Canberra ‘at fault’ for power delays
EnergyAustralia has questioned the continuation of Scott Morrison’s interventionist approach in the electricity sector.
Power giant EnergyAustralia has questioned the continuation of Scott Morrison’s interventionist approach in the electricity sector, arguing its planned $400m Tallawarra gas plant in NSW had been delayed due to uncertainty over the federal government’s plan to underwrite generation.
The government has grown frustrated over the lack of new electricity generation built since 2015 when AGL Energy first announced plans to shut down its NSW Liddell coal-fired plant, arguing this week that power prices will jump if not enough replacement supply is in place when the facility closes in 2022-23.
Canberra has set an April 2021 target for industry to reach final investment decisions on 1000MW of dispatchable capacity such as pumped hydro, coal, gas and batteries. If that is not signed off, it will build generation itself with the government-owned Snowy Hydro drawing up plans for a gas plant in the Hunter Valley.
EnergyAustralia expects to make a decision on sanctioning the 400MW Tallawarra gas plant before the end of 2020, but said an opportunity to move the project along had already been lost.
“We may well have moved ahead with that project sooner to final approval had it not been for the uncertainties (created) by the repeated statements by the government that they intended to subsidise competing projects,” EnergyAustralia chairman Graham Bradley said.
Electricity operators including EnergyAustralia with a market share of greater than 10 per cent in any region of the national electricity market were barred from tapping the taxpayer-funded underwriting mechanism, leaving a significant investment and generation boost on the sidelines.
The government’s promise to not interfere in the market if private investors stepped up had provided some clarity after a prolonged period of uncertainty, Mr Bradley said.
“It’s an important signal to the industry particularly companies like EnergyAustralia that have potentially viable projects on the drawing board but have been inhibited by two things: one has been the massive overhang of capacity that will be created when Snowy 2.0 is completed, which is a major intervention in the generation sector by the government,” Mr Bradley said.
“And secondly the underwriting generation proposals which were threatening the viability of a number of private projects that were being worked on by various companies but most particularly the major generation companies such as EnergyAustralia.”
The Australian Energy Council, which represents companies including EnergyAustralia, hit out on Tuesday at the government’s renewed intervention threat and Mr Bradley agreed it was an unhelpful approach.
“The fact they are still planning to support and subsidise new generation projects is an unnecessary continued intervention by federal taxpayers in a market that would otherwise respond to the appropriate market signals and provide the generation needed,” Mr Bradley said. “This has been a challenge for many years now since the government started to intervene in what has been for a decade the privatised generation sector.”
The Liddell Taskforce found closing the AGL plant without dispatchable replacement capacity risked prices rising by around 30 per cent over two years, or $20 per megawatt hour to $80 in 2024 and up to $105 per MWh by 2030.
Origin shelved an expansion of its Shoalhaven pumped-hydro project in NSW with the investment failing to stack up partly due to the impact of the giant Snowy 2.0 on the market.
Up to 19 gigawatts of dispatchable resources will be required in the next two decades to back up renewables.
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