How does the free market cope with rogue businesses?

AGL from being a local NSW gas company has become the largest energy business in Australia.  Having weathered a disastrous period when Welshman Paul Anthony was installed as CEO in the early 2000s, the firm went into rehabilitation under the leadership of CEO Michael Fraser between 2007 and 2015.

Fraser presided over a modest share price recovery.  But his spectacular acquisitions of coal fuelled power stations have turbocharged value.  Those acquisitions comprised Victoria’s 2200 MW Loy Yang A station and mine which cost $1.5 billion in 2012.  The station is relatively new and was originally sold by the Kennett privatisation in 1997 for $4.9 billion.  The Liddell and Bayswater NSW facilities, bought for $1.5 billion in 2014, are twice Loy Yang’s capacity but do not have their own coal (though much of their supply is under a long term contract at very advantageous prices).

Earnings from coal have come to dominate the firm’s balance sheet.  They were $1.38 billion, 80 per cent of total profits in 2015/6, when the electricity spot price was less than half of that of today.  Once contracts are fully renegotiated, the firm will therefore see windfall profit gains of over $1 billion a year.

Among the beneficiaries of this is the present CEO Andy Vesey who has taken the firm in a green-friendly direction.

If, as it said it will, AGL were to close the Liddell 2000 MW power station in 2022, it would expect the wholesale price to rise further and push up profits, without the need to invest maybe one billion dollars in refurbishment of Liddell.

Compared to such revenues, those irritating coal ads Let’s face it. Things are changing    are mere bagatelle for a company the earnings of which are dominated by the product they denigrate.

The current CEO’s coalphobic policies have been married to agitation and funding of radical groups.  Among Vesey’s appointments are Labor-Green former GetUP! Director Skye Laris, as head of AGL’s public advocacy. Laris had already had made a name for herself as a staffer then mistress of former Environment Minister Tony Burke.  Under her guidance Burke introduced policies that have taken water from Murray irrigators and brought great distress to the province which is responsible for a third of the nation’s agricultural output.

Attacking rival businesses using green agitation brought a key scalp in the closure of Hazelwood, which led to the doubling of wholesale prices we have seen in the past year.

The green thrust of Australia’s biggest energy business is being further amplified by a new head of Government Relations, the Al Gore trained nominal Liberal Tony Chapel.

Nobody should begrudge a firm making money by innovating and taking risks as did AGL under CEO Michael Fraser.  But AGL is taking entrepreneurship further by conscripting government policies to harm competitors and boost its profits with measures that include a narrative that falsely maintains that coal, notwithstanding over 1,500 new units under construction around the world, is finished as an energy source.  For over 30 years, renewable energy boosters have been declaring that their product will be cheaper in the near future but it remains twice the cost of coal generation with none of its reliability.

AGL is not the only energy business that decries the fossil fuels on which its profits depend.  However, its activities in nurturing government policies that force up prices and damage the economy, perhaps irreparably, make it an outfit verging on being a rogue firm.

Its threats to close Liddell, a plant which is critical to preventing further electricity price rises and instability, should perhaps be met with a government requiring the facility be sold to another competitor.  Not exactly a policy of free market detachment but the denigration of fossil fuel energy has created conditions that are difficult for a free market to repair.

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31 Responses to How does the free market cope with rogue businesses?

  1. cui bono

    Vesey’s on a 457? Is that true?
    It’s sound like your average casino croupier could be running the show.

  2. H B Bear

    The NEM is so thoroughly bastardised that nationalising coal plants now seems like a good idea. Hugo Chazez would approve.

  3. I’ve said it before, but nothing will change until the lights go out.

  4. RobK

    ” Not exactly a policy of free market detachment but the denigration of fossil fuel energy has created conditions that are difficult for a free market to repair.”
    I heard the new CEO of AEMO (?) the lady from New York with so much green credentials. She says it’s a changing market and we could be leading the world. Heaven help us. Even on Reneweconomy website they are flailing about the distortion in the biding, the rigging of frequency control spinning reserve biding. They do think they aren’t subsidized and they believe they are only “this far” from being competitive. At a certain point you just have to scrap the whole thing and start again. It’s a nightmare. Completely out of control. The government is being lead around by it’s nose. Layers of bureaucracy and opportunists. Punters being fleeced, country down the toilet.

