Energy market turmoil: Snowy Hydro delayed until 2028 while coal plants run at half capacity

Cold snap and gas shortages spike electricity prices amid multiple outages at coal-fired power stations

Snowy Hydro’s Snowy 2.0 renewable energy pumped hydro project, due online by 2026, may not be operational before 2028, according to the Australian Financial Review. Photograph: Lukas Coch/AAP

Australia’s troubled energy market has been thrown into fresh turmoil, with the country’s biggest electricity generator’s coal plants running at just over half of capacity and the country’s biggest storage project likely delayed until 2028.

AGL Energy has told the ASX that one of the four units at its 2,210MW Loy Yang A power plant in Victoria’s Latrobe valley would be offline until the second half of September, at least six weeks longer than previously forecast. The company had five of its 11 coal-fired power units offline as of Friday morning.

Separately, Snowy Hydro’s multibillion dollar Snowy 2.0 pumped hydro project, that was assumed by regulators to be online by 2026, may now not be operational before 2028, the Australian Financial Review has reported.

Chris Bowen, just over a week into his new job as federal climate and energy minister, said the Snowy 2 delay “looks to be another hidden parting gift” from the former prime minister Scott Morrison and Bowen’s predecessor as energy minister, Angus Taylor.

The giant project was first announced by then prime minister Malcolm Turnbull in 2017 as a four-year $2bn project, a figure than may approach $10bn when extra transmission and other costs are added. Using two 27km-long tunnels to pump water between two reservoirs, the scheme is intended to supply 350,000 megawatt-hours of power, or enough to power 3m homes for a week, Snowy Hydro said.

“I find it inconceivable that the former minister, now shadow treasurer, didn’t know about this delay,” Bowen said. “This is exactly the kind of chaos and mismanagement of the energy portfolio that put Australia in its current mess.”

The reported delay of as long as 19 months also came as a surprise to ministers, who were not briefed by the Australian Energy Market Operator (Aemo) during the first meeting of national ministers on Wednesday since the change of federal government. “It didn’t come up,” said one person familiar with the meeting’s proceedings.

An ongoing cold snap across south-eastern Australia in recent weeks has contributed to soaring wholesale power prices and a shortage of gas in Victoria last week that prompted urgent meetings with companies to ensure sufficient supplies.

Rolling outages of coal-fired power plants, which typically supply about 60% of demand in the national electricity market serving eastern Australia, have contributed to the tight demand, with as much as 30% of capacity offline.

AGL said unit 2 of its 2,210MW Loy Yang A power plant in Victoria’s Latrobe valley would not return to service until the second half of September, rather than 1 August as originally hoped, after an electrical fault halted its operations on 15 April.

“The outage extension is driven by global supply chain issues and the availability of specialised materials,” the company said in a statement.

News of the extended issues at Victoria’s biggest power station has been followed by additional woes at AGL’s two coal-fired power plants in NSW’s Hunter valley.

The 1,680MW Liddell plant, scheduled for complete closure next April, has only two of its remaining three units online. Its partner plant, the 2,640MW Bayswater power station, had just one of its four units operating as of Friday.

“We took Bayswater Unit 2 out of service on Wednesday to repair a tube leak and it is expected to be out for up to 10 days,” a spokesperson for AGL told Guardian Australia. “Yesterday, a maintenance issue on the Bayswater Unit 4 boiler ash conveyor required the unit to be taken out of service for a few days.”

Unit 3, meanwhile, has been under a major maintenance program since March and is expected to resume generating electricity at the start of July.

With five of its 11 units down, electricity supply remains tight in NSW. At one stage on Friday morning, Aemo forecast four periods of a lack of reserve supply, an alert intended to prompt more supply into the grid.

Snowy Hydro and energy ministers in NSW and Victoria have been contacted for comment.