Behold the Morrison Hunter White Elephant Pork Power Plant

For years we have fruitlessly pointed out the folly of Australia’s east coast gas exports. For the nation, the three LNG export plants built on Curtis Island were a shining example of Banana Republic commodity economics gone drastically wrong. The exports made no money for the producers, who were forced to write down tens of billions in wasted capital investment. Yet they formed the backbone of a domestic gas reserves cartel that charged whatever it liked at home to make up the losses. This gouging was dramatically amplified by the fact that gas-fired electricity was the marginal price setter in the power grid. The result for the east coast economy was a net loss of economic utility as skyrocketing gas and power prices at home overwhelmed any income benefits from the gas exports.

But that was not the end of the wastoid outcomes. Ironically, this abject failure of policy was, in effect, a private carbon tax (that is, one kept by the gas cartel as profits). It achieved what any such mechanism will. It accelerated the decline of uneconomic gas-fired power, and dramatically accelerated investment in cheap renewables as high power prices triggered a supply response.

This outright perversity and extraordinary inefficiency today reaches a new apogee as the same Coalition Government that oversaw the entire energy debacle crowns its idiocy with one final white elephant for the road:

  • The Morrison Government is insisting on building a 660MW gas-fired power station in the Hunter to lower prices.
  • This despite EnergyAustralia committing to a new 316MW facility in the Illawarra.
  • The Australian Energy Market Operator (AEMO), the government’s own power regulator, says the new hunter station isn’t needed.

We all know that the new station is purely to support a troglodyte economic narrative that supports fossil fuels via subsidies (or, perhaps, it’s just the usual Liberal donor rort). The new power station is not needed because the gas that will fire it is no longer economic thanks to cartel prices (still around $10Gj):

Australian energy costs compared

And it’s going to get worse for fossil fuels:

Price of solar and batteries over next 5 years

Much, much worse for gas and coal:

Price of solar and batteries over next 5 years

One might argue, therefore, that Morrison’s new gas white elephant pork power plant will, in fact, lift power prices.

But, the lesson of the secret carbon tax of the gas cartel suggests a different outcome. Every time that the Morrison Hunter White Elephant Pork Power Plant turns on and lifts power prices, it will incentivise further investment from the much cheaper battery and other power storage options. So, any price spikes will be brief and will soon be swamped by more supply with which the Morrison Hunter White Elephant Pork Power Plant will be unable to compete.

All we needed from the outset was to keep the carbon price. It would have gathered untold billions from polluters for the federal budget, recycled as immense tax cuts, and leading to a net outcome for consumers of zero-cost energy transformation.

Instead, we delivered ourselves $80bn of wasted investment in QLD white elephant gas plants. Probably almost as much in excess and rentier household utility bill charges. Manufacturing hollowing out. And fifteen years of political idiocy with PMs turning over with the regularity of a power dynamo.

Now complete in the Hunter, with the idiotic Morrison Hunter White Elephant Pork Power Plant.

David Llewellyn-Smith
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Comments

  1. Behold! Let us watch Labor worry about being racialist with border closures, racialist with China aggression and say absolutely SFA about this corporate theft from the public purse masquerading as Strayan corporatist scallywagging.

    And yet the electorate on LNP and Abbott: Foolishly Forget Finagling Fckwit Fostered Fantastic Fckups.

  2. kierans777MEMBER

    > All we needed from the outset was to keep the carbon price.

    Instead we got Tony Abbott which started the death spiral towards the most incompetent and corrupt government in our history.

    Abbott should have supported the carbon price. It’s a “conservative” policy in that it makes the polluters pay. Instead we got “Australian conservatism” which is actually socialism welfare for the rich through Direct Action. In Soviet Australia we pay you!

  3. Cynical snake

    “Every time that the Morrison Hunter White Elephant Pork Power Plant turns on and lifts power prices,”
    There is absolutely no way at all that adding a power plant can lift prices.
    In our wonderful privatised market each supplier must bid and the LOWEST bids are accepted to buy power from, at the price of the lowest required bid to meet demand.
    All an additional power plant can do is lower the price by bidding less than existing plants.
    Whether it can run profitably at that price is a completely different question.

  4. TheLambKingMEMBER

    There is absolutely no way at all that adding a power plant can lift prices.

    South Australia says hi. Legislation can force the ‘use’ of a % of power from a source in the name of ‘grid reliability.’ I am sure if an LNP mate is ‘forced’ to build this white elephant, then they will ensure that they get paid handsomely and ensure it runs continuously.

    The other example is the local gas price. There is absolutely no way that the local price should ever be more than . As supply and demand says that if I am a supplier of gas I can get at least $0.01 more selling locally than I can for selling to the exporters (as they don’t have to pay for processing and shipping!) But surprise, surprise for some reason (a cartel) the local price has generally be more expensive that export price+processing – there is absolutely no way that that can happen in a free market.

