Australian Chart of the week | I can’t believe it’s not b[e]tter?… spreads getting better in NSW

The Federal Government announced this week that they will step into the electricity market (through the state-owned Snowy Hydro) to build up to 1,000MW of gas-fired generation to fill the gap left by the Liddell Power station for the 2023-24 summer unless the market can demonstrate final investment on dispatchable power by 2021.

It comes at a time when

  • AEMO announced in the ISP that no new gas is needed for the NEM
  • AEMO electricity statement of opportunity suggests that only 154MW of capacity is needed – this is to meet the more strict interim reliability standard (which is 3x more stringent than the actual reliability standard)
  • Rough capital cost for an OCGT would be $1,250/kW which is more than the cost of battery storage
  • Total rough short-run margin cost for new GPG to $81-$87/MWh
    • Fuel cost to run a gas-powered generator would be >$75-80/MWh given future gas projections recovering to $6.50/GJ by next year (plus $1/GJ for transport)
    • Variable O&M cost is ~$6-$7/MWh

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