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Australian electricity market wrecked by big-gov: corporates gouge $3b from electricity customers

Posted By Jo Nova On March 25, 2019 @ 5:43 pm In Global Warming | Comments Disabled

Thanks to Big-Gov’s Renewable Energy Target, big corporate greed was unleashed:

ABC — Australian energy giant AGL ‘gouged’ customers after Hazelwood closure, new research shows

Some of the nation’s biggest energy companies have allegedly used the closure of Australia’s dirtiest coal-fired power station to price gouge customers and make an extra $3 billion in wholesale profits, according to a new report.

We already knew that renewables are so poisonous they make other generators more expensive. But this is something “extra”. Either big corporate’s suddenly turned into greedy machines or the government destroyed the free market that worked fine for years:

When the closure of Hazelwood was announced just a few months earlier, AGL increased the price of much of the coal-fired power on offer from the Bayswater and Liddell plants in NSW.

The study found a significant part of the output from the Liddell plant was repriced from $40 to $60 per megawatt hour, to greater than $5,000 per megawatt hour — so expensive it effectively restricted supply.

At the same time, much of the power offered by the Bayswater plant almost doubled in price, from about $40 per megawatt hour, to about $80 per megawatt hour.

AGL’s competitors, Energy Australia and Origin, hiked the prices of their coal-fired power too.

Remember when competition from cheap energy would reduce the bids of competitors?

The free market could solve this, but our government forbids it

Right now in Australia you could not legally set up a coal fired cheap plant and supply consenting adults with cheap electricity through our national grid. The government has decreed that in order to change the weather, all coal plants must charge their customers extra so they can pay off “cheap” wind and solar providers who provide green-nice-weather electrons. The government also says that when these green electrons are available (randomly) the market must buy them and ignore cheaper options. Both Liberal and Labor governments endorse this socialist control. Voters who want cheap electricity need to pick “something else”.

Where is our major free-market party?

Did he just admit wind and solar couldn’t supply cheap energy?

Mark Collette from Energy Australia, has denied price gouging, and says that there was no cheap energy available to replace Hazelwood brown coal.

“I think the market did everything it could to replace that energy as cheaply as possible but there was no source of cheap energy available in the timeframe.”

For some reason, all that new cheap wind and solar are not filling the gap left by the 53 year old Hazelwood coal plant?

The ABC finds a government funded “independent” spokesperson to lay the blame at big corporates:

Bruce Mountain, the lead researcher and director of the Victoria Energy Policy Centre, said the price increases flowed through to consumers, and the effects were still being felt.

“[Consumers] are paying roughly $200 more than they should and that’s ongoing,” he said.

“Hazelwood should not have had such a large impact on the market. It was about 5 per cent of the national coal generation market, it was not a big deal. It should have been handled easily.

If the government funded ABC had asked an actual independent commentator (like me) I could have told them that actually closing Hazelwood was a big deal and for blindingly obvious reasons. Even though Hazelwood closed in autumn, during the low demand part of the Australian year, in its last month it was supplying wholesale electricity for $30/MWh and providing more electricity than Australia’s entire wind powered fleet.

How could prices not rise when we force out one of the cheapest most reliable providers?

ABC reports on evil capitalists — says nothing about big-bad-government

The ABC is happy to say that AGL is being a big greedy corporate. They won’t admit that it was government rules that caused cheap coal to close and made it possible for companies to legally screw billions out of the market. They won’t admit that if wind and solar were really as cheap and reliable as coal that AGL, Origin and EnergyAustralia couldn’t have done this.

It’s all legal, but couldn’t have happened without the RET (Renewable Energy Target)

The Australian Competition and Consumer Commission also examined the price rises, according to its chairman Rod Sims.

“We did not find a breach of the law, because it’s not against the law, it’s not against competition law or consumer law when you’ve got something that’s relatively scarce, to price higher,” Mr Sims said.

“So if I buy an apple for $1 and sell it to you for $10, I’ve ripped you off but that’s not against the law,” he said.

“There’s no law that stops people charging excessively.”

The RET makes sure that coal fired stations are working at a competitive disadvantage. That was the point — to force coal generators out of business, and it’s working.

AGL was given Liddell coal plant for free in 2014. It plans to shut it down in 2022 and despite pleas to sell it or revive it — it turned down offers of a quarter of a billion dollars.

When is an asset is worth more in the trash-can than sold to a willing bidder? — when the market is so screwed the owner makes more profit from destroying an asset than selling it.

Handy questions ABC journalists could’ve asked

  1. If solar and wind are cheaper why did prices rise after Hazelwood closed?
  2. Don’t the comments by Mark Collette demonstrate that renewables can’t yet replace cheap brown coal?
  3. Why did our national electricity market work so well to create low prices and competition for years and then fail recently? Australian electricity wholesale costs were around $30 per MWh for years, now there are almost no settlements at these prices. Surely the big three corporates would have taken the opportunities to profit in the past if they could have?
  4. Is there any country around the world which has a high penetration of intermittent renewables and cheap electricity? Please name them…
  5. Isn’t this another hidden cost of intermittent power — how the irregular supply affects other generators and raises their costs? eg.Stacy, 2015, showed wind generation makes gas power 30% more expensive.

h/t George, Dave B, El Gordo

USEFUL LINKS

Australia closed a cheap coal generator and electricity got 85% more expensive

Hazelwood Countdown: 53 years old and making more electricity than Australia’s entire wind industry

 

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