Australian energy goes Third World

Today we have a nice demonstration of what happens to long term fixed assets when they are surrounded by ideological mismanagement for long enough. The damage takes decades to manifest but when it comes it is disastrous and there is nobody left to fix it.

To wit, the National Electricity Market which is now being pulled part like a carcass by vulturous interests.

To begin, there is the Federal Government which has resorted to blackmailing entire state populations with threats of no power to protect coal, via The Australian:

Energy Minister Angus Taylor will demand tougher energy ­reliability standards in a move that could trigger legal obligations on major retailers in some states, including Victoria, to source more power from coal, gas and hydro.

The intervention comes with the market regulator already warning of blackouts this summer in Victoria, which is under pressure to meet the current standard and will likely be forced to again seek emergency reserves during periods of high demand, with 1.3 million households forecast to be at risk of power outages.

Mr Taylor told The Australian that he would be asking for agreement on the tougher standards at a Council of Australian Governments meeting of his state and territory counterparts on Friday.

Hydro takes decades to build. Coal is not fit for purpose given the intermittency demands of the renewable penetraded grid requires rapid switching on and off. Gas is perfect for that role and quick to install, but plants have been shelved because the east coast gas export cartel guarantees supply disruptions.

Mr Taylor can throw as many tantrums as he likes but until his Government does something to rein the gas cartel there is nothing that anybody else can do to boost reliability or lower power prices.

Meanwhile, unions don’t care either, at Domain:

Unions at the giant Yallourn mine and power station in Victoria’s east are demanding a closure agreement with the plant’s operators in case of a shutdown, arguing coal-fired power stations are on “life support”.

The move raises the prospect of another seismic shock to Victoria’s energy supply, which is still absorbing the closure in 2017 of the Hazelwood generators, plunging the electricity market into chaos and throwing hundreds of people out of work.

Unions representing the 500 permanent workers at the Latrobe Valley plant say they have learnt from the “ambush” of the Hazelwood closure and want a deal with Yallourn’s owners that looks after their employees when the station closes.

The Yallourn workers’ demand for certainty echoes the the Andrews government’s lack of confidence in the coal sector.

The Victorian government has repeatedly warned that the state’s ageing power stations cannot be relied upon to keep the lights on in Victoria this summer.

The problem was not Hazelwood. The entire purpose of the carbon price, RETs, Direct Action and other carbon mitigation policies was to close coal power stations. The plan worked. What went wrong was the gas-fired power plants that were supposed to supplant coal never materialised. Why? The gas cartel stole all of the gas, pricing it for domestic use.

Meanwhile, Gottiboff says it’s all Victoria’s fault:

What does the nation do when the resource minister of a major state tells at best a half truth and at worst grossly misleads? At stake is the price and quantity of gas the nation has available and desperately needed water for farmers.

The federal Minister for energy Angus Taylor wants Victoria to remove the bans on the development of its vast on shore gas reserves. Victoria’s resources minister is Jaclyn Symes and she also doubles as minister for regional development and agriculture.

She is quoted in the Financial Review as signalling that she will not budge on the state’s onshore gas bans.

The bans should be lifted but they will not solve the problem. The gas is too expensive and will be sucked up by the cartel and shipped out anyway! The only answer is gas reservation.

What hope is there for the national interest when politicians and unions rip at each other, and the media has no idea what is going on, in something so basic to standards of living as the provision of power?

David Llewellyn-Smith

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.

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Comments

  1. There really is no hope is there. You just know the theft of gas will continue unabated if Labor won as well. They would be called anti business if they tried gas reservation and cowards that they are would never try it.

  2. The LNP will be happy – they’ll have a third world power infrastructure to complement their third world NBN where we lie between Kazhakstan and Senegal.

    Come to think of it, it will also complement our third-world water, rail, school and road systems.
    Coming soon – genuine third world population growth and corruption.

  3. I am puzzled by the lack of critical thinking by these supposed smart journos

    I mean MB has been banging on about this for ages and you can’t tell me none of Coorey, Tingle etc etc etc know this either

    That no one is prosecuting this along the MB lines is crazy

    I mean if nothing else PVO should be onto this when he’s on RN Breakfast shouldn’t he?

    Should not the states be bleating about this if for no other reason than self interest?

  4. Is there any truth in the rumour that Trevor St Baker is Taylor’s energy adviser (and second cousin, twice removed)?
    St Baker has honed his skills at buying coal stations cheap and revaluing them up. Hey, how did he miss out on Hazelwood?