Coalition secret carbon tax puts Yallourn out of business

It has been coming for a long time now. Since 2014, the Coalition Government has allowed an evil gas export cartel to corner Australian energy markets by occupying and shipping offshore all of our gas. This drove local gas prices wild, from $3Gj to $20Gj, and because gas-fired power sets the marginal cost of electricity in the NEM, drove power prices crazy as well.

It is darkly amusing to observe that, in today’s environment of transitioning power, what this amounted to was the installation of a privately-owned carbon tax. Unlike the original carbon price, which charged polluters and reimbursed consumers, costing them nothing, the sneaky Coalition version rewarded polluters with super highly-priced electricity and charged consumers via utility bills.

And now it has had its way. The crazy power prices driven by gas incentivised new supply from much cheaper renewables. To wit, today at the AFR:

  • Energy Australia is to shutter Yallourn early in 2028.
  • Cheap wind and solar are the cause, along with falling COVID demand.
  • There is some kind of “safety net” (that is subsidy courtesy of yourself) with the VIC government to keep it open that long.
  • Catherine Tanna, CEO of EA, said it would install a 350MW battery as a partial offset.

This is so chock full of irony that it is difficult to know where to start. Cath Tanna was perhaps the key architect of the private carbon tax when she ran British Gas and developed the QCG LNG export plant. When BG was sold to Shell, Tanna moved downstream to Energy Australia to enjoy the earnings windfall delivered for power producers delivered by the resulting huge gas price hikes.

That lasted for a few good years. But the resulting surge in renewable investment is now hammering EA as it has failed to innovate swiftly enough and is stuck running off stranded coal assets.

More broadly, expect this to continue and accelerate. The private carbon tax of an astronomical gas price has done its work and super-competitive renewables just keep getting cheaper:

Australian energy costs compared

And cheaper:

Price of solar and batteries over next 5 years

Aaaaaand cheaper:

Price of solar and batteries over next 5 years

Both gas and coal are already priced out. Soon they will be as dead as the dinosaurs that they burn.

Congratulations must go to the Coalition’s secret private carbon tax – in the form of a rapacious gas cartel – that has enriched a whole bunch of mates as it delivers decarbonisation.

Not so much to the gouged, extorted and browbeaten Australian people who threw away a free carbon price in order to pay oligarchs for the privilege of not burning alive.

David Llewellyn-Smith
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Comments

  1. tsport100MEMBER

    Watch the EV space next for fossil fuels to get “priced out” as electric vehicles are powered by the very same ever-cheaper renewables..

    • Exactly, why is this even news? Solar power will plug the gap and power prices will decline! I reckon using those prices above our power bills will halve in a decade… at least!

  2. I hope you’re right, but why are Li-ion batteries going to keep falling 10-20% per year for next 5 years? Seems like it’s mature tech now with gigafactories etc?

    • TheLambKingMEMBER

      I hope you’re right, but why are Li-ion batteries going to keep falling 10-20% per year for next 5 years? Seems like it’s mature tech now with gigafactories etc?

      2 things:
      1) increasing production almost always decreases price and battery production is growing exponentially.
      (https://about.bnef.com/blog/behind-scenes-take-lithium-ion-battery-prices/ )

      “From the observed historical values, we calculate a learning rate of around 18%. This means that for every doubling of cumulative volume, we observe an 18% reduction in price. Based on this observation, and our battery demand forecast, we expect the price of an average battery pack to be around $94/kWh by 2024 and $62/kWh by 2030.”

      2) New battery technologies including solid state batteries & sodium-ion batteries will also drive down the price.

