AGL: virtue signalling while raising prices by closing plant

Australia has lost its pole position in electricity competitiveness. The gradual increase in subsidised renewable energy in forcing out coal plant has transformed the Australian industry from perhaps the cheapest in the world into, on some measures, one of the most expensive in the world.

A 2022 closure of Liddell would mean a further deterioration of industry competitiveness and increased household prices. Some options to prevent this would include new capacity being built – perhaps an enlargement of Victoria’s Loy Yang B now under Chinese majority ownership, or the National Party’s call for a government-financed new station in Queensland. But even with such new investment, there will be a great deal of pressure placed on AGL to maintain or sell Liddell – after all, if the station were really worthless it could just hand back ownership to the NSW Government which could seek an alternative owner.

See the full article in the Spectator

AGL: impoverishing the nation to boost its bottom line

 

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39 Responses to AGL: virtue signalling while raising prices by closing plant

  1. duncanm

    why is this not price fixing behaviour ?

  2. teddy bear

    duncanm technically it is not because it is our destructive governments restricting supply by preventing new base load power not AGL, they are however exploiting the situation for all it is worth.

  3. sabena

    Why shouldn’t the Government compulsorily acquire Liddell and then argue with AGL over compensation.

  4. RobK

    Thanks Alan,
    The article mentioned the 1600-odd coal HELE plants planned around the world and they have little issue with funding but my guess is the relivant governments are not hamstringing the proposals with parasitic RET schemes. Like AGL, banks are not normally foolish. The australian situation is one where the RET scheme has forced experiments on a reasonably well functioning grid to bring on in large scale what could hardly be done economically on small scale except in niche situations. We now have the absurd situation where the government has to pressure players to not do what they expressly wanted them to do; namely reduce carbon dioxide emissions. Until the government can back away from that and give guaranteed market access in fair competition nothing will change. Who would invest in a scheme where the government has it’s foot on your throat. AGL is correct in it’s view, the government is wrong in it’s.

  5. BoyfromTottenham

    The authors of the RET and the NEM, and the pollies who voted for this legislation either did not have a clue about how electricity markets work, or intended to destroy Australia’s low cost, reliable electricity system in the name of the Green god. That is why they call us the Lucky Country!

  6. zyconoclast

    Why shouldn’t the Government compulsorily acquire Liddell and then argue with AGL over compensation.

    The can but they wont.
    The government wants you too hot, too cold, too poor and hopefully dead.
    You will be replaced my big government immigration vote heards.

  7. BoyfromTottenham
    #2584505, posted on December 14, 2017 at 12:46 pm
    The authors of the RET and the NEM, and the pollies who voted for this legislation either did not have a clue about how electricity markets work, or intended to destroy Australia’s low cost, reliable electricity system in the name of the Green god. That is why they call us the Lucky Country!

    I would be very surprised if any politician actually understood what they were voting for when passing legislation. They are just not that smart.

  8. Dr Faustus

    Besides power, Liddell’s turbines provide system stability – spinning reserve ancillary services, or SRAS – a service which AGL sells to AEMO in addition to the Mwh’s. Liddell is a big station and forms a significant part of the total East Coast conventional spinning reserve.

    AEMO is currently tendering for SRAS for 2019/20 and beyond.

    Closure of Liddell will both increase the price of ancillary services and create an opening for some rent-seeker (for example, AGL) to provide SRAS by battery storage (in the same way as the Musk battery is designed to stabilise SA’s non-dispatchable fleet).

    As rentier in chief, AGL will obviously be in the market to supply battery based services. Importantly for AGL, having control of the fate, and timing of the withdrawal, of a massive chunk of the conventional spinning reserve gives it a massive competitive advantage in bidding its battery offering. Competitors will be beset with enormous uncertainty in pricing and securing finance for their bids.

    There is no way that AGL will discard this strategic advantage by selling, or giving away Liddell.

    The geniuses who are responsible for Australia’s energy policy know exactly that they are being gamed by a creature that they created. And, within the constraints of timing and legal options, they can do sweet tweet about it.

  9. Motelier

    Alan,
    The preposterous idea that Qld would build another coal fired powerstation, is just that, a preposterous idea.

    I will let Mark Bailey MP explain.

