may have had to pay up to 175 times its normal price for power.

AGL said that rather than pay the higher prices, Tomago “chose” to take a cut in power supply. The result was that one potline was shut down for an hour on Tuesday night, with the other two potlines shut down for an hour each on Thursday night. Each time, Tomago’s power was reduced by a third, or more than 300 megawatts.

But at Tomago, Mr Howell said the smelter had no practical option but to accept a power cut, otherwise the likely outcome was blackouts somewhere in the state.

Tomago Aluminium product waiting for delivery.

Tomago Aluminium product waiting for delivery.

Labor MPs Meryl Swanson and Joel Fitzgibbon blamed this week’s situation on the Turnbull government, with Ms Swanson saying the NSW grid was “using Tomago as a battery” because it was relying on being able to cut Tomago’s supply to meet demand elsewhere.

Mr Fitzgibbon said the mistakes of the past could not be changed but he called on the government to “stop the nonsense about extending the life of Liddell and allow AGL to quickly proceed with its investment plans in the Hunter”.

These include improvements to Bayswater, a pumped hydro system, and a large solar array and a gas-fired power station at Tomago.

But Mr Howell appeared to questioned renewables as a solution when he said: “The planned and unplanned outages of coal fired generators leaves the state’s power supply at the mercy of the weather.

“When the sun is shining in the middle of the day and the wind is blowing there is usually enough capacity.

“But when we need it most in early mornings and evenings in summer and winter, solar resources are useless and wind generators are often idle.”

Environment and Energy Minister Josh Frydenberg said Labor was misleading its constituents as “AEMO had said there was enough supply and no impact to power system security on either Tuesday or Thursday of this week”.

“AGL and Tomago have a commercial agreement where decisions can be taken to reduce energy demand to minimise exposure to the spot price,” Mr Frydenberg said.

He said Labor’s failure to support Liddell and to “kick-start the closure of coal fired power stations” was selling out the blue-collar workers it claimed to represent.

A "market notice" issued by AEMO on Friday forecasting a lack of reserve power in the grid.

A "market notice" issued by AEMO on Friday forecasting a lack of reserve power in the grid.

While the power system may have coped officially, Mr Howell said even the temporary reduction led to the smelter having 200 “anode effects”. An anode effect is a situation in aluminium production where problems with the electricity supply disrupt the potline system, causing a range of unwanted physical and chemical processes.

“Every time a potline is switched off to prevent rolling blackouts, we run the risk of a catastrophic potline freeze,” Mr Howell said.

“This occurred at Portland Aluminium in December 2016; an unplanned power interruption resulted in more than two-thirds of the pots freezing solid. This resulted in taxpayers having to bail out the business to the tune of $240 million.”

The power shortage this week was caused by problems with four parts of the grid.

AGL confirmed it had three units out at Bayswater, one on planned maintenance and two out of service because of unexpected maintenance needed to two other units because of boiler tube leaks, leaving only one of the four 660 megawatt turbines operating. 

Units were also down at the older Liddell station.

State by state power sources on Saturday morning. Black is black coal, brown is brown coal.

State by state power sources on Saturday morning. Black is black coal, brown is brown coal.

The Herald told the Vales Point power station, owned by Sunset Power International, was also completely offline. Sunset did not return a request for comment.

The Herald has repeated previous situations where Tomago was forced to cut power use to accommodate grid shortages but AGL said on Friday that it no longer had the power to order a “curtailment” after a change to the market rules late last year.

One such occasion was reported in February 2017.

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