Claims WA's main power grid 'slowly collapsing' as its biggest gas plant teeters on edge
One of Western Australia's biggest gas-fired power plants has been teetering on the edge of bankruptcy, fuelling worries its failure could spark a wider crisis in the state's electricity system.
It is understood former WA energy minister Reece Whitby last year sought a bailout of more than $30 million for the Newgen power station in Kwinana, south of Perth, as the generator battled to keep its head above water.
With a capacity of more than 310 megawatts, Newgen is one of the most important units in WA's main power grid and supplies a significant share of the energy contracted by state-owned utility Synergy.
Ian Porter, a 50-year veteran of the energy industry who now runs his own consultancy, said the importance of a plant such as Newgen should not be underestimated.
He said it represented anything up to 15 per cent of the production in the state's main grid, which covers the south-western corner of the continent.
The Newgen plant is owned by Japanese conglomerate Sumitomo and UK infrastructure group Foresight.
Sumitomo is also the owner and operator of another troubled WA plant — the coal-fired Bluewaters near Collie, 180 kilometres south of Perth.
Amid the pleas for a bailout, it is believed Mr Whitby argued that a failure by Newgen would directly expose Synergy to the wholesale electricity market, where prices have been soaring in recent times.
Such an exposure would come as a further blow to Synergy, which sought its own billion-dollar bailout last year as its financial position continued to deteriorate.
But the government is believed to have rebuffed the request, instead saying Synergy should fund any lifeline out of its own pocket.
Mr Porter backed the government's decision to reject the bailout proposal, saying it should not be up to taxpayers to rescue privately owned companies.
What's more, he said even if the plant became insolvent, that did not necessarily mean it would stop operating.
"The company may go, but the assets remain," he said.
Central to Newgen's troubles was a big shake-up in late 2023 of WA's biggest electricity market.
The revamp was aimed at helping the grid cope with the transition towards renewable energy, which now accounts for about 40 per cent of WA's power.
Mr Porter said the rise and rise of renewable energy in the west had been successful in many ways but he noted it had not been without its challenges.
Chief among them, he said, was the way in which renewable energy could force out virtually all other generators when the sun was shining and the wind was blowing.
Mr Porter said this presented a major problem for thermal generators such as coal and gas plants, which still provided most of the so-called essential system services that kept the grid stable and reliable.
To maintain those services, he said the market had been redesigned to ensure market players were better paid for providing them.
The problem was, he said, payments only benefited some generators and not others such as Newgen, even though the costs were spread across all market players.
"I'm surprised that this would affect a gas generator," he said.
"It would certainly affect renewables generators and how they're affected by that. I'm rather puzzled."
On top of these problems, it is understood Newgen has also been affected by hurried moves to buttress the grid through back-up services such as large-scale batteries.
Financial disclosures by Newgen show the plant has been losing money for some time.
According to filings with the Australian Securities and Investments Commission, the generator was underwater to the tune of $1.67 million in the 12 months to June 30 last year.
This followed on the heels of a $2.9 million reverse the previous financial year.
Its financial health for the current period — the year in which Mr Whitby made his pitch for a bailout — will not be revealed for months yet.
Summit Kwinana Power, the operating company behind Newgen, declined to comment.
WA Energy Minister Amber-Jade Sanderson also declined a request to be interviewed about Newgen's predicament.
Instead, the new minister provided a statement in which she said Newgen's finances were a matter between it and Synergy.
"Synergy's contractual arrangements are commercial in confidence," Ms Sanderson said.
Shadow Energy Minister Steve Thomas was more forthcoming, saying the problems at Newgen were just the latest sign of distress in the state's main electricity market.
Dr Thomas said Newgen was a vital cog in what was arguably the state's most important machine — the grid — and letting the generator fail was a dangerous option.
"I'm worried about Newgen, but I'm worried about the entire energy system," Dr Thomas said.
"I'm worried about all of the generators who seem to be struggling.
"I'm worried that the lights will not stay on in the fullness of time.
"And I'm worried that the price for consumers, business and families will be beyond their capacity to pay."
Critically, Dr Thomas said the government was facing a reckoning over its plans to get out of coal by 2029.
He noted the government was already falling way behind in its efforts to build the new capacity needed to replace its giant Muja and Collie coal plants.
If critical gas plants such as Newgen started falling over, too, he said, the state's plans and the broader energy system would end up in tatters.
"We're going to see more of this," he said.
"As the pressure comes on the government to provide the energy that's required at a cost that business and families can afford, the government is going to be under enormous pressure.
"And this may well be just the first step.
"The result will be prices through the roof as the system slowly collapses."
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