BHP Billiton CEO Andrew Mackenzie raises job fears after new power blackout

BHP Billiton chief executive Andrew Mackenzie is furious that another failure of the electricity network in South Australia resulted in the prized Olympic Dam mine being without power for more than four hours overnight.

He said the outage - which affected 200,000 customers early Thursday - was a "wake-up call" to politicians across Australia on energy policy failure and energy security must be urgently addressed before investment and jobs in Australia are placed in jeopardy.

"Olympic Dam's latest outage shows Australia's investability and jobs are placed in peril by the failure of policy to both reduce emissions and secure affordable, dispatchable and uninterrupted power," he said on Thursday.

"This is a wake-up call ahead of the Council of Australian Governments meeting, and power supply and security must be top of the agenda and urgently addressed," he said.

Federal Energy Minister Josh Frydenberg said the outage was a reminder of the vulnerability of wind-heavy SA's energy supply and the need for states to be able to produce their own power to reinforce energy security across the National Electricity Market.

"This is why the Turnbull Government through COAG has initiated the (Chief Scientist Alan) Finkel review which will provide valuable and timely advice on what new measures we need to put in place to enhance energy security."

An energy buyer for another large user whose facility did not lose power said, "It just shows the fragility of South Australia when you put all your eggs into the wind and interconnector baskets you are at the mercy of outages and constraints."

South Australia depends for about 45 per cent of its generation on wind and solar energy but the wind was barely blowing at about 1.15am Thursday when the state was cut off from Victoria's brown coal power and the local supply from the Torrens Island and Pelican Point gas plants was not enough to meet demand.

Just before that, the state was generating about 880 MW from gas plants, 125 MW from wind and importing about 460 MW from Victoria, AEMO said.

Olympic Dam, which produces copper and uranium, was unable to operate for more than two weeks after a state-wide power blackout in late September following a severe storm-induced collapse of the electricity network which plunged the entire state into darkness.

The mine, 560km north of Adelaide, only came back on line on October 13 because the transmission line it was on took the longest time to be repaired. The latest blackout overnight has infuriated BHP Billiton.

The shorter blackout overnight in South Australia, which affected up to 200,000 residents in Adelaide, was the result of the Heywood interconnector - South Australia's energy lifeline to Victoria - tripping after a transmission failure in Victoria.

The state has suffered from high wholesale electricity prices with frequent spikes, supply squeezes and stability and frequency control problems whenever Heywood has been operating at reduced capacity since last year, and especially since the closure of its last coal fired power station - Northern in Port Augusta - in May.

On Thursday prices peaked at $1353MWh between 1.30am and 2am National Electricity Market time (2.30-3am eastern time) and again at $9175MWh between 10am and 10.30am. South Australian electricity futures for 2017 and 2018 are about $106MWh compared to $67-69MWh in coal-rich Victoria and NSW.

Mr Mackenzie said the broader policy situation needed to be fixed urgently. "The challenge to reduce emissions and grow the economy cannot fall to renewables alone," Mr Mackenzie said.

OZ Minerals, which runs the Prominent Hill copper mine about 850km north of Adelaide and is preparing to invest $980 million on the new Carrapateena mine in northern South Australia which is due to begin production in 2019, was also hit. Prominent Hill was without power for up to six hours, even though back-up generators did kick in. A spokesman for OZ said on Thursday "there needs to be a co-ordinated Federal and State solution".

The Whyalla steelworks, which is one of the assets in the final stages of the Arrium sales process by administrator KordaMentha, was almost impacted by load-shedding but a spokesman said there was no material impact because of self-generation and internal load-shedding.

The Australian Energy Market Operator said at 1.33am AEDT on Thursday morning the South Australian power system "separated from Victoria" resulting in localised outages in the state for up to an hour, together with the disconnection of the Portland smelter in Victoria.

AEMO said the separation of the SA part of the network was due to an issue on the Victorian transmission network, impacting the flow via the Heywood interconnector. It said the "root cause" was still under investigation.

AEMO said about 220 megawatts of power was lost in South Australia "due to the need to balance the frequency of the network". By 5.41am AEDT the South Australian power network was reconnected to the national grid.

South Australian Treasurer Tom Koutsantonis, who is also the Energy Minister, told reporters on Thursday that AEMO had made a deliberate decision to shut off the state from the national grid after a problem with the interconnector had emerged. "We were islanded".

"It wasn't our fault," Mr Koutsantonis said.

"This was an event that started in Victoria," he said. He rejected any suggestions the state's pioneering approach to energy policy to ensure that renewable energy made up 40 per cent of the electricity production mix was to blame.

He said thermal generators at Pelican Point and Torrens Island had stepped up overnight, while there had also been 100 MW of wind power available. Alinta Energy shut down the last coal-fired power station in South Australia in May this year at Port Augusta, which brought to end 60 years of baseload power generation from that power station.

A spokesman for Alcoa Australia, operator of the energy-hungry Portland smelter, said the 360 million tonne-a-year plant was out cut off from power for about five and a half hours from 1.15am. It was still bringing its potlines - the lines of large crucibles in which alumina is smelted into aluminium under high voltage - at midday Thursday.

He said it would take about 48 hours for the plant managers to assess the damage and any financial losses. Portland was cut off by transmission losses on the Victorian side of the border which cut the flow of power to South Australia and caused the Heywood interconnector - wind dependent SA's lifeline to Victoria's brown coal power stations - to trip.

Most Adelaide residential customers who were affected had power restored by 2.45am AEDT.

AEMO said it was working closely with the Victorian transmission network service provider AusNet Services to identify the cause of the fault.


DEC 2 2016
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