  5. OldOzzie

    Australian Taxpayers are being taken for a ride and treated like Mugs on all sides and by both Major Parties, Labor and Liberal

    Solar farm burns money

    Imagine putting $100 in the bank and getting back a guaranteed $83 a year for four years, and then $59 a year for the next decade — all taxed at a maximum rate of 30 per cent. Your 2.9 per cent high interest saver account, taxed at 39 per cent, isn’t looking so good.

    Courtesy of Australian electricity users, and the stupidity of the commonwealth government, Saudi Arabia’s Abdul Latif Jameel Energy, which bought Spanish solar farm builder Fotowatio in early 2015, has indeed struck such stellar returns.

    In 2014 the Australian Renewable Energy Agency proudly made a $101.7m grant to the Spanish company for a $164m solar farm about 10km out of Moree, comprising 250,000 solar panels. An enthusiastic Clean Energy Finance Corporation chipped in a $47m loan to help, leaving Fotowatio with only $15.3m to put towards the project itself.

    With a capacity of just under 150,000 megawatt hours a year, the solar farm, up and running, will generate about $12.8m in revenue a year for the next few years, based on the current Large-scale Generation Certificates (LGC) price of $85.

    Assuming that price falls to $60 on average between 2020 and 2030, the farm will provide a tidy $9m a year to the Saudi owners.

    All up, over the 14 years, the $15.3m investment would have reaped about $140m for the owners, a return of more than 900 per cent, which, by the way, is quite a bit better than the typical super fund.

    “The project would not be possible without the unwavering support of the local community, Moree Plains Shire Council, the federal Members for Parkes, NSW state government, all the people who have dedicated many hours to development of the project, and last but not least, ARENA and the CEFC who have provided funding for the project,” said the Fotowatio regional manager for Australia. Full marks for honesty, at least.

    Before you get jealous though, rest assured the project will, AREA said, create about 100 jobs, and provide electricity for 15,000 homes.

    This has been a fantastic outcome for our Spanish and Saudi foreign investors, but it’s far from clear it’s a good deal for anyone else. The 100 jobs that have supposedly arisen have come at a cost of almost $1.5m each, including the grant and the government loan.

    And the 15,000 homes could have sourced their electricity from other, far cheaper sources. Too bad those cheaper sources are gradually shutting down.

    What about carbon abatement you say? According to Fotowatio, the farm will avoid 102,000 tonnes of CO2 a year. So that works out at between $88 and $125 a tonne, based on the LGC prices assumed above, which is up to five times more expensive than Julia Gillard’s carbon price of $23 a tonne.

    Surely though, despite all this excess, households will be enjoying lower power prices?

    After all, that’s what the modelling provided by the renewable energy sector and the army of consultants who work for them keeps telling us: more renewable energy will ultimately lead to lower wholesale electricity prices, which will be passed on to consumers.

    Unfortunately, this sort of modelling has a major flaw. It assumes the owners of coal power stations keep them running, incurring huge losses every day they can’t sell their electricity into the power grid because it’s windy or sunny.

    In reality, these stations inevitably choose to close, as Alinta’s Northern coal-fired power station in South Australia and Hazelwood in Victoria have already done. Liddell in NSW is next. That will leave a greater share of the grid’s capacity supplied by intermittent solar and wind.

    My Energy Australia power bill arrived yesterday, for the three months to August, showing a 15 to 23 per cent price increase per kWh of electricity between June and July. The bill came to $527 for three people in a small house who are barely home.

    A cynic might hope for blackouts across the eastern states this summer, to show voters the consequences of years of kneejerk, feel-good energy policy: extremely expensive, even absent power.

    And it’s hard to see the cost of power falling or the level of reliability improving. Because of the RET, electricity retailers like Energy Australia are forced to buy power from renewable energy providers such as Abdul Latif Jameel when it is available. This year they are buying around 28 terawatts, rising to 33 terawatt hours a year by 2020.

