Kapunda firm JT Johnson and Sons says $500,000 government grant will be eroded by doubled energy bills as result of renewables push
KAPUNDA’S largest employer says a $500,000 government grant will be “completely eroded” by a doubling of its energy bills created by the state’s headlong dive into renewables.
KAPUNDA’S largest employer says the benefits of a $500,000 State Government grant it received last year to boost energy efficiency at its livestock feed factory will be “completely eroded” by a doubling of its energy bills created by the state’s headlong dive into renewables.
Family-owned firm JT Johnson and Sons has written to Treasurer Tom Koutsantonis calling for an urgent solution to the state’s energy price crunch, and warned many other businesses will find themselves in the same position when long-term power contracts expire at the end of the year.
JT Johnson and Sons says it was previously buying power for about $800,000 a year, and the same volume of energy is now going to cost about $1.6 million on a new contract.
It employs 85 people in Kapunda and buys services from local farmers and contractors.
Mr Koutsantonis rejected the claim, saying recent price volatility had been because of a perfect storm of unusual events, adding that he was working to build new connections with other states in a bid to even out the market and bring greater stability to SA supplies and prices.
JT Johnson and Sons general manager Andrew Hayward told The Advertiser SA risked becoming uncompetitive as interstate rivals with cheaper power undercut local companies on price.
The $500,000 grant was issued last year under a scheme overseen by Regional Development Minister Geoff Brock.
It aimed to reduce energy consumption in a new pellet mill development by 25 per cent. The pellets are used to feed livestock and exported around the world.
Mr Hayward said it was a “big punch in the guts” to face even higher power bills despite having undertaken a major upgrade in a bid to increase the efficiency of the factory’s consumption.
“It’s really going to affect us in our competitiveness, mainly against other states,” he said.
“We compete against pellet factories that are in Victoria and WA. If everything else is equal but our power costs are higher, they are straight away much better off than us in the market.
“That means our orders are reduced, we don’t work as many shifts or buy as much hay locally from the farmers. “That has an impact on the business down the track.”
Unlike Arrium and BHP, who Mr Koutsantonis criticised in July for being caught out by wild price fluctuations on variable contracts as they warned of potential shutdowns, JT Johnson and Sons have found themselves exposed to the soaring costs of generation even with fixed prices.
The Opposition says their case proves there is “nowhere to hide” from surging energy costs, which will hit all companies and households as retailers set new prices in the coming year.
Mr Hayward blamed the state’s heavy reliance on intermittent energy sources like wind, and the retreat of the Port Augusta baseload coal-fired station from the market, for high prices.
“The State Government’s drive is for growth and for jobs, and they want SA to be a place where people want to do business. It makes it extremely hard, and we’re not the only ones,” he said.
Mr Koutsantonis said spot market volatility in July was the result of a record cold snap, upgrades to the interconnector to Victoria and a lack of available gas in the market.
“The decision in Victoria to ban conventional and unconventional gas exploration and development and restrictions in NSW and the NT are further blows to gas supply in Australia,” he said. “Renewable energy is incredibly cheap and brings down power prices.
“What we need to do is find ways to increase the supply of gas in the market and increase competition in energy generation at a national level.”
Mr Koutsantonis said the sale of ETSA 20 years ago limited competition in today’s market.
He said the Government had also requested the state’s utility price watchdog to undertake an independent inquiry into the most recent price increases to investigate if they are justified.
Opposition energy spokesman Dan van Holst Pellekaan said high prices would hurt the whole state, especially as new contracts were negotiated early next year.
“Regular householders have not been affected yet, but they will be,” he said.
“As retailers come around to renegotiating, they’re going to get smashed as well.”
Mr van Holst Pellekaan said new wind farm proposals should only be approved after a thorough analysis of their impact on the broader energy market. He said the state also needed to support the development of new storage technology and investigate baseload renewable power, like the proposal for a solar thermal plant at Port Augusta to replace the defunct coal station.
