Concerns that Kogan Creek industrial action could push electricity prices up on the East Coast

Workers at CS Energy’s Kogan Creek commenced industrial action on Thursday 21 September, creating concerns over supply to the East Coast.

The 16-year-old 750 MW coal-fired power plant has a capacity of 750 Megawatts and supplies 10 percent of Queensland’s electricity needs.

The grid in Queensland is already under strain due to units being offline at CS Energy’s other plant Callide C.

Callide C3, which was taken out of commission last October due to a cooling tower failure, is expected to be partially reinstated from 30 September 2023 while full availability is forecasted for 31st December 2023 at the earliest. 

Callide C4, which suffered extensive damage after an explosion, is currently expected to return to service on 31st October 2023. 

The Mining and Energy Union has advised of potential widespread power disruptions in the state.

The union obtained permission from the Fair Work Commission to engage in protected industrial action.

The disagreement revolves around CS Energy allegedly failing to adhere to the recently established Queensland Energy Workers’ Charter, as stated by the union.

Union members are seeking assurances that contractors will not substitute them and are advocating for a “fair allocation of attraction and retention benefits within the enterprise agreement to ensure the continued safe operation of the generator,” according to the union’s statement.

MEU Queensland district vice-president Shane Brunker warned of “dire consequences for energy security running into the peak period of summer power generation”.

THE MEU said there was an absence of direction from the government to state-owned CS Energy at the negotiating table.

CS Energy said it had engaged in sincere negotiations to create a fresh enterprise agreement for Kogan Creek. 

The company expressed optimism that a resolution would be reached soon. A spokesperson played down the likelihood of any potential labour-related disruptions causing widespread power outages.

A spokesman said: “CS Energy has made an offer to provide employees with generous terms and conditions.”

“Kogan Creek Power Station is continuing to generate electricity, and we have plans in place to ensure the safety of our people and plant and minimise the impact of the proposed industrial action.”

Initial planned actions, including bans on working at height and in confined spaces, are impacting maintenance work this week. 

It could start to impact generation output in the following days and weeks.

Potential action the union may take includes operating the power station continuously at full capacity rather than reducing output during periods when wholesale power prices fall to near zero or below during the day. 

Alternatively, they may choose to operate the power station at a significantly lower rate even during the peak-demand evening periods.

Both strategies would significantly cut the earnings made from the generator near Chinchilla, which supplies 10 per cent of Queensland’s power and much of northern NSW.

What does Kogan Creek industrial action mean for electricity prices?

Currently, there is minimal evidence of pressure on electricity resources, as the National Electricity Market (NEM) recorded an all-time low in power demand on Sunday, 17 September, thanks to the significant generation from both rooftop and large-scale solar facilities.

However, the Australian Energy Market Operator (AEMO) issued a cautionary statement last month, indicating that Victoria and South Australia are at a heightened risk of experiencing rolling blackouts during the upcoming summer.

The resurgence of an El Niño weather pattern is expected to bring a hot and dry season with an increased likelihood of days lacking significant wind for power generation.

If supply does get tight and the weather does not cooperate with wind and solar farms, we could see spot prices go through the roof, as they did when Callide exploded in 2021. 

If spot prices do shoot up and hit the new market cap of $16,600 per MWhour for sustained intervals, we can expect those prices to replicate in the wholesale futures market, which would then be passed on to energy customers.

In addition to impacting spot and futures prices, reducing energy output at Kogan Creek could lead to rolling blackouts on the East Coast.

As events in Kogan Creek develop, customers within the power station’s serviced areas may also expect rolling blackouts and increased spot and futures electricity prices.

Reduced energy supply and fluctuating prices are challenging for large energy consumers, but Leading Edge Energy’s Energy Management Consultants may be able to help find solutions to soften the impact on businesses. 

Speak to one of our Energy Management Consultants at 1300-852-770 or email us at info@leadingedgeenergy.com.au

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