    For the massive sums Australians are forking out via their power bills and taxes to build solar and wind farms and provide juicy returns to foreign investors, we could have built multiple small nuclear reactors, which would, by the way, generate a lot more than 100 jobs each.

    If we’re going to splurge on unreliable, emissions-free power, why not do it on reliable emissions-free power instead. A kilogram of coal can light 100 light bulbs for less than four days; a kilo of uranium would do the same for more than 1140 years.

    Australia is the only country in the G20 to have banned nuclear energy, which is completely bizarre, rivalling the RET itself for stupidity.

  6. zyconoclast

    I heard the new CEO of AEMO

    I heard the boss of AEMO admit that the problem with wind and solar are they are intermittent. But this gives us the chance to embrace new opportunities such a cycling your pool pump and refrigerator so they can operate when demand was low.

    It sounded like a Maocolm speech about agility, disruption and innovation.

  7. herodotus

    Another episode of who’s in bed with who. The tactics of “rogue” companies is something worth noting. But the dodgy “climate change “tactics of several governments has made the bed they lie in.

  8. RobK

    Australia will only sink deeper in debt whilst it entertains the CO2 conjecture. These alt energy schemes are not capable of supporting a robust economy. Dreamers the lot of them.

  9. herodotus

    Yes, I also heard the AEMO person interviewed on ABC radio today. So much programmatic jargoniferousness that even KRudd would have been hard put to keep up with it. But like they say about the English and music, even not knowing what the hell it was all about, he’d have liked the noises she made.

  10. zyconoclast

    AEMO APPOINTS NEW CHIEF EXECUTIVE OFFICER, MS AUDREY ZIBELMAN

    During Ms Zibelman’s leadership at the NYPSC, New York Governor Andrew M. Cuomo enacted the ‘Reforming the Energy Vision’ (REV) plan. The REV plan has been internationally recognised for successfully developing and implementing 21st century regulatory reform with a focus on lowering the cost of energy for consumers while building a more resilient and reliable power system.

    https://www.lexology.com/library/detail.aspx?g=bbeb89a4-810f-47fc-bae1-c6271e366f99

    Timing. Even if the ultimate vision of widespread, clean distributed generation is highly desirable to many New Yorkers, there could be practical implications inherent in the time it takes to transition from the current status quo to the new vision. Proponents may need to pragmatically accept that lead times on these changes could be measured in years rather than months or quarters.
    Price increases — particularly shocks — will be detrimental to the final success of REV. While one of the premises of REV is that money will be saved by consumers—in large part due to increased customer choice, increased proximity to generation sources, and increased ability to own generation assets—it is also true that the changes contemplated by the plan will cost money. This is a risk for politicians who need to ensure that constituents are aware of both the risks (despite the difficulty of those conversations) and the benefits of REV, and that price increases and shocks are minimized.

    Conclusion

    New York’s REV initiative is ambitious and will serve as a guide for regulators in other jurisdictions moving toward various versions of the “grid of the future.” The PSC estimates that the energy savings, reduced line losses, and other cost reductions under REV could save New Yorkers between $1.4 billion and $2.1 billion a year.

    However, the road to attaining the true DER/DSP dichotomy that is one of REV’s goals remains fraught with perils. Exceptions to rules threaten to swallow some of the more innovative aspects of the plan. Realization of the savings quoted by the PSC is contingent on proper execution and the removal of uncertainty from the plan.

    Even to the extent that these problems are addressed, it is not inconceivable that resolution will take longer, even much longer, than some market participants have discussed. However, with any transitional period comes disruption, and it is clear that policymakers in New York are considering the difficulties that will arise during this period of change. The fact that the task is difficult does not make it less worthwhile—indeed the opposite may be true. Those deploying disruptive technologies, and those with the appetite to develop projects speculatively, could be big winners in such an environment.

    The REV process, even if implemented efficiently, will be a bumpy ride. But it could provide entrepreneurs and customers with great benefits and could well serve as the testing ground for any number of ideas that will shape the future of energy generation and distribution in America.

