Australian power plants turn to diesel instead of gas

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  • • Rising gas prices put pressure on the fragile and costly gas networks
  • • The spot market price in most states has risen to unprecedented levels recently
  • • Diesel made up only 0.05% of total electricity generation in the past 12 months
  • • All 6 Valley Power plant turbines have been operating for about 48 hours non-stop

Gas-fired power plants in the Australian state of New South Wales are turning to polluting diesel, due to rising gas prices and a shortage of coal plants.

It comes a few days after the federal elections in Australia, as the coalition government’s only energy strategy – called the gas-led recovery – appears to be in tatters.

Coal power plants in New South Wales reached nearly half capacity last week, putting pressure on fragile and costly gas networks, even as hydropower production has increased markedly.

Switching to diesel fuel

The electricity market is currently busy talking about power plants that have decided to switch to diesel. Due to the sudden rise in gas prices of $48/GJ or more.

Power plants
Power Valley gas-fired power plant – Photo courtesy of the Renew Economy website

David Leach, an analyst with the Australian electricity, gas and carbon market analysis company, David Leach, said that the rise in gas prices will bring the price of electricity generation from gas to more than $ 500 / megawatt / hour.

David Leitch found that price tag low, even for prime-time power plants.

He noted that some generators have no choice but to generate at this cost, although they bid on prices accordingly, which is why the spot market price in most states has risen to unprecedented levels in recent weeks.

It should be noted that some generating units have the option of switching, because they are “coupled”, which means that open-cycle turbines can run on gas or diesel.

Economic and environmental crisis

There is talk of the switch taking place; Because diesel is likely to be cheaper than the gas option, depending on how much was paid for a liter of diesel, which is a polluting fuel, and its emissions are much higher than gas, not much lower than coal-fired electricity.

Other analysts argue that the problem is not the price, but the enormous pressure on the system; Because of the multiple outages at coal plants and on the gas network, they expected the next winter to see a continuation of the problem.

The use of diesel as fuel for peak stations can sometimes become necessary, with no other option in times of heavy demand, and diesel made up only 0.05% of total generation, in the past 12 months, according to the National Electricity Market Corporation (NEM).

Diesel use in the current market is relatively low, when there is demand, when nearly a third of the coal plant fleet is offline, and gas generation is very expensive, and diesel use is an indictment of the failure of the coalition government’s focus on fossil fuel energy priorities.

Bi-fuel power plants

Talk of the electricity market in Australia this week has included interest in operating dual-fuel generators, notably the 300-megawatt Valley Power plant in the Latrobe Valley that is owned and operated by Snowy Hydro, which is owned by the federal government.

The plant features 6 fast open cycle turbines with a capacity of 50 MW that can run on gas or diesel. It is one of 3 dual-fuel power plants operated by Snowy Hydro, along with Colongra and Laverton North.

Electricity produced from various fuel sources in Australia

All 6 Valley Power plant’s turbines operated for nearly 48 hours non-stop, from early Thursday 12 May until late Friday 13 May, which is unusual for a so-called “peak station”.

Most intriguingly, it’s often offered at negative prices of $1,000/MWh for most of that time, according to electricity industry analytics firm Watt Clarity.

In response, Paul McCardle, an analyst with Australian electricity, gas and carbon markets analysis firm AKT, said there is likely to be some kind of madness behind the situation.

Moreover, bidding at a negative price ensures that the market operator will use the peak plant, and wind, solar, and strategic coal units often use the same, especially when you know prices will be high.

Some traders said that given the high gas prices at the time, it would make sense to switch to diesel to save money, especially if the power plant had an ample supply of diesel which he might have bought at a lower price than is currently available.

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