Steve points out the idiocy of the Prime Minister who is tip-toeing to a form of gas reservation to ensure that domestic needs are satisfied before exports. The tragedy for businesses investing on the basis that they can sell wherever the price is highest compounds the losses the east coast gas exporters are already incurring.
Australia has oodles of gas on both coasts but in the words of an Australian editorial has caved in “to pressures from green groups, rural lobbies and the anti-exploration hysteria of a prominent radio shock jock”. All state jurisdictions but Queensland have severely restrained the exploration and supply of gas and are undermining the nation’s wealth potential.
I have a piece in The Australian this morning that leverages off AGL’s blatant hypocritical claim it has “a plan to get out of coal as smoothly as possible — embracing cleaner, more sustainable sources of energy like solar, wind and hydro”.
As a result of the forced closures of reliable coal plant in South Australia and Victoria, the wholesale ex-generator price of electricity has risen 2-3 fold. AGL will see its profits increase $3 billion this year – not bad for a firm that struggles to make $1 billion a year. Other generators also gain, including, sadly, the exotic renewables whose subsidised output is the cause of the price increase as well as the deterioration in reliability.
The flipside is higher prices for consumers – especially commercial businesses some of which face a doubling of their electricity price and where that accounts for 20 per cent of costs this wipes out profits and means the businesses (even Politically Correct BHP) will look to less green pastures for future expansions.
Overall the national wholesale energy cost has been lifted from $7 billion in 2015 to over $22 billion this year
The piece finished with
The only reason Australia is confronting this detrimental economic situation is because of the energy policies being followed, primarily the subsidies to wind. The situation remains retrievable partly by salvaging mothballed plant in Victoria and NSW (South Australia having already destroyed its closed coal generators). We may also see the building of new plant. AGL may have turned its back on fossil fuels but there are dozens of other enterprises around the world and locally that would seek to exploit the profit potential from supplying a market that is overpriced.
And such potential is readily available. The last major coal generation power station built in Australia was Kogan Creek owned by the Queensland government and commissioned in 2007. At that time the power station could operate profitably by selling power at under $45/MWh. The cost, taking into account the preference given renewables, is now said to require $70/MWh, though this seems excessive as inflation since 2007 has been only 24 per cent. What is certain is that the price of coal-based electricity is a fraction of that available from renewable sources — which costs $110/MWh — and well below that available from gas plant.
To maintain living standards, Australia needs to prevent premature closures of low-cost electricity generators and to build new ones that take advantage of our abundant coal supplies and the expertise of the workforce. The only thing stopping this is government regulations forcing subsidies to renewable energy.