  11. Garry

    When the light finally go out the public will turn on this pack of useless idiots.

  12. RobK

    Garry,
    They will be nowhere to be found.

  13. OldOzzie

    Canberra scapegoats AGL for power crisis

    The plot lines are increasingly clear ahead of Monday’s showdown between Prime Minister Malcolm Turnbull and AGL’s Andy Vesey, with the government to use an upcoming ACCC report on electricity prices to threaten Vesey with the government’s powers to force divestment of his power generation.

    The sheer hypocrisy of Canberra — having failed to establish long-term energy and climate policy, it lectures business on how it should behave — simply beggars belief.

    If this was an ALP government the Liberals would be screaming murder and recalling the ghosts of Karl Marx.

    It comes during a tussle over AGL’s plans to shut its coal-fired Liddell power station in NSW in five years, as Canberra presses for the plant to be kept open to avert feared blackouts and relieve pressure on power prices.

    Forcing retailers to divest generation assets is expensive and a flawed concept, but in the present climate that won’t stop the politicians bringing it up.

    The government can force divestment on reasonable commercial terms, which would make the billions spent on the Snowy revamp or the NBN look like petty change.

    In simple terms, it’s an issue of supply and demand, with too little supply forcing prices up.

    As AGL has noted in its ACCC submission, stand-alone generators have the incentive to withhold supply to get higher prices, while integrated retailers have an incentive to invest in new generation to increase supply but also to manage the balance.

    The big three energy retailers control 70 per cent of the market and more than 51 per cent of your electricity bill, given they all have their own generation assets. Network costs are another 34 per cent and other government charges including the subsidy to renewable energy accounts for 15 per cent.

    The retailers are in the firing line because their name is on the bill. Energy Australia in its submission to the ACCC noted in the last six years the average retail return on capital was 4.9 per cent, or roughly half the 9 per cent earned by the network operators and below the cost of capital at 8 per cent.

    At the turn of the century after the Victorian privatisation, the retailers and network companies were under the same roof, but the network companies went for the regulated model, which boosted returns by minimising risks.

    Market changes will happen.

    The Grattan Institute’s Tony Wood argues there should be some form of market intervention, like the reverse auctions Britain uses to guarantee capacity.

    The National Energy Market sends price signals but is an energy-only market, which means the price is determined by supply, with capacity not an issue.

    Wood’s idea is that the market regulators of Finkel’s security board would have a look at the outlook and say we need another “x” megawatt hours of supply, and generators would bid to provide guaranteed supply.

    They would be paid even if the supply wasn’t needed, for example because the season wasn’t as bad as expected.

    Without even seeing the coming Australian Competition & Consumer Commission report, Energy Minister Josh Frydenberg is already making it known that ACCC boss Rod Sims is no fan of vertical integration under which, traditionally, one entity owns all levels of the supply chain — generation, transmission and distribution.

    Sims knows his way around Canberra and knows what sort of report the politicians are looking for.

    He is due to hand his report to Treasurer Scott Morrison just before delivering a National Press Club Speech on September 20.

    A politically astute ACCC chair is no bad thing but the organisation’s reputational risks are magnified when, like now, the government is operating in a populist policy vacuum.

    The politicians’ game is obvious — find someone else to blame for their own incompetence in not being able to fulfil their job, which is to implement the Finkel report and finally lay down a long-term energy policy that marries with climate policy.

    When politicians can’t make decisions they find scapegoats and Andy Vesey is their man.

    Vesey, for his part, has already produced the hard evidence to show Turnbull, Frydenberg and Sims they are 100 per cent incorrect on vertical integration, with evidence backed by one of Australia’s leading econometricians, Professor Bob Bartels from Sydney University.

    The ACCC fought the good fight against vertical integration in court for years in the 2004 AGL Loy Yang case and the 2014 Macquarie Generation case, when, ironically, AGL picked up control of the Liddell power station.

    In both cases the ACCC lost.

    Frontier Economics found: “The most important contributor to a change in bidding behaviour that causes prices to rise was the declining quantity of reserve generation capacity in the National Energy Market.”