    Go long on portable generator futures because it is going to get far worse before it gets better.

  10. Rabz

    Will Liddle be dynamited like the coal fired stations in mainland Tassie?

  11. RobK

    Rabz,
    Will Liddle be dynamited like the coal fired stations in mainland Tassie?

    I believe the plan is to maybe use some of the alternators as synchronous capacitors, then use the land and grid infrastructure for solar and storage batteries etc. Basically what is called for under the prevailing policy.

  12. H B Bear

    Like AGL, banks are not normally foolish.

    Like energy companies, banks are being subjected to well funded and sophisticated campaigns by various activist groups, superannuation trustees in breach of their duties and super asset advisory groups. They are just taking the path of least resistance in the face of this.

  13. RobK

    HB,
    I think the government has also fallen to the least line of resistance as you describe, and we are to pay an enormous price.

  14. John Michelmore

    I hope all the Cats are ensuring they are supplied by someone other than AGL

  15. RobK

    Ahem…line of least resistance.

  16. tgs

    Is it virtue signalling or (legal) market manipulation?

  17. RobK

    As I see it, government policy has brought this on. Next someone will be saying AGL needs a social licence. They are in the game to make a quid.
    Government sets the rules.

  18. harry buttle

    The people elected the Govt to implement these policies, these policies are making staying in coal unviable (whilst also making our grid unviable), AGL are acting to maximise their return to shareholders, as required by law.

    The people asked for this and deserve to get it.

  19. Up The Workers!

    I wonder what the tax liability of these money-gouging rogues would be, if we had increased their taxes by the same percentage as they have extortionately increased utility charges by?

  20. Boambee John

    The fascist left used to scream blue murder when a private company increased its profits at the expense of the poor.

    Now they applaud.

  21. Myrddin Seren

    I would be very surprised if any politician actually understood what they were voting for when passing legislation. They are just not that smart.

    Exhibit A – Turnbull’s NEG as presented to the Party Room:

    MALCOLM Turnbull has “shirt-fronted” Tony Abbott over energy policy, according to one Coalition backbencher.

    The unnamed MP told Sky News the backbench overwhelmingly supported the Prime Minister’s new energy strategy in a joint party room meeting today.

    The MP described it as the Prime Minister’s “shirt front” to Mr Abbott, who is understood to have asked for a “political discussion” on the policy after experts finished speaking at the meeting.

    My recollection of another report on the meeting was that some ‘unnamed source’said they didn’t really understand the proposal, but all cheered when TA was shut down from probing the nuts-and-bolts of the NEG, and lauded Turnbull for his visionary gamechanger.

    In other words, they really are a bunch of window licking morons.

  22. RobK

    ” if we had increased their taxes by the same percentage as they have extortionately increased utility charges by?”
    …then they would still be making money and we’d be paying even more for electricity but the government could have more to spend. Not a great outcome in my book. There would be bugger all windmills and solar panels but for government policy. It’s the policy that is doing us in. Unless we change course, we’re headed for a rougher ride.

  23. Unreliables have pushed gas demand and prices. Also upward pressure on diesel.
    Good thing we have import capacity for diesel.

    Medium term Prediction: diesel shortage, higher prices for diesel.

  24. H B Bear

    In other words, they really are a bunch of window licking morons.

    I don’t think that has ever been in doubt. Exhibit A – O’Dwyer and ScoMo.

  25. GP

    Coal: digging & burning – bad.
    Gas: burning OK, drilling – NOT OK.
    Catching butterflies sunrays and wind – OK.
    Splitting hairs – OK. Splitting atoms – NOT OK.

  26. Australia and Australians will have to go through a huge amount of pain before this scam ends.

    How many industries and jobs need to go before it’s declared a national disaster?

  27. JC

    Can anyone explain how the populace accepts this shocking behavior without an outcry. I don’t get it.

    South Australia actually pay forms to close down when energy demand rises to a certain level. It’s too shocking to be true.

  28. RobK

    “South Australia actually pay forms to close down when energy demand rises to a certain level. It’s too shocking to be true.”
    Anything to defray the cost of actually meeting demand with agrarian based technologies.

  29. H B Bear

    Mainland Tasmania’s main industry will be fully carbon offset writers festivals by 2025. Assuming the GST formula isn’t changed.

