Power giant AGL Energy will consider tweaking output from its NSW Bayswater coal plant during the day as cheaper solar and wind challenges the long-term role of fossil fuels in the grid.

With rival Origin Energy trialling a similar shift at Australia’s biggest coal plant, Eraring, AGL said all the nation’s coal fleet would have to contemplate optimising output over the coming years to remain competitive.

“Do you leave four units on and run them up and down or do you take one unit off and leave three up at full load?,” said AGL’s wholesale markets head Richard Wrightson. “Those are the things all the players are looking at as renewables push through.”

In the last five years, big coal stations have generally been run throughout the day and night reflecting both strong market demand for supply within the grid but also the challenges of tweaking output from ageing plants.

However, with solar now beating coal on price during the day, plant owners are looking at shutting down generator units after meeting morning demand and firing them back up to meet evening peaks.

Still, rolling out the so-called “two-shift” operation among coal plants is likely to be assessed on a raft of factors including the age of the power stations and cost of their coal supplies.

Such a move could make sense at AGL’s 2640MW Bayswater station when it’s paying for black coal at Newcastle spot prices.

“At Bayswater we are buying coal at Newcastle spot indices minus washing costs and making live day-to-day decisions,” Mr Wrighton said.

“So do I buy more coal to sell more electricity? That is an economic decision as we move to more renewables.”

However, AGL’s 2210MW Loy Yang A facility in Victoria with access to cheap brown coal supplies could make it uneconomic to pull generation back from the grid.

“The issue for Loy Yang is that brown coal is dug out of the ground for practically nothing beyond the royalties we pay to the state government,” Mr Wrightson said. “Therefore to pull back at Loy Yang you’re basically taking zero cost energy out.”

That trend was illustrated — on a grand scale — by the closure at short notice of Engie’s Victorian Hazelwood plant in 2017.

“There was an instantaneous hit on price,” Mr Wrighton said.

The AGL executive also points out that it was only earlier this decade that power prices were low and coal units were regularly taken offline to reflect excess supply in the grid — in some sense an early trial of tweaking coal output.

“Four or five years ago with prices being on the floor with electricity, we were dropping generator units on a regular basis,” Mr Wrightson said.

Despite the strides made by renewables, clean energy still only accounts for 20 per cent of Australia’s electricity generation with coal still dominant at 70 per cent.

Mapping the future generation mix of the country’s energy grid over the next few years remains highly uncertain.

The next big jolt to the grid could be when AGL’s Liddell coal plant exits in 2022.

It is expected the big generators such as Bayswater and Eraring will consider the need to cover the medium-term impact of Liddell’s retirement while at the same time having to plan for a potential market shift in their daytime operations.

Source: The Australian