Via the ABC:
Malcolm Turnbull’s son has lashed out at vested interests in the Queensland coal mining industry, who he says are exerting undue influence over the Liberal Party’s energy policy.
Alex Turnbull, who describes himself as a keen environmentalist, studied economics at Harvard and runs a private hedge fund in Singapore.
Before leaving Australia he spent five years at Goldman Sachs, where he was responsible for buying and selling the debt and assets of energy companies.
It was during that time that he began to appreciate the consequences of what he calls 10 years of energy policy “panic and mania”.
Speculating on the value of the debt at companies like Alinta or AGL made Goldman Sachs hundreds of millions of dollars.
It was during the Rudd-Gillard governments, when the prospect of a carbon price depressed the long-term prospects of those energy generators.
Mr Turnbull, 36, bought the debt cheap. But when Labor decided to provide generous compensation to those high emitters, the debt price spiked and the investment bank made loads of money selling it.
Explaining why he had decided to speak up, the younger Turnbull said: “I’m a free agent now and I can express my opinions as and how I please”.
“I’ve been quietly very frustrated at how unproductive policymaking has been in this area and how partisan, because generating tonnes of volatility is great for hedge funds but it’s not particularly good for consumers,” he said.
A big part of his job was to forensically analyse the cost and viability of coal-fired power stations.
Speaking to ABC Radio’s PM program, he said it made no economic sense for the Coalition Government to be entertaining the idea of underwriting new coal-fired power plants.
“Coal prices are now high enough that it is very hard for coal to be competitive. You cannot buy a tonne of coal for the 2002 price any more easily than you can send your kid to a private school for the 2002 price of school fees,” he said.
Mr Turnbull referred PM to a February 2017 analyst report by new energy finance analysts at Bloomberg.
It stated that if new coal stations were to be built in Australia, electricity prices would be “substantially higher” than with a combination of wind, solar and gas (provided gas markets operated efficiently).
The report warned that investing in new coal would be “very risky” for four main reasons:
- Future carbon (price, regulation and policy) risks
- Significant risks of reputational damage for the lender/investor
- Exposure to the highly-variable wholesale electricity price market as coal plants struggle to secure long-term supply contracts
- A history of delays and cost overruns with the construction of recent projects
The Australian Energy Market Operator estimates the time gap between commissioning a new coal-fired power station and it coming online and generating electricity would be eight years.
Depending on the capacity, Mr Turnbull calculates that such a new plant would cost between $2 billion and $4 billion to build, but he is sceptical that such a project could survive three electoral cycles.
The decision to build the Datteln 4 coal power station in Germany was announced in 2004, started construction in 2007 and after delays on account of legal challenges and engineering hiccups, it is not expected to come online until at least 2020.
Bloomberg concludes that equity sponsors committing to coal-fired power stations demand higher returns for their capital, and debt providers will limit their exposure or avoid such projects altogether — as has happened with the case of some Australian banks saying they will not finance the controversial Adani coal mine in Queensland.
Asked whether debate about the economics of coal-fired power was being muddied by the lobbying of coal miners, Mr Turnbull said people who “own a lot of coal in the Galilee Basin (Queensland)” were exercising “undue influence on Liberal Party policy”.
Described as “small miners” he said “they have assets they probably regret purchasing that don’t make a lot of sense anymore and they’re trying to engineer an outcome which makes those projects economic.”
Australia’s mining industry represents about 8 per cent of GDP and employs 200,000 people, but the younger Turnbull said it was not the Government’s job to choose which jobs it was going to protect and which ones it would not.
Days before his father suffered the ignominy of losing the prime ministership in a chaotic coup, the Liberal Party had taken the decision to abandon its signature National Energy Guarantee and a pledge to legislate a 26 per cent emissions cut in the electricity sector.
Notwithstanding that, Mr Turnbull said he was very proud of his father’s achievements as Prime Minister.
“He’s been a voice of moderation and reasonableness and sanity and getting things done despite overwhelming odds and I’m proud of what he’s done in numerous areas,” he said.
“Climate has been ferociously difficult and has claimed however many prime ministers one can count over the last decade and it remains a serious challenge and one of profound public interest.”
A week before Scott Morrison appointed him as new energy minister, Angus Taylor told a commercial radio station that “the obsession with emissions at the expense of reliability and affordability has been a massive mistake.”
The younger Turnbull rejects that entirely.
“It’s a mistaken idea that there is a conflict between decarbonisation and reducing power prices,” Mr Turnbull said.
Exactly right. The key section is this:
Mr Turnbull referred PM to a February 2017 analyst report by new energy finance analysts at Bloomberg.
It stated that if new coal stations were to be built in Australia, electricity prices would be “substantially higher” than with a combination of wind, solar and gas (provided gas markets operated efficiently).
As I say repeatedly, the problem is not coal it is gas. If we had normal gas prices the energy wars would be over. Indeed would never have started.
Alex might want to ask his ridiculous father why he didn’t smash the gas cartel when he had the chance instead of doing a handshake deal on export net-back prices that were 350% higher than historical averages.
To me it is obvious that he did so to keep the energy wars alive to beat Labor and its renewables commitment over the head with so Alex might not want to get too haughty.
RESERVE GAS!
