Underwriting New Generation Investments program

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Underwriting New Generation Investments program is an Australian Government program which was launched in late 2018 to underwrite new privately-owned power generation capacity and new coal plants or upgrades of existing ones in particular. In March 2019 Prime Minister Scott Morrison announced that 12 projects had been short-listed including a coal plant upgrade proposed by Delta Electricity, a company co-owned by Trevor St Baker.

Background

The program, the Department of Environment and Energy states, is "to increase firm electricity supply and improve wholesale market competition to reduce wholesale electricity prices." While the program is touted as being "technology neutral" and intended to provide "a level playing field to enable the best and lowest cost generation options to be supported" the government has made clear its intention is to support new coal-fired power stations.

While nuclear power projects are excluded, the departent states the program will consider "greenfield and brownfield projects, such as upgrades or life extensions of existing generators."

Registrations of Interest

On February 1, 2019 the Minister for Energy Angus Taylor announced that the Department of Environment and Energy had received "66 submissions." While proclaiming that the program was "technology neutral" his media release described the proposal as comprising "a balanced mix of sources of generation including coal, gas and hydro." He made no mention of projects which included batteries, solar or wind or other technologies even though in a subsequent press conference he referred to the proposals being "for a whole range of different technologies." He said the proposal included "a whole range of different types of projects in these submissions from gas to coal to waste-to-energy to batteries."

In an earlier interview he said of the proposals that "our electricity system needs balance - it needs the reliable, 24/7 baseload power alongside the very significant investment in renewables that is happening right now. it needs the reliable, 24/7 baseload power alongside the very significant investment in renewables that is happening right now."

In an interview on the Alan Jones radio program Taylor said that 10 of the 66 experessions of interest "are for coal". The projects, Taylor said, had a total capacity "equal to more than half of the total capacity of the National Electricity Market." The installed capacity of the National Electricity Market is approximately 50,000 megawatts (MW).

In another interview Taylor said "the only submissions that we'll accept are ones that provide dispatchable power and the reason is because there's been a loss of balance in the system." Asked whether renewables with batteries could be included, Taylor avoided answering the question directly stating only that "I'm not interested in picking technologies."

It was reported that the 66 expressions of interest identified 70 proposed projects including 26 in NSW, 17 in Victoria, 15 in South Australia and 12 in Queensland.

Known projects

While Angus Taylor has referred to there being 66 projects, the only public details are where proponents have voluntarily disclosed details. To date, only three of the 10 mooted coal projects have been mentioned.

One of the co-owners of Sunset Power International, Trevor St Baker has stated that he is proposing two coal projects. Alinta Energy has also indicated it is proposing to upgrade an existing plant.

Trevor St Baker's bid

In January 2019 St Baker told The Australian that he would submit a proposal to Australia's Minister for Energy, Angus Taylor, for government support for three projects: a new A$3-4 billion 1320 MW new brown coal plant at the site of Engie's now closed Hazelwood power station in the Latrobe Valley in Victoria; a new A$2 billion 660 MW black coal plant in NSW's Hunter Valley at either AGL's Liddell power station or adjoining Sunset Power International's existing Vales Point power station; and a 240MW Goat Hill pumped hydro project near Port Augusta in South Australia. St Baker claimed "our plan is the cheapest way to supply the essential firm generation you need for reliable power."

The report claimed "St Baker has lined up a Chinese joint-venture partner" but did not name the company. St Baker said that financing the projects would not be sought from Australian banks but instead would rely solely on international lenders. (See Hazelwood (Sunset Power International) power station for more details.)

Alinta Energy's bid

In late 2018 Alinta Energy flagged that it planned to proceed with a A$170 million upgrade to its 1000 MW Loy Yang B power station in Victoria's Latrobe Valley. It was reported the proposal would increase the plant's generation capacity by 5 per cent.

In its 2019 Environmental Improvement Plan Alinta Energy states that in January 2017 the Victorian Environment Protection Agency granted the company a works approval to upgrade each of the two 500 MW units at the plant. In its plan the company stated "we are scheduled to undertake turbine and generator upgrade projects on Unit 2 in early 2019, followed by Unit 1 in 2020. This work will include two major outages and is forecast to improve Loy Yang B’s emissions intensity (efficiency) by approximately 5% and an increase in electricity by up to 8.6%."

While Alinta has not public released details of its expression of interest, the company's chief executive Jeff Dimery told the Australian Financial Review the company would be seeking the support of the scheme for "marginal improvements" at the Loy Yang B power station. It also reported that Alinta was also seeking funding for "a new 300MW gas power plant in South Australia, gas upgrades in Victoria and Queensland and a pumped hydro project in NSW."