  30. John Constantine

    Exactly as intended by Mugabe’s African voting block, and the Chinese bribed voting block, and the Venezuela/Cuba voting block and the general socialists that draft and vote into existence these binding transnational conventions.

    Topple the last bitter clinging colonial racist literally Nazi western settler cultures.

    Create a brand new Zimbabwe in the southern pacific.

    What a brilliant idea Julie Bishop.

    Mugabe could well survive longer than the Australian economy, if the chicoms keep his stem cell treatments up.

    Comrades.

  31. Damienski

    Can anyone explain how the populace accepts this shocking behavior without an outcry. I don’t get it.

    It is easier to convince the populace to follow the green orthodoxy than it is to teach them logic and reason. Gramsci understood this very well.

  32. Robbo

    AGL are well on the way to winning the Most Disgraceful Performance Of The Year award. The Directors of this mob should be sacked for their blatant efforts to manipulate the energy market to benefit their company at the expense of their customers. Anyone who currently deals with AGL should give immediate serious consideration to dumping them. They deserve nothing less.

  33. Nathan

    Robbo, your angst is directed at the wrong organisation. AGL exist to provide returns to their shareholders. They are absolutely doing the right thing. It is the government that has allowed AGL to have this effect on the market by artificially reducing competition from coal fired power. It’s the government you should be railing against. AGL are giving us what the government wants, lower CO2 emissions. They just didn’t seem to realise all the bad things that came with that.

  34. manalive

    The people asked for this and deserve to get it …

    … harry buttle at 3:03 pm.
    I don’t think that’s correct.
    The electorate have not been given a clear choice with all the cost implications.
    Certainly electors rejected the Carbon (dioxide) Tax decisively when given the opportunity.

  35. Confused Old Misfit

    Can anyone explain how the populace accepts this shocking behavior without an outcry.

    The politicians wish to be thought of as intellectually elite and as a consequence are influenced by the Birkenstock’d, cardigan’d, spectacle’d. wispy beard’d, bow-tie’d, corduroy trouser’d, superannuated hippies that infest inner cities and academia.

  36. Bruce of Newcastle

    Alan – This paper looks to be very important. Worth you having a look at it.

    The cost of displacing fossil fuels: some evidence from Texas

    A link to an early working draft of the paper is available as a PDF at the bottom of the article.

    What it is about is some electricity cost modelling based on a fairly isolated grid in Texas, one with about 25% wind in its mix. They used actual 2016 data from the performance of the grid.

    They found this:

    1. Unless gas isn’t ridiculously expensive, 100% gas is best.
    2. If gas is expensive nuclear plus quick response gas is second best
    3. If gas is really really expensive then nuclear plus storage is third best
    4. There was no combination of wind plus gas or wind plus storage that was cheaper than the above three options. Wind was totally uncompetitive.

    The reason was that the intermittency imposed such costs on wind either through storage cost or through gas generation cost that it was too expensive. Either it was better just to use gas or use nukes plus storage because nukes needed much less storage. (I suspect you could actually completely dispense with storage and load level using steam management, but it doesn’t look like they analysed that.)

    Basically wind is stupid.

    And since wind is cheaper than solar, it means solar is stupid too.

  37. RobK

    BoN,
    That paper has arguments that mirror my view, especially: “Our result implies, however, that far from making highly variable and uncontrollable sources of generation more competitive, storage would in fact better advantage stable and controllable generation. ”
    The arguments hold if coal is substituted for nukes from a cost perspective. If CO2 is an imperative, nukes come into play. Wind power is at best a marginal player in all scenarios.

  38. Alan Moran

    BoN, RobK
    Hartley’s work is excellent (he is a former colleague at Tasman Institute). WInd is high in Texas due to subsidies (and those subsidies may survive the Trump tax reforms due to negotiations).

    He points out how the costs arise naturally through contracts if wind is required to firm up its inherent intermittency – something that would happen in Australia, though the government is taking steps to require it through the NEG. The higher the share of intermittents the higher the firming contract price. Wind, even if it were at $90 per MWh (cf Australia coal at $50) would require an associated firming contract which Frydenberg has placed $16 where wind is 8 per cent of supply. It would be much greater where wind is, as under current plans, around 16 per cent of supply.

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