    The NEM is short of supply and hence prices increase. It’s as simple as that.

    The report continued: “This change in investor behaviour is due to the high level of uncertainty surrounding carbon pricing and the fact that the federal government’s renewable energy target is subsidising renewable generation capacity that is continuing to displace existing base load generation.”

    The politicians know the average punter is furious about higher prices, so they want to be seen to be doing something.

    They do have a solution — getting off their backsides and making a decision.

  14. stackja

    RGR déjà vu all over again.

  15. Ƶĩppʯ (ȊꞪꞨV)

    As usual government, especially socialist government turn everything they touch into shit.

  16. Oh come on

    Saw some propaganda piece on ABC News a couple of nights ago about how uneconomic coal-fired power stations are. An example to illustrate this was provided – the Muja coal fired station in Collie, which supplies a great deal of Perth’s power. Apparently it was budgeted to cost $150 million to modernise the power station and prolong its service life by decades. However, the final bill came to $300 million. Take home message = we can’t afford these old coal power stations!

    Okay, that’s a large cost overrun relative to the original estimate. But $300 million is chickenfeed considering the power station is a critical piece of infrastructure. And if that’s the cost of refurbishing existing coal-fired plants, then it’s a bargain! No wonder power in WA costs half the price it does in the East.

  17. Oh come on

    It’s a pity the energy generation market isn’t truly free, and that the RET exists. If our policymakers were more enlightened, it would be possible for some consortium to buy Hazelwood, refurbish it for a not especially huge amount of money, and start generating bargain-basement energy again!

  18. Empire

    You do God’s work, Alan.

  19. What an incredibly tangled web of regulatory deceit and unintended consequences. Its like it was designed by Mussolini and implemented by Speer.

  20. If coal fired generation were to be outlawed completely, this entire AGW scam would end in a heartbeat.

  21. OldOzzie

    Australia has gone from cheapest to most expensive power

    If I read another press release about the millions of dollars of our money being handed over to the mendicant players in the renewable energy space, I’m going to scream. The latest was $100 million awarded to Macquarie Leasing to subsidise electrical cars. I’m not joking.

    But here’s the worst bit. Environment and Energy Minister Josh Frydenberg says: “The Turnbull government’s investment in clean energy technologies is helping deliver affordable and reliable energy as we transition to a lower emissions future.”

    So we hand over $100m of taxpayer money to Macquarie Leasing so it can offer concessional deals on top-of-the-line Tesla electrical cars to high-­income ­individuals, and the government justifies this as delivering affordable and reliable energy — and a low-emissions future, of course.

    Pull the other one, I say. The last time I noticed, electrical cars will be drawing power from our rickety, overpriced electricity grid. That is, electrical cars — which, by the way, have a very ­uncertain ­future in Australia; just ask any tradie or farmer — will be imposing additional demands on our electricity system. Josh, there’s no free lunch out there.

    Being in receipt of these press releases on a regular basis, can I just tell you that the amount of money that is being handed out to opportunistic green rent-seekers is out of control. We tend to concentrate on the implicit subsidies of the renewable energy target — at least $3 billion a year — but the country is awash with substantial grants to “green” players at both the federal and state levels.

    Another example I read about recently was a taxpayer handout to a company established to provide loans to households to install solar panels on their roofs. On the face of it, you might think this could be a good idea: low-income, cash-constrained households getting access to concessional finance to reduce their power bills.

    But that’s not what the company has in mind. Its business is confined to homeowners. You see, they are a better risk.

    And to think that taxpayers are assisting this cynical venture — well, it simply beggars belief. Obviously the subsidies that households with solar PV installations receive from other electricity users by virtue of unjustifiably high feed-in tariffs are not enough. They need more of these reverse-Robin Hood gifts.

    The crisis in the electricity market, the result of years of costly and defective intervention by federal and state governments, is only now getting the attention it deserves. We have gone from having close to the cheapest electricity in the world to among the most ­expensive. We have all the feeder stock we need — coal, gas and uranium — yet electricity prices have doubled in a decade.

