Support is hardening in the federal Coalition for coal-fired power to have a medium-term role in Australia's electricity market, with some MPs suggesting a "base-load investment scheme" to upgrade and extend the life of coal plants and operate alongside a future Clean Energy Target.
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But the Liddell power station at the centre of the political fight over energy is operating at below half its rated capacity, and would present "mammoth problems" for any company seeking to extend its life, according to a former senior Macquarie Generation engineer.
The retired senior engineer, who worked at the neighbouring coal-fired Bayswater plant and had frequent discussions with his counterparts at Liddell, said Liddell was known "to have massive problems".
"It's just never been a good plant," the man, speaking on condition of anonymity, said. "It's never been reliable."
Prime Minister Malcolm Turnbull is due to meet AGL chief executive Andy Vesey on Monday to discuss the company's plans to close its Liddell power plant in 2022. The Australian Market Energy Operator said earlier this week Victoria and South Australia could face electricity supply shortfalls as early as this summer, while NSW could endure a similar squeeze after Liddell shuts.
The federal government has not ruled out taking a partial stake in the Liddell plant as a last resort to maintain the plant, but believes it is likely a private sector buyer, such as Delta Electricity, will be found to keep it operating.
Fairfax Media spoke to six Coalition MPs who identify as conservatives or who are from The Nationals on Thursday, and all confirmed that a "grand bargain" was needed to ensure the medium-term future of coal plants for Environment Minister Josh Frydenberg to secure support for a Clean Energy Target.
The government hopes to secure that support by the end of the year.
"It's obvious what needs to happen. We need to find a solution. We all want a solution. We will likely do some clean energy but also upgrade base-load [coal] infrastructure," one said.
Mr Frydenberg may also face a push to water down the Clean Energy Target proposed by Chief Scientist Alan Finkel.
He would not comment on whether he had had discussions about a "base-load investment scheme" when contacted by Fairfax Media, but said the AEMO report "has reset the debate about energy policy".
"I'm confident that the government has put and will continue to put significant policies in place, which focus primarily on the affordability and reliability of the system, as well as meeting our international commitments [for emissions reductions under the Paris climate agreement]."
The engineer familiar with Liddell said the plant routinely had at least one of its four units out of operation, and that half of the rated 2000-megawatt capacity was suddenly unavailable on February 10 – the first day of a record NSW heatwave – due to leaks in boiler tubes. That poor performance was despite its turbines being replaced about a decade ago.
On three occasions, the plant's equipment had oil supply failures that led to turbines grinding to a halt in about 10 minutes, compared with 40 minutes under normal conditions; "basically wrecking" the machinery.
AGL, which valued Liddell at zero dollars when it bought it in 2014, said in a statement: "Liddell has four units that, due to age and reliability issues, are rated at 420MW".
"Safe generation levels at Liddell are driven by a number of factors including market demand, plant outages and maintenance but more critically at present access to coal supply."
Dylan McConnell, a researcher at Melbourne University's Climate & Energy College, said Liddell operated at just 39.6 per cent capacity in August.
That level was about half the capacity utilised of Victoria's aging Hazelwood power plant in the final year before its closure in March.
Stephen Saladine, the managing director of Macquarie Generation at the time AGL bought both the Bayswater and Liddell plants, said the then state-owned corporation had planned for Liddell's closure "in the early [20]20s".
Mr Saladine, who had 40 years experience in the power industry, predicted Liddell would be gradually wound down – probably one unit at a time – as costly maintenance of the aging boilers was curtailed.
While Liddell could be extended beyond 2022, it would likely require careful work being done now. Ensuring the equipment – which operates with steam under very high pressure and temperatures – was safe remained critical, as "any catastrophic failure would be a risk to people".
ANZ Bank chief executive Shayne Elliott, meanwhile, said his bank was unlikely to finance any refurbishment of the Liddell power station to extend the plant's life, because it would not meet the bank's environmental standards.
With Clancy Yeates