    • New battery tech is still very much on the tech curve, and still a fair way from being mature, with very large economies of scale coming to compliment new tech. Drops in power coming from batteries should keep dropping 10-20% per year for a while yet, IMHO…

    • I’m still struggling to understand what makes Edison Batteries (NiFe) so expensive.
      Sure they’re not suited to Automotive use but they look ideal for Residential storage especially when combined with a way to big solar PV system (so that energy recovery / efficiency is unimportant)

  3. Is this the next headline “due to a spate injuries caused by roof top solar on private residences, the government has taken the difficult decision to ban roof top solar on private residences”

    • Holiday In ScomodiaMEMBER

      Just like pink batts, it will somehow all be Labors fault – the LNP has to step in and ensure work places are safe- safe workplaces and ministerial accountability is what the LNP is all about…

  4. Yeah, but this was always the path forward for Australia.
    This electricity system transition is not a local thing, it’s global, and as such it really doesn’t matter where we make the Gas for Coal replacement. With that in mind why would Australia Energy producers have ever decided to cut short the life of their Base load Coal fired power stations so that Natural gas could provide a transition fuel.
    It just doesn’t make sense and they’re neither stupid nor naïve.
    Logically Australia makes its transition by:
    – reducing the energy needs of heavy industry
    – Creating an environment where Renewables are willingly funded by private investors
    – Pushing forward with the changes needed for distributed electricity generation
    – Incorporating localized battery storage into the grid
    – adding large capacity centralized storage (snowy 2)

    there’s so much to do and so little time to do it in, the last thing Australia needed was the distraction of Natural Gas as a transition fuel, so what needed to happen happened.

    We’re now entering a new phase where the residential grid will no longer be looked at as an essential service with reasonable expectations (and design goals) of 4 nines reliability (or is it 5 nines in Australia?).
    we’ll get regular brown-outs and irregular blackout but nobody with a residential battery will give a flying F. This will be a cost that is born by renters and other low lifes that have no right to complain. It’s already happening, the wealth and even the middle class now export electricity all day long (and get paid more than the base load generators for electricity which nobody really wants). Contrast this with the poor who get charged additional to cover the costs associated with incorporating distributed residential power generation.

    There’s absolutely nothing accidental about the journey that we’re on, at every turn we’ve taken the same people benefit and the same people pay.

    • I think we’ll be OK, and we’ll also all get cheaper power, whilst maintaining grid efficacy.

      If anything, if we get gung-ho with power production, we might actually coax more heavy industry and manufacturing back here…

    • MountainGuinMEMBER

      The brown out scenario could happen if there is low storage levels and we get freak weather patterns. However with the hydrogen sector looking promising, I think the path is to build more supply than the broader economy typically needs and hydrogen gen can soak up cheap excess supply or dial way back were there is a shortage. Live price EV charging can also help ensure a good chuck of demand is price responsive

      • An interesting thing about NiFe batteries is that they produce Hydrogen when they are overcharged (and that’s about all that happens no performance or lifetime degradation)
        So NiFe battery with excess Hydrogen stored in Metal Hydrides starts to sound real interesting

  5. One of my best mates works at one of the largest coal fired power stations in the country…says that there is talk of renationalisation of the plant to assist the transition to renewables, as private ownership is getting smashed…

    The new tech really is clobbering the old tech…I think there is an enormous amount of denial amongst many, and we are somewhat missing a multi-generational opportunity.

    • I’ve family members who were born in the late 40s that worked in petroleum, ran power stations and such. They are all across power they just can’t see how it can be done in a way that is different to what they spent their whole life working with. When it is in place they’ll see it. Until then we may as well be discussing teleportation or interdimensional transcendence as far as they are concerned. They also fell hook, line and sinker for the Coalition’s NBN nonsense.

      • Yeah, I’ve experienced a fair bit of what you’re talking about; I think you’re right that it will take the actual change to be in place before some (many?) will ‘get it’.

  6. If you “Australian-ise” the tables in the article natural gas on a peaking or intermitted basis is well above USD0.12 per kWh.

    The other thing that stands out is that anyone can participate at a micro scale in the solar + battieries part of this value equation.

    If the LRMC of solar + batteries is US$0.09 so call it AU$0.12 then the arbitrage between that and the average cost of domestic electricity which is in an Australia wide range of $0.15/kWh (off-peak) to $0.45 per kWh (peak) is enormous – Gross these up for income tax and the arb is 30% – 40% greater. That and the operational risks of such a domestic investment are tiny. It is simply a no brainer.