What hope for energy price relief?

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Some blah from Alinta today:

Alinta Energy plans to aggres­sively drive down electricity prices and challenge the market muscle of the big three east coast power companies after finalising the $1.1 billion purchase of the Loy Yang B brown coal power station in Victoria.

Alinta managing director Jeff Dimery, who is beefing up his coal exposure in a similar way to his former employer AGL Energy when it embarked on a push for new customers six years ago, says he expects wholesale power prices to come down and he wants to lead an east coast push to translate this to lower retail prices.

The comments could provide some hope for business and consumers who have faced surging energy prices and been hurt by decades of unco-ordinated policy and the closure of several ageing power plants.

Meh. It doesn’t have the capacity to displace the gas that’s causing the price spikes. To wit, Domainfax:

Victoria’s power grid will walk a thin line between success and failure during this week’s heatwave.

The state’s power generators have had a number of unit failures this month, but are confident they can operate through the hot weather without a hitch.

Victoria is forecast to hit highs of 38 and 37 degrees Celsius on Thursday and Friday, while South Australia can expect to see every day this week hit 30 degrees or above, spiking to 38 degrees Celsius on Thursday, pushing state power systems to their limits.

The states’ energy systems have come under fire over the last two months as a number of coal-fired power station generator unit trips have raised concerns of critical failure ahead of this heatwave. A trip or a short is when the generator experiences an outage due to an overload or failure of the system.

Over the last four weeks, AGL’s Loy Yang A power station has had at least six failures, while one of its units remains down.

Two units at Energy Australia’s Yallourn power station have also recently tripped, and suffered a false start on Monday morning.

An industry insider said Victoria’s coal-fired power stations were likely to operate well, but the real test would come if the wind was not blowing in South Australia.

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These trips have been overcome by imports from South Australia where the Tesla battery has been doing a fine job of injecting frequency when needed. The AEMO should be able to handle the heat wave with its new demand management strategies.

In truth, there is little or no sign of easing of price hikes for energy. The electricity forward curve has risen since Turnbull’s mysterious National Energy Guarantee (NEG) appeared. Big east coast price hikes are still flowing through for households and business. And Energy Minister Josh Frydenberg is still putting politics ahead of the national interest:

Federal Energy Minister Josh Frydenberg said the Victorian Labor government’s clean energy target could result in the earlier closure of the Yallourn coal-fired power station as its owners ask for an extension of the mining lease until 2050.

The Andrews government, which is heading to a state election later this year, is under pressure to knock back an extension of EnergyAustralia’s mine licence which feeds its Yallourn power station amid fears it could jeopardise the state’s own clean energy target.

With the National Electricity Market still dealing with the fall-out from the closure of the Hazelwood power station in Victoria last year, EnergyAustralia executive Mark Collette confirmed the company has applied for an extension of the extraction licence at Yallourn until 2050. It was due to expire in April 2026.

But the company said it only planned to keep the mine open until 2032 when it would close the Yallourn coal-fired power station which provides a quarter of Victoria’s energy needs and then rehabilitate the site.

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The RET is the only policy still producing greater generator capacity. Nobody knows what the NEG even is. Those I know in the power sector that have asked the government for more detail have been told that it’s still figuring out its own policy.

The key driver is still being ignored in the price of gas. It bottomed in Q3 last year and has been trending higher ever since with Asian prices:

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There’s no reprieve in sight for gas or electricity prices, except for these guys, via Bloomie:

Australia, one of the world’s biggest users of rooftop solar panels, likely added the most new capacity on record last year as electricity users sought to ease escalating power bills.

A preliminary estimate by Australia’s Clean Energy Regulator of 1.05 gigawatts installed last year would be a record for the country, the government body said in an emailed statement Friday. While subsidies and generous feed-in tariffs helped boost growth earlier this decade, last year’s gains were driven by users seeking to sidestep a surge in the cost of electricity and a push by vendors into the commercial sector, according to Bloomberg New Energy Finance.

I’m about to join them.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.