Alinta Energy said that the upgrade involved a six week shut down on Unit 2 in 2019 to allow the replacement of both the turbine and generator. In 2020 the turbine and generator on Unit 1 will be replaced. Alinta state that after the upgrade the new turbine and generators should last until the plants nominal closure date of 2048.

Shortlist announcement

On March 26, 2019 Prime Minister Scott Morrison announced that 12 projects had been short-listed including a coal plant upgrade proposed by Delta Electricity, a company co-owned by Trevor St Baker. The announcement simply stated that the Delta Electricity project was "Lake Macquarie" but provided no additional details.

While only one coal project has been selected so far, more may be supported subsequently. In announcing the shortlist Morrison stated that "the Government will continue to engage with proponents that have not made the shortlist, but meet the guidelines."

He also announced:

"a new program to address supply and affordability issues specifically for high energy-intensive and trade-exposed customers in North and Central Queensland. As part of our plan for a stronger economy, the Government will provide $10 million over two years for the program, which will fund a business case that will focus on short and long-term customer energy requirements and future generation opportunities to meet customer needs. The program will develop a detailed roadmap and identify viable locations for firm generation including coal, gas, pumped hydro, and biomass opportunities, including Collinsville and Gladstone."

The new program, Morrison stated, "will conduct detailed evaluation and feasibility of projects in North and Central Queensland through the Underwriting New Generation Investments program. These projects include but are not limited to a new HELE coal project in Collinsville, upgrades of existing generators as well as gas and hydro projects.

In a media conference the same day in Brisbane Morrison stated that the study on North Queensland power supply would be a "feasibility analysis across a range of projects to see what best can meet the industrial power needs of north and central Queensland. Now, that will engage in a range of projects, which will also include looking at the Collinsville proposal, which is a proposal that has been around for some time. But there is no commitment to underwrite or support any of those projects, we want to do the proper analysis to work out which project or which group of projects actually delivers on the need."

While proclaiming that the feaibility study would assess a range of option, he made clear that he was broadly supportive of the proposed new coal plant in Collinsvill promoted by the Liberal National Party of Queensland. "Now, in terms of the plant, the Collinsville proposal is there, that will actually have an emissions intensity which is lower, lower than the current average for the entire east coast grid. So these are projects which at the end of the day, will continue to help us meet all of our emissions reduction targets. None of those are put at risk by this, in fact they're enhanced I believe by what we're proposing here. Certainly at a global level, ensuring that we can keep industries in Australia that operate on a far more environmentally friendly basis here in Australia, than they would if they actually went offshore," Morrison said.

When questioned, Morrison said that "there are no proposals for us to invest in those projects" and that "we have no plans for subsidies at all." However, the implication of his comments was that he was open to the possibility of providing underwriting or other financial support after the feasibility study has been completed.

The exchange at the media conference between Morrison and the journalist was:

JOURNALIST: On energy in north and central Queensland, is that limited to underwriting or could subsidies be a part of that program?

PRIME MINISTER: In North Queensland, what we’re looking to do is establish what is the most viable approach. There are no proposals for us to invest in those projects. What we have always been looking at is the underwriting provisions that can assist in those projects, gathering finance. But we’ll look at the case studies.

The key point is this; what is the most effective, most sustainable and most affordable and reliable way to save the jobs and keep the jobs of people working in north and central Queensland? We will take the best answer and once we know what that best answer is - and this project will be able to determine that once and for all.

JOURNALIST: So you wouldn't rule out subsidies?

PRIME MINISTER: We have no plans for subsidies at all, no, we don't have such a plan. What we have a plan to do, is work out what's the best project and then work out what is the best way to make that project happen. The only things we presently have in our toolkit are the underwriting powers on price, which is what we would be applying if those other projects were successful.

Timeline

• October 23, 2018: Program announced;

• November 9, 2018: Deadline for submissions on the proposed design of the scheme;

• November 7, 2018: The Minister for Energy, Angus Taylor, hosted a roundtable in Sydney;

• November 9, 2018: The Department of Environment and Energy hosted a consultation forum in Melbourne;

• January 23, 2019: Deadline for submission of Expression of Interest;

• January/February 2019: updated program guidelines released and proponents who submitted an EOI and any other interested parties requested to submit proposals due in March 2019;

• March 26, 2019: Prime Minister Scott Morrison announced the shortlist of 12 projects, including one proposed coal plant upgrade;

• Projects assessed, a recommendation made to the Energy Minister on which project or projects should be supported with a final decision made by the Government with the aim that funds will be allocated at the beginning of the 2019-20 financial year.

Related GEM.wiki articles

• Trevor St Baker
• Sunset Power International
• Alinta Energy

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