Energy backflip flicks switch on AGL’s Liddell coal-fired power station

Canberra’s sudden backflip on national energy policy has pushed AGL’s Liddell power station back to centre stage.

The federal government’s sudden backflip on national energy policy has put AGL Energy’s contentious Liddell coal-fired power station back in the spotlight amid warnings from the industry that price controls and divestment powers would chill investment in replacement generation and push companies out of the market.

After staring down calls from the Prime Minister Malcolm Turnbull and Energy Minister Josh Frydenberg to sell Liddell to a competitor or extend its life past the schedule 2022 close date, AGL could face the threat of the government forcing it to divest under measures announced today.

“Re-regulation of electricity prices and aggressive market interventions are not the long-term answer to high energy prices,” the Australian Energy Council said.

“Today’s announcement by the Federal Government has left the most critical policy, the National Energy Guarantee, in limbo,” AEC chief executive, Sarah McNamara, said.

“The NEG and policy stability remain the long-term solution to bringing down prices.”

Facing a threat to his leadership from pro-coal conservatives Prime Minister Malcolm Turnbull today dumped plans to legislate emissions targets as part of the NEG.

But he has agreed to legislate for a default electricity price, as recommended by the competition watchdog and introduce powers to direct electricity companies and order divestment of assets.

The move appears to end the government’s signature effort to marry energy and environment policy via the NEG and signals a switch to focus exclusively on energy prices.

Announcing the changes, Mr Turnbull said the powers would be a “last resort” for “the most egregious cases of abuse.”

Ms McNamara said increasing the Australian Competition and Consumer Commission’’s powers to allow divestment of private assets was not supported by the ACCC’s own report into bringing down retail electricity prices.

AGL declined to comment.

But the company has previously announced plans to replace the generation capacity lost from closing the ageing plant with a mixture of solar, wind, gas, pumped hydro and battery power. It received mixed reviews from the Australian Energy Market Operator, which said coal plants should be left running as long as possible during the transition to more green power and that there would be no market shortfall if AGL committed to all of the investment that it had announced.

The AEC said the government had made the moves without consultation and warned that the industry needed bipartisan agreement to invest in new capacity to replace the 5000MW of largely coal generation that has exited the market.

“Replacement investment demands bipartisan policy and the lack of it remains the biggest drag on the energy market,” Ms McNamara said.

“A national climate and energy policy would mean that the government doesn’t need to risk taxpayer funds to support new generators.

The industry rejected plans for price caps but backed increased monitoring of prices as proposed for the ACCC.

“It will simply highlight that energy companies are, and have been, acting appropriately,” she said.

“But retail price caps and other interventions are trying to treat the symptoms and not the cause. We agree with the Australian Energy Market Commission’s assessment that re-regulation is not warranted. “Re-regulation has the very real potential to damage competition and confidence. It is extremely difficult for any regulator to set a default price accurately. If it is set too low it will push energy companies out of the market. If it is set too high it will mean consumers are paying more than they should.”