    The Australian Energy Market Operator report released this week on the reliability of the electricity system points to the reasonably high likelihood of demand exceeding supply in South Australia and Victoria in the coming summer, with reliability a continuing issue for the next few years in these two states. After 2022 and in the event of the closure of the 2000-megawatt Liddell coal-fired power station in the Hunter Valley, the reliability of the supply of electricity in NSW becomes ­increasingly problematic.

    These predictions of the AEMO come notwithstanding a veritable torrent of investment in intermittent, renewable energy in recent years. At the present rate, we should hit the target of 33,000 giga­watts hours by 2020, although the requirement of back-up for these projects will generally be ­observed in the breach.

    What has happened is a hig­gledy-piggledy flow of projects, mainly bunched in SA and Victoria and generally located a long way from the established grid. The early wind farms, which were ­encouraged by virtue of renewable energy certificates and various state government incentives ­(enabling planning approvals and payroll tax concessions), actually made the system more unstable because of their failure to incorporate the required software.

    But here’s the thing: the greater the penetration of renewables, the more unreliable the system ­becomes even with the latest software being in place. This is not just about the laws of physics (which AEMO emphasises) but the fact that most of eastern Australia shares the same weather patterns, so any gains from heterogeneity (dissimilar weather patterns) are very small.

    However, the kicker is the fact renewable energy, with its preferential dispatch status and low operating costs, sends ­dispatchable power plants into early retirement and kills off the incentives to build new ones. Note that since 2011 nearly 6000 megawatts of coal-fired plant capacity has been withdrawn from the ­market, or close to 12 per cent of total capacity.

    Now the point is often made that we have reached this appalling position — high-cost, unreliable electricity affecting, in particular, the competitiveness of our heavy industries — because of very poor government policy.

    But whether the outcome was entirely unintended is not so clear-cut. From the time John Howard introduced the first version of the renewable energy target, it was a one-way street to more subsidised, intermittent renewable energy and an investment strike in dispatchable energy. This was the aim; it could not have been otherwise.

    To be sure, there has been plenty of toing and froing in the policy space. The carbon tax, at the ludicrously high figure of $23 a tonne of carbon dioxide-equivalent in 2012-13 (rising to $24.15 the next financial year), was a high water mark of stupidity. Don’t forget this tax, which was nearly three times the EU price, was imposed in combination with a ludicrous RET of 41,000 gigawatt hours.

    That the tax was abolished and the RET wound back by the ­Abbott government meant that imminent disaster was averted, but the future possibility was not removed entirely.

    Sadly, most of the expensive apparatus attached to the carbon tax policy, such as the Clean ­Energy Finance Corporation and the Australian Renewable Energy Agency, survived, chowing down taxpayer money at the rate of knots to be handed out to the green panhandlers that have flourished in this environment. We also have to put up with the pointless but prejudiced Climate Change Authority.

    There have been some major porkies told about energy policy, such as the one about wholesale electricity prices falling upon the renegotiation of the RET in 2015. The assumption there was that there would be no retirement of coal-fired power stations until 2040. Yes, pigs might fly; it’s just unclear why the politicians didn’t cotton on.

    So where does this leave the government? It was a mistake to think AGL is on its side. The company is more than happy to use misleading advertising — we’re getting out of coal and the like — while securing more than 90 per cent of its profits from fossil fuels. Its aim is to milk these assets for all they are worth while pretending to be greener than Kermit.

    Whether it will sell the Liddell power station is anyone’s guess: the company may regard its exit as being in its commercial interest, and hang Australian businesses and households. Let’s face it, AGL (or any other energy company) doesn’t really care how high are electricity prices.

    And then there is the consideration of the clean energy target. Forget all that tosh about needing investment certainty: this is just code for a continuing subsidy arrangement for renewable energy.

    The most pressing need of the government is to secure the future of dispatchable electricity generation and to do so at reasonable prices. Everything else is a side-show.

  22. Nighthawk the Elder

    Oh come on
    #2492449, posted on September 8, 2017 at 8:30 pm

    It’s probably getting a bit late to buy Hazelwood and refurbish it, especially for this coming summer. Not widely reported is the extent of active decommissioning that has been underway since closing.

