Via Domainfax:
AGL will defy pressure by the Turnbull government to sell its ageing Liddell power plant, warning that interference in the market would raise issues of ‘‘sovereign risk’’ that could deter investment in new energy assets.
In a rare interview, chief executive Andy Vesey told Fairfax Media the much-publicised interest in AGL’s Hunter Valley coal-fired power station from smaller rival Alinta had been limited to a phone call on Tuesday evening from Alinta chief Jeff Dimery and a follow-up email on Wednesday.
Mr Vesey said his rival had indicated in the email a ‘‘desire to engage in a potential acquisition” of Liddell and asked about the purchase process.
Liddell will be retrofitted with a gas turbine and other renewable sources. This is the simple key to the entire energy debacle. Liddell does not need to kept open. All we need to to is force the gas price lower permanently and coal-fired power will covert to gas-fired base load and peaking power while storage catches up. This was always Australia’s decarbonisation plan.
It was only spoiled when the gas cartel formed to steal east coast gas. What will solve the crisis is VERY OBVIOUS:
- install gas reservation that keeps 10% of east coast exports here;
- if prices don’t fall then fix them at $5Gj;
- gas sets the marginal cost of electricity in the National Electricity Market so power cost will also crash.
Why this is OK is equally straight forward:
- the east coast gas boom was a classic malinvestment bubble and the big gas companies that are shipping the east coast’s cheapest reserves to Asia at huge losses lied about having enough gas to fill their LNG plants;
- as such they have been buying up all of the third party gas on the east coast and driving up prices;
- by allowing them to do this we are bailing them out for misallocating capital;
- if we fix the price of gas they will have to bear the brunt of their bad decisions rather than passing them on to everyone else via local discriminatory pricing.
This solution to the gas market failure will crash Australian energy costs and put our decarbonisation program back on track as well. Cheaper gas can fulfill the role it was always planned to have displacing base load coal as renewable storage catches up.
While we’re on the subject, we shouldn’t let the ACCC’s contribution pass unnoticed:
The competition watchdog has blasted energy giant AGL, saying it ignored the public interest in past business decisions and that failing to sell its Liddell power plant to one of three interested buyers would disadvantage consumers.
The Australian can confirm Chinese conglomerate Shandong Ruyi remains interested in buying the 1800-megawatt Hunter Valley plant, and would seek to conduct due diligence with Alinta Energy and Delta Electricity, if allowed by AGL.
The Australian Competition & Consumer Commission said it could not force AGL to sell the plant, but there was no question that doing so would be in the interests of consumers.
“It is clearly pro-competitive and good for consumers if one of those companies gets hold of Liddell,” ACCC chairman Rod Sims told The Australian.
The ACCC’s performance on energy has been disastrous. For years it held up domestic gas reservation as it lodged its head in an economic test tube. It’s still there, banging endlessly on about terrestrial gas reserves in NSW and VIC which are locked up by community objections. Then it waved through the Shell acquisition of British Gas and Arrow Energy, allowing the gas cartel to completely dominate east coast reserves. Whatever it says, do the opposite.
Put the sovereign risk on those that created it: force the gas price lower and make the LNG sector wear the cost of its capital misallocation.
