Why Forrest’s green power station is being blocked

The NSW government has embraced Andrew Forrest’s offer to build a natural gas and hydrogen-fuelled power station at Port Kembla as the state looks to a secure energy future and life after coal.
  1. The NSW government has embraced Andrew Forrest’s offer to build a natural gas and hydrogen-fuelled power station at Port Kembla as the state looks to a secure energy future and life after coal.

    But the Morrison government and its Energy Minister, Angus Taylor, won’t back the Forrest power station unless it receives approval from Australia’s independent market operator, which has deemed it too big in its current form.

    Mr Taylor on Tuesday refused to rule out pushing ahead with plans to spend taxpayer money on a similar plant at Kurri Kurri, even with the Forrest offer on the table and the mining billionaire saying his power station would be built within two years of gaining approval.

    NSW Energy Minister Matt Kean said Dr Forrest’s vision for a green energy future was “exactly the direction in which the world is heading”.

    Under the proposal, revealed exclusively by The Australian Financial Review, Dr Forrest’s privately owned Squadron Energy would fully fund a new power station next door to where it is already building a LNG and green hydrogen import facility.

    The power station, expected to cost $1 billion and employ 700 people in the construction phase, would start life burning gas, or gas and green hydrogen, before a transition to just green hydrogen.

    The world’s biggest power station equipment manufacturers now make turbines suitable for both gas and green hydrogen and Squadron is already deep in talks with them about the Port Kembla facility.

    Dr Forrest wants to build a 850-1000 megawatt single unit power station because it is more efficient and enables Squadron to make use of the latest technology.

    The Fortescue Metals Group chairman and founder has pledged to start work on the power station as soon as he has approval from the Morrison and NSW governments.

    The Australian Energy Market Operator (AEMO) argues it is too large as a single unit, given most of the coal-fired power stations operating in NSW produce about 650 megawatts.

    AEMO said that when assessing power generation proposals, it had to consider whether a new power station can be safely and securely integrated into the system.

    “If a single unit is too large, it may pose a threat to system stability, as any interruption in its output must immediately be replaced to maintain balance of supply and demand,” an AEMO spokesman said.

    “In the case of Squadron Energy’s proposal, the originally proposed unit size exceeds the level that the system can withstand losing.”

    AEMO said it did see both gas and hydrogen playing a key role in the reliable supply of electricity to homes and businesses.

    Dr Forrest said his power station project needed the support of both the NSW and federal energy ministers, NSW Premier Gladys Berejiklian and Prime Minister Scott Morrison.

    “At the bureaucracy level they are saying we should have diversity of supply. I’m saying, well sure, but if the people of NSW want their electrons to be fully carbon-free then either people join me, which they are not, or they allow us to optimise the size of our power station,” he said.

    Dr Forrest hosted a town hall meeting in Port Kembla last week, and also met Mr Kean recently.

    The Morrison government has recognised the merit of Dr Forrest’s Squadron proposal by including it on a shortlist of 12 on the Underwriting New Generation Investments program.

    Mr Taylor has met all the proponents, including Squadron, to discuss their projects, but the government maintains Squadron must get the necessary approvals from AEMO.

    Mr Kean said the Forrest proposal was another green light for the NSW government’s plans to make the Illawarra a hydrogen hub.

    “I support any proposal to the NSW energy grid that provides for reliable and cheap electricity for the people of NSW,” he said.

    “It is also in line with our $750 million net zero industry program, which is about making sure NSW prospers in a low-carbon world.”

    Mr Taylor declined an interview request but a spokesman for the minister said new gas projects would help to ease affordability and reliability concerns as a result of the closure of the coal-fired Liddell power station in 2023-24.

    He has committed the Morrison government to building a gas-fired power station with future green hydrogen capacity at Kurri Kurri if there are no concrete proposals of 1000 megawatt scale from the private sector by the end of April.

    Squadron wants to build a power station with a starting life of 30 per cent hydrogen capability and then, by the late 2020s or early 2030s as technology evolves, transition to 100 per cent hydrogen.

    Dr Forrest’s vision is for much of the green hydrogen needed for the power station to come from Western Australia, where his Fortescue Metals Group is aiming to become a major producer and exporter of green hydrogen as part of an energy business he believes may one day dwarf its iron ore operations.

    Fortescue announced on Monday it was aiming to be carbon neutral by 2030 and has tied achieving the target to executive remuneration.

    NGS Super followed the Fortescue lead on Tuesday, with the $12.8 billion fund setting a 2030 target for a carbon-neutral investment portfolio.

    NGS said 2050 targets were simply not good enough and super funds needed to advocate through action to protect retirement savings.

    Source: Financial Review