Coal news and updates

Coal a ‘dirty word’ as Synergy records $263m loss amid energy transition

State-owned electricity generator and retailer Synergy lost $263 million last financial year due to increased costs to clean up Kwinana Power Station and pricey fuel supply contracts.

In the utility’s annual report tabled in Parliament this week, Synergy chief executive Jason Waters said the major drivers for the loss were directly linked to the transition of the electricity system to lower emissions power.

After an independent expert reviewed its numbers, Synergy increased the cost estimate for decommissioning Kwinana Power Station by $92 million. The change came just two years after the provision for decommissioning all Synergy facilities was independently assessed.

Provision for onerous contracts was increased by $160 million. The provision is the expected cost of meeting unavoidable obligations in supply or sales agreements.

It is understood one contract of concern is a 2011 deal to buy 125 terajoules a day of gas from the Gorgon gas project for 20 years, which started supply in 2016. The price agreed in 2011 is believed to be well above the current market price, and a scheduled price renegotiation in 2019 did not fully remedy the situation.

Without these provisions, Synergy reported an underlying net profit before tax of $3 million from its sales revenue of $3.06 billion.

Revenue grew 2.3 per cent despite more customers generating their own power with rooftop solar. Synergy attributed the growth to the weather and more people working from home because of COVID.

Synergy chairman Robert Cole said the utility has committed to support the WA Government’s aspiration of net zero emissions by 2050 “which will have a profound influence on our business going forward” and place “considerable financial pressure on Synergy.”

“The next five years will be a critical transformational period for the energy sector – and Synergy in particular – as we prepare for a new energy future.”

Last week Minister for Climate Action Amber-Jade Sanderson said the state government would soon set interim targets towards net-zero emissions for its own activities, but it was not confirmed if this would include Synergy.

Synergy’s preparation for the future includes the installation of a 100 megawatt “big battery” at the Kwinana Power station site that is expected to be operational by September 2022.

The power produced from Synergy’s coal and gas-fired power stations has dropped 30 per cent in the five years to June 2021. Over that period, Synergy’s share of power supplied to the South West grid dropped from 44 per cent to 32 per cent.

The Synergy report is full of references to its renewable energy-related activities. It makes little mention of the importance of its two coal-fired power stations, Muja and Collie, which generated 26 per cent of the power sold onto the South West grid during the past 12 months, according to Australian Energy Market Operator data.

The word “coal” appears just a handful of times in Synergy’s 101-page report, and the critical Collie and Muja facilities are called “traditional thermal generation.”