    Cables have been cut left right and center to permanently disconnect equipment; great holes have been gas axed in boilers and pipes to prove they have been permanently drained; thousands of litres of oil and process chemicals removed from site and lots of bits cannibalised and sold off. Likewise, the big coal mining dredgers have been given a similar treatment. You would be absolutely lucky to get one turbo generator up and running by Christmas 2018 and then probably unreliably.

    For all the talk this week by politicians to buy back Hazelwood, it’s absolutely clear none of them bothered to pick up the phone and actually ask the owners of the plant what state it’s currently in. It would have shut down any further talk immediately. Mind you, the labor/green spivs didn’t bother either and failed to caplitalise the politics to their short term advantage.

  23. Faye

    AGL is not the only energy business that decries the fossil fuels on which its profits depend. However, its activities in nurturing government policies that force up prices and damage the economy, perhaps irreparably, make it an outfit verging on being a rogue firm.

    What do you expect the moneymakers to do when they are handed moneymaking gifts from the government?
    We need a new government which does not believe in/push the climate change agenda and everything connected to it. It’s that simple!

  24. Oh my this is hilarious. Alan Moran, small-government, libertarian and free-market advocate suddenly realises there might be some problems with privatisation and indeed capitalism itself. But only when it confronts his own prejudices.

  25. Kneel

    AGL’s plan is as obvious as it is devious.

    Shut Liddell and mothball it – don’t sell it. They can cite economic reasons for the right and environmental ones for the left, so no-one will argue.
    When the lights go out, get govt to pay all costs associated with getting it running again, including some refurbishment so it can last until a new one is built, while being able to charge higher prices for the end-product than if they kept it running.

    It’s freaking brilliant as a business strategy, you have to admit – they cause the problem, someone else pays to improve their asset and at the same time it increases the price they can charge for the product that asset produces! What’s not to like? Just that pesky “social responsibility” thing, but hey, we were trying to save the planet like you all said we should and as per govt policy, weren’t we? So we’re doubly the good guys, right? And that extra profit windfall we got – well, that’s just market economics for you. We took a risk, we were in the right place at the right time, lucky us! At the time, we thought we’d purchased a dud and were looking at a big write-down.

    It’ll work too, if they can pull it off – no-one will blame them for trying to meet RET and for trying to reduce CO2 emissions, or for not trying to sell an asset when the sale would see them lose money.

  26. Snoopy

    How does the free market cope with rogue businesses?

    Go long on piano wire.

  27. IDefender of the faith

    Fact is that most of the large coal generators are getting old. Lot Yang A might be “new” but it was built in the late 1980s. Mt Piper and Wallerawang in nsw are of similar vintage. Liddell much older and also handicapped by mismanagement in the old Pacific Power era.
    New plant is not being built. Old plant is being gamed. The gas market wreckage exacerbates the picture, which is what you get when there is no strategy and no policy.
    One thing we should all be mindful of is the effect of all this. Australia has had considerable advantage in energy supply and cost (putting aside some of the stupid subsidy pricing for reineries, smelters etc from the state govt auctions of the 70s). Now our energy is a handicap. So we are losing big new investments that should be here (notably those of Incitec Pivot now in louisiana etc) and driving established energy exposed business out. This is eroding the base load, exaggerating the peaks and making the system more expensive for consistent load users.
    It is way past time that both the green extremists and the coal lovers were ignored and policy moved on to settings that work.

  28. Empire

    Evcricket
    #2493041, posted on September 9, 2017 at 1:17 pm
    Oh my this is hilarious. Alan Moran, small-government, libertarian and free-market advocate suddenly realises there might be some problems with privatisation and indeed capitalism itself. But only when it confronts his own prejudices.

    Lamest sledge since The Vandergeld Sisters pitiful display of yo mama.

    Big government is the root cause of the problem, dummy.

  29. So the solution to big government is bigger government and more regulation got it

  30. Tel

    RET: is that free market? or is it government regulation?

    Nuff said really.

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