    • Cynical snake

      ” there is absolutely no way that that can happen in a free market.”
      Gas is not a free market. Extraction is strictly controlled and licensed. and a monopoly formed, much like land bankers and zoning.
      SA proved that the free for all energy market doesn’t actually work, due to lack of any ability to conduct central planning and minor inconveniences like “grid reliability”.
      To see how it has played out in the past see https://en.wikipedia.org/wiki/2000–01_California_electricity_crisis

      “There is one fundamental lesson we must learn from this experience: electricity is really different from everything else. It cannot be stored, it cannot be seen, and we cannot do without it, which makes opportunities to take advantage of a deregulated market endless. It is a public good that must be protected from private abuse. If Murphy’s Law were written for a market approach to electricity, then the law would state ‘any system that can be gamed, will be gamed, and at the worst possible time.’ And a market approach for electricity is inherently gameable. Never again can we allow private interests to create artificial or even real shortages and to be in control.
      Enron stood for secrecy and a lack of responsibility. In electric power, we must have openness and companies that are responsible for keeping the lights on. We need to go back to companies that own power plants with clear responsibilities for selling real power under long-term contracts. There is no place for companies like Enron that own the equivalent of an electronic telephone book and game the system to extract an unnecessary middleman’s profits. Companies with power plants can compete for contracts to provide the bulk of our power at reasonable prices that reflect costs. People say that Governor Davis has been vindicated by the Enron confession.”

  5. Lord DudleyMEMBER

    You know what’s, like, totally rad? As far as I can see, solar has the same price curve that computers did in the 80’s and 90’s. If solar can keep that up for another 20 years, it’ll displace pretty much all other power sources for applications that don’t require high energy density (aircraft, ships, AL smelters, a few other things). The only way it doesn’t is if energy storage improvements can’t keep up… (because it gets dark sometimes), and given all the R&D being pumped into batteries right now, I wouldn’t want to make that bet.

    It’s like watching newspaper classifieds and old-school retail vs the tech sector circa 2005. Given exponential improvements, the tech sector is going to win, it’s just a matter of time.

    • Cynical snake

      ” The only way it doesn’t is if energy storage improvements can’t keep up… (because it gets dark sometimes), and given all the R&D being pumped into batteries right now, I wouldn’t want to make that bet.”
      I would, The battery in you IC car is essentially the same as those invented 150+ years ago. https://en.wikipedia.org/wiki/Lead%E2%80%93acid_battery
      Lithium batteries are better but lithium is literally the lightest and one of the most reactive metals available, so not a lot to be gained from this point by changing to alternate chemistries, and lithium will only offer incrermental increases as the performance is predominantly determined by chemical properties.

      • TheLambKingMEMBER

        The battery in you IC car is essentially the same as those invented 150+ years ago

        Yes, kind of, but the function of energy storage provided by a battery has completely changed. The miniature battery in an hearing aid is orders of magnitude cheaper, orders of magnitude smaller and orders of magnitude more capacity! Due to multiple changes to technology.

        And batteries are still becoming cheaper (~20% a year), smaller with more capacity.

        EV Batteries have just gone below US$100/kWh – while home batteries (Tesla powerwall) is still $1000/kwh. At $100/kWh $5k will you get enough storage to power a home for 3-5 days (50kWh) enough to be off grid. Less then $1k to only need grid power (with solar) 2 or 3 days a year. Remember, prices are dropping by 20% year on year! Batteries will be EVERYWHERE. On houses, in the suburb sub-station and on the Grid. We will have more than enough batteries to fill the times when the sun does not shine and when it does not blow!

  6. Jumping jack flash

    Solar and battery all the way! To hell with the grid, they are a pack of gougers.

    The future is solar, battery(ies) and an electric car which equals total energy independence for the people, and there’s not much they can do to stop it now. Their precious free market has spoken.

  7. Pretty sure it’s also for shoring up votes in the Hunter.

    I’m also fairly sure the land being used is – surprise, surprise! – owned by a substantial LNP donor (Jeff McCloy, who I think was kicked from the Newcastle City Council for corruption??).

    Down the road, also in the Hunter, I’m fairly sure AGL will still build their 1.2GW battery on the Liddell site, which will frequently fill the role of the new Kurri gas plant, only faster and cheap.

    If memory serves me right, Origin are also going to install a 800MW battery at Eraring, which will also fill the role of the gas plant much of the time, only faster and cheaper.

    Yep. Pork. Waste.

    May well end up a stranded asset quite quickly.

    • Lord DudleyMEMBER

      Stranded assets are the taxpayer’s problem! Given the way Australians vote, all stranded energy assets will end up being bailed out by the tax-payer. It’s the LNP way!

        • They will pay a company related to an LNP donor to take it off their hands on the premise that private industry can decommission and clean it up better than government.

          That company will then pay itself a large dividend and a year or so later run out of money to do the actual clean up.

          • Cynical snake

            Probably, it’s been repeated over and over with the existing government built power generation infrastructure.
            Privatisation. It saves money……………………………………………… for the private